Dual Agency: What You Should Know Before You Buy

In most real estate transactions, there is usually a buyer’s agent and a seller’s agent. But in some cases, you’ll run into real estate agents operating as a dual agency. In cases like this, the real estate agent can work as both a listing agent and a buyer’s agent in the same real estate transaction.

Is it a good idea to work with a dual agent? Let’s take a closer look at the advantages and disadvantages.

What Is Dual Agency?

Dual agency occurs when a real estate agent works on behalf of both the home buyer and seller. In most real estate transactions, it is much more common to have separate agents represent each party, as this helps avoid the conflict of interest that can happen when an agent negotiates for both sides.

You can work with a dual agent, especially if you fall in love with a home that your real estate agent happens to have listed. However, you’re not required to if the idea of working with someone representing both the seller and the buyer makes you uncomfortable when you’re ready to buy the house. Be aware that in some states, dual agency is illegal.

Who Benefits From A Dual Agency?

As a buyer, you may be attracted to the ease of a dual-agent arrangement. With only one agent involved in the deal, you may be able to streamline communications between you and the seller.

Although there are some benefits for the buyer, the person who benefits the most from this type of agreement is the dual agent themselves.

After all, the dual agent will want to strike a deal that works for both parties. But as a dual agent, they will also be interested in closing the deal as quickly as possible without too much concern over the negotiation details. They’ll get a commission from both the buyer and the seller, so it’s in their best interest to close the sale as close to the asking price as possible. This makes it difficult for the real estate agent to satisfy their fiduciary duty (in other words, act in the best interest) to both clients and puts both buyers and sellers at risk of paying more than they should in commissions.

The Drawbacks Of Dual Agency

If you are considering a dual agency situation, there are some drawbacks that you need to be aware of. These include the following:

• Misaligned interests between the agent and the buyer: Because the agent commission is based on the sale price, a dual agent may not be inclined to help the buyer negotiate a better price.
  
  
• Misaligned interests between the agent and the seller: Although the agent and the seller want to get the best price, the agent may feel pressure to close the deal more quickly.
  
  
• Conflicts of interest: Dual agents can’t give advice to either side that they represent without creating a conflict of interest.
  
  
• Increased workload for the agent means limited availability: Dual agents take on twice the work compared to an exclusive agent, which means buyers and sellers have to battle each other for the agent’s attention.

The drawbacks can be overcome in certain situations. But you shouldn’t pursue this arrangement if you aren’t comfortable.

Are Dual Agents Illegal In Certain States?

Even if you are interested in working with a dual agent, it is not possible in all states. In fact, it is outright illegal in Alaska, Colorado, Florida, Kansas, Maryland, Texas, Vermont and Wyoming.

Although dual agents are legally allowed to operate in most states, there are usually restrictions in place that limit dual agency powers. The buyers and sellers will need to provide written permission to the agent to move forward if dual agency comes into the picture. Without written consent from both parties, a dual agent will not be able to represent both parties.

How Does Commission Work With Dual Agency?

The seller will pay the commission in a dual-agency scenario. Although the exact amount of the commission will vary, it is typically between 5% – 6% of the purchase price.

When the buyer and seller each have their own representation, the agents will have to split the commission in half. With that, each agent would only receive 2.5% – 3% of the purchase price.

There is a financial incentive for a dual agent to run the entire transaction and pocket the complete commission. Therefore, it’s important to be cautious when considering a dual-agency scenario because the seller’s interests don’t align with the buyer’s interests.

What Is A Dual Agent Vs. A Designated Agent?

A dual agent is an individual who acts as both the buyer’s and seller’s agent in a transaction.

It is easy to confuse dual agents with designated agents. But unlike a dual agent, designated agents are two separate individuals representing the buyer or the seller. However, the designated agents may work for the same real estate broker or their brokerage.

With designated agents, you’ll know that you have someone with your best interests at heart working with you. With that, many buyers and sellers prefer to work with a designated agent to ensure their REALTOR^®️ has their best interests in mind.

Is Working With A Dual Agent The Right Decision For You?

Dual agency can save both buyers and sellers time and frustration when navigating the home sale process. However, it’s not an agreement you should enter into lightly. You’ll want to think about how the dual agent will impact your experience before you make your decision. Here’s how to tell if a dual agency arrangement is right for your real estate transaction.

For Sellers

Dual agents can streamline the home sale process, helping you sell your home faster and with less hassle. However, since they represent the buyer too, your real estate agent may not be willing to negotiate a higher price with the buyer. This can eat into your profit and keep you from getting the terms you’re looking for.

If you’re in a hurry to sell and aren’t worried about maximizing your potential profit, working with a dual agent may be an acceptable option.

For Buyers

Dual agents can be more beneficial for buyers than sellers. Working with a dual agent may increase the number of available homes that you can view with ease and can simplify communication with the sellers since they’re already working closely with them.

If you’re worried about communicating with sellers or want to be able to view the most homes possible before making an offer, working with a dual agent may be a good idea.

The Bottom Line

Although there is nothing wrong with working with a dual agent – in states where it’s legal – it can be tricky to confirm that your real estate agent is working for your best interests. It may be an easier option to work with your own agent to make sure that your interests are being taken care of.

Take your time to weigh the pros and cons before working with a dual agent. Once you’re ready to look at homes and find a trustworthy real estate agent, start the mortgage process. This way, you’ll be able to make an offer as soon as you find a house you love.