The typical real estate transaction traditionally involves a buyer and seller each with their own separate representatives. In this situation, each real estate agent has a fiduciary duty to their respective clients, which means they have a legal obligation to look out for their best interests at all times.
However, there are times when the same agent (or different agents from the same brokerage) represents both the buyer and the seller in a single real estate transaction. This is referred to as “dual agency.”
Buyers might come across this situation when they fall in love with a property and decide to allow the seller’s agent to represent them as well, as long as they haven’t already signed a Buyer Agency contract with another agent. It's not a very common occurrence, but it does happen, particularly in smaller markets with tighter inventory.
Dual agency can also happen when the seller and buyer agents both work for the same brokerage. That’s because a broker and the agents of the brokerage represent the same entity. It is essentially the broker's relationship with buyers and sellers that determines whether or not a dual agency exists. This type of scenario is more common in larger brokerages that have many agents working under their umbrella.
Other forms of dual agency occur when, for instance, a real estate agent who represents the seller finds a buyer on his or her own and signs an agreement with the buyer to both help sell their home and buy the agent's listing.
It’s imperative that both the buyer and seller sign off a Dual Agency Agreement and understand the pros and cons of such a scenario before agreeing to share the same representative. Full disclosure of dual agency is required by law, so agents can land themselves in hot water if they are not upfront about dual agency with both parties. Buyers and sellers should be aware that agreeing to a dual agency essentially means that they are foregoing their agent's undivided loyalty and attention, as it will have to be shared among both parties.
So, what exactly does dual agency mean for you, and what are the potential implications for buyers and sellers involved? Is dual agency a good idea?
How Does Dual Agency Affect Your Real Estate Contract?
While real estate agents must keep pertinent information about each party private, a lawyer might advise you to be careful about the things that you say around your agent and the information divulged.
As a real estate client - whether buyer or seller - you have the right to refuse a dual agency representation. If you are not comfortable with this type of arrangement, you can hire another broker to represent you in the transaction.
Downsides to Dual Agency
The obvious disadvantage of dual agency is that you won’t be the sole client being represented by your agent in a real estate transaction. Your attention and loyalty will be divided with that of the other party involved.
The dual agent must be neutral when helping clients on both sides of the deal. However, it can be extremely difficult to stay entirely neutral. For example, considering the fact that an agent's commission is a percentage of the sale price of a home, it would intrinsically be in the best interests of the agent to try to get a high selling price to put more money in the pockets of both the seller and the agent.
That's beneficial both for the seller and agent, but not necessarily so for the buyer. Even if you are able to save some money on commission, it’s still highly possible that you would have been able to negotiate a better price had you secured your own separate representation.
It can also be tough to remain fully neutral and not break the confidence of either party. As such, the agent might stay quiet about interesting pieces of information that you might have been able to learn more easily if you had your own agent.
The Bottom Line
There certainly are some perks associated with dual agency, but there are also some downfalls that come with this arrangement. The W&Y Homes Co. Team doesn't believe that dual agency is in the best interest of our clients so be sure to consider every aspect of it before you agree to have your agent represent both you and the other party in a real estate transaction.
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