A dual agency: Can you represent both the buyer and the seller?

A dual agency: Can you represent both the buyer and the seller?

First of all, what is dual agency? What is dual representation real estate? In real estate, the dual agency definition means that one broker will represent both the buyer, and the seller in the transaction.

However, dual agent real estate brokers can’t disclose any confidential information to any of their clients.

This can lead to a lot of complications, for everyone. For example, you can’t get the highest price possible for a seller, and the lowest price for a buyer, this is more or less impossible.

But, is dual agency illegal in some states? Yes, dual agency is illegal in some states. You should do some research about dual agency illegal in which states specifically, before you dive into dual agency real estate situations.

How does a dual agency agreement come to life?

This is very close to when you want to define double agent. The listing agent, and the selling or buying agent, work for the same brokerage firm.

And, the relationship between the broker, and the buyer and seller, will determine the dual agency disclosure.

There is a subtler definition of dual agency situations, when a real estate agent represents a client as a listing agent and afterwards finds a buyer.

They sign a listing agreement, and the agent helps the buyer sell their home, so they can buy the listing.

How does the dual agency define trust issues?

Real estate agents are bound by agency definition law, and they must be undividedly loyal to their clients. These duties are written in the contract, state, tort and licensing laws.

To make sure that everyone understands the dual agency system, and agrees to it, the real estate agents will disclose the relationships.

If a consumer, regardless of whether it’s a seller or buyer agency real estate, agrees to dual agency, he is giving up the right to undivided loyalty.

What you should be careful about

Even though the agent cannot share your private information in order to give an edge to the other client, you will find that plenty of attorneys might advise you that you’re careful about things you say around the agent.

Now, when you’re a client, you do have the right of refusing dual agency representation. If you aren’t really comfortable with this kind of arrangement, you should be considering finding another broker that could represent you.

For example, John Smith, of the John Smith brokerage firm, lists a home on Third Avenue. John’s agent, Mark, brings him an offer. Mark’s buyer is actually represented in dual agency.

John Smith’s seller rejects the offer, and Mark’s buyer makes an offer on another property on Third Avenue. This property is listed by the Jim Doyle brokerage firm, but because Mark doesn’t work for it, his client buyer is now represented by single agency.

Are there benefits to dual agency?

Sure there are, as it usually streamlines the home buying process. If you have separate agents for both the buyer and the seller, before you can show the property, you need to make sure it fits with the schedules of four people.

When you cut one of the agents out, that’s 25% easier.

There’s another benefit, as this situation saves you on commission. Home sellers pay a percentage to their agents, and then that is split with the buyer’s agent, for their hard work.

However, if you’re a dual agent, you get to keep the commission, and this kind of agents are usually open to lowering the commission as they don’t have to share it.

But what are the downsides?

Now, a professional dual agent should be neutral, and help both of his clients equally. However, in this kind of situation, it is tricky to stay neutral.

For example, the agent gets a commission on the sales price. Therefore, a higher sales price is in his benefit. However, that isn’t very good for the buyer, is it?

How to represent both the buyer and the seller

Well, the truth is, this is extremely hard to do. And, there are often regulations and laws that will prohibit a dual agent to do their duty for either of their clients.

For example, in Massachusetts, the law dictates that a dual agent must be neutral in regards to any conflicting interests of the buyer or seller.

So, this isn’t just logistically tricky, but there are regulations that stop the dual agent from properly representing one, or the other’s interests.

This is very similar to being a lawyer, and trying to represent both the defendant, and the plaintiff. That can’t end well, can it? Well, being a dual agent is more or less the same thing.

And, during the transaction, it’s unavoidable that one party will feel like the other one is getting treated better. But, this isn’t the worst part. Let’s take a look at an example.

How the dual agency system won’t work for the seller, nor the buyer

When I list a home on Third Avenue for $400,000, I will go about marketing. When someone calls me and wants to see it, I will show it to them.

They will tell me they want to make an offer, but when they ask what to offer, I can’t help them, because I’m a dual agent.

Now that they’re on their own, they offer $380,000. That offer is then taken to the seller, which will ask me whether they should give the buyer a counter offer, and how much? And again, I can’t help them, because I’m a dual agent.

In this situation, neither party is properly represented, and both the buyer and the seller will lose. At $380,000, the buyer may be underpaying, or overpaying, and the dual agent can’t really provide guidance.

One of the clients will make a big mistake, and the only one that will come out winning is the agent. This is but an example, and the transaction is actually just getting started.

Ending thoughts on a dual agency

A dual agency situation is where you work with both the seller and the buyer, as a real estate agent.

Many people that are familiar with the market know that the listing agent works with the seller, and the buyer’s agent works with the buyer. However, the dual agent category is a mysterious one.

If you enjoyed reading this article about dual agency, you should read these as well:

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Houzez Staff

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