What Is Dual Agency and is it illegal?
In layman’s terms, a duel agent (or dual agency) is someone who is representing the buyer and the seller at the same time.
Because dual agency is legal in some States, it’s extremely important for buyers and sellers to clearly understand exactly who the agents involved in their real estate transactions are working for.
When you’re in the market for a real estate agent, you may encounter the term “dual agency”, wonder what it is and whether or not it’s a good idea for you.
In most cases, you need to RUN!
What is Dual Agency?
An agent who represents both the seller and the buyer at the same time is a dual agent. It can also occur when an agent representing the seller and an agent representing the buyer work at the same brokerage.
This probably sounds like a conflict of interest. After all, how can one agent provide undivided loyalty and confidentiality while representing both parties to the transaction? In many cases, the answer is it’s not possible. When you agree to engage a dual agent you will be giving up your exclusive right to loyalty although you have every right to expect your personal information to be kept confidential.
What Is Dual Agency Disclosure?
Because of the potential conflict of interest, this type of agency must be disclosed to all parties to the transaction.
In addition, both the seller and the buyer must sign a consent form acknowledging they understand the dual agency concept and the restrictions it places on the real estate agent.
If either the seller or the buyer refuses to sign the disclosure agreement, the transaction can’t be completed.
If the agreement is signed, the real estate agent officially becomes the disclosed dual agent.
Is Dual Agency Illegal?
Dual agency is illegal in some states. The laws vary.
According to Realtor Magazine, the problems with a dual agency are so prevalent eight states have outlawed it: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.
More states are expected to follow suit.
Whether you are selling property or buying it, chances are you will engage a real estate agent to represent you.
You want to feel confident that your agent has your best interests at heart. Playing both sides against the middle, with achieving the highest possible commission as the sole goal, is one reason dual agency is illegal in some states.
So you need to know what sort of real estate agent has your best interest at heart….
Are There Advantages to Having a Dual Agent?
It can streamline the process. The fewer people you have involved in a transaction, the faster things get done.
When you have one agent representing both parties, you don’t have to wait as long to get questions answered or contracts presented.
When there are two agents involved, things take longer. For instance, the buyer has a question about a particular property. He calls his buyer’s agent. If the buyer’s agent doesn’t have the answer, he has to get in touch with the seller’s agent. If the seller’s agent doesn’t have the answer, he has to get in touch with the seller.
Getting the answer to the question back to the buyer is a reverse of the process.
In the case of a dual agent, the buyer asks the agent a question about a particular piece of property. The dual agent can pick up the phone or text the seller directly to get the answer.
It can save some money.
This is especially true if you’re the seller. Sellers normally pay a commission of about 6% which is split between the buyer’s and seller’s agents.
With dual agency, there’s just one agent involved who gets the whole commission. In this case, a seller can sometimes negotiate the commission down.
What Are the Disadvantages of Dual Agency?
Lack of impartiality.
It’s hard for agents to maintain impartiality when they’re working for buyers and sellers at the same time.
Buyers want to pay the least possible price for the property they’re interested in, and sellers want the highest dollar amount possible for the property they’re selling.
Dual agents are left dangling in between, practically worthless.
In addition, most agents work on commission. The more a property sells for, the more money the agent makes.
It limits honest communication.
Because a dual agent is barred from taking sides, he can’t give the seller advice about what the listing price should be.
He can’t give the buyer advice about what kind of offer to make on a particular property, and he can’t advise the seller on whether or not to accept a given offer.
Here is a shortlist of some of the questions a dual agent is barred from answering:
• What is the property worth?
• What should I offer for the property?
• Are there any negative factors that might affect the property’s future market value?
• Should I make a counteroffer?
• Should I ask the seller to make repairs or make concessions on closing costs?
• Should I make the repairs the buyer is asking for?
It can sacrifice trust.
Trust is a crucial component in the relationship between real estate agents and their clients.
If you have an agent who is representing both sides of a transaction, can either side fully trust the integrity of that agent? It can be much harder for both sides to feel they got the best deal possible when the agent has a foot in both camps.
What you suspect can happen, happens all the time. There are plenty of unscrupulous agents who will work both sides of the fence. One day they’re the buyer’s agent, and the next day they’re the seller’s agent.
They give both sides advice, and it’s almost always to the agent’s financial advantage. The strict code of ethics all real estate agents are required to follow goes right out the window. That’s why dual agency is illegal in some states.
Who Pays the Commission in Dual Agency?
The seller typically pays the agency commission in a real estate transaction. Since there is only one agent involved in a dual agency transaction, as the seller you have the perfect right to request a reduction in the amount of commission you are required to pay. Whether or not your request is granted is up to the agent’s broker.
Final (and my personal) thoughts.
Dual agency is not something you want to deal with. Your goal as a buyer should be to get the best deal on your property and your goal as a seller should be to get the most amount of money. Working with an agent who has other motives does not allow anyone to accomplish his or her goal.