Dual Agency Explained: What You Need To Know

Dual agency in real estate occurs when one agent represents both the buyer and the seller in the same transaction. This situation can present a conflict of interest, as the agent has a duty to act in the best interests of both parties, whose interests may be opposed.  

Key Points about Dual Agency:

• Conflict of Interest: The primary concern with dual agency is the inherent conflict of interest. The seller wants the highest possible price, while the buyer wants the lowest. It’s challenging for one agent to effectively negotiate the best outcome for both.  
• Limited Advocacy: In a typical transaction with separate agents, each agent advocates solely for their client. In dual agency, the agent’s ability to advocate fully for either party is limited. They must remain neutral and cannot disclose confidential information from one party to the other.  
• Informed Consent: Dual agency is legal in many states, but it requires the informed consent of both the buyer and the seller. This means the agent must fully disclose the implications of dual agency and obtain written consent from both parties.  
• Types of Dual Agency:
  • True Dual Agency: This is when a single agent represents both the buyer and the seller.  
  • Designated Agency: This is when two agents from the same brokerage represent the buyer and the seller. While technically not “dual agency” in the strictest sense, it still involves the same brokerage representing both sides.
• State Regulations: Laws regarding dual agency vary by state. Some states have strict regulations or even prohibit it altogether.  

Potential Advantages of Dual Agency:

• Simplified Process: Having one agent can streamline communication and potentially speed up the transaction.  
• Potential Cost Savings: In some cases, the agent may agree to a reduced commission since they are representing both sides.  

Potential Disadvantages of Dual Agency:

• Compromised Representation: As mentioned earlier, the agent’s ability to fully advocate for either party is limited.  
• Risk of Undervalued or Overvalued Transaction: Without dedicated representation, there’s a higher risk of the buyer paying too much or the seller accepting too little.
• Lack of Confidentiality: While the agent cannot disclose confidential information, there’s still a potential for unintentional disclosure or a perceived lack of confidentiality.  

Should You Agree to Dual Agency?

Whether or not to agree to dual agency is a personal decision. Consider the following:

• Your Comfort Level: Are you comfortable with the potential conflict of interest?
• The Agent’s Experience: Does the agent have significant experience with dual agency transactions?
• The Complexity of the Transaction: Is it a straightforward transaction or a complex one with intricate negotiations?

In conclusion: Dual agency is a complex issue with potential advantages and disadvantages. It’s crucial to understand the implications, ask questions, and make an informed decision based on your individual circumstances. If you’re uncomfortable with the potential conflict of interest, it’s always best to have your own dedicated agent. Sources and related content