Dual vs. Single Agency Relationships in Real Estate

Real estate agent and buyer explore a house on the market.
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Buyers and sellers of real estate are often confused about the role of real estate agents. If you are buying or selling a house, and working with a real estate agent, you may wonder who the agent represents, who they are loyal to, and whether there are any rules around agent relationships.

To clear up these questions, many states require that agents give buyers and sellers an agency disclosure form to sign. The form used in California, for example, is not a contract between two parties, but rather it is a disclosure from one to the other. It makes clear the many types agency functions that may come up when buying or selling a home, and the rules each type of agent must adhere to. All parties must read it so they know what to expect, and so they can select the type of agency relationship they prefer.

Single Agency

All agents who represent clients under single agency have a duty to treat their client with a certain standard of care. This sounds pleasant, and it is, but in practice it is a legal standard that dictates certain rules that come with the job. For instance, all real estate agents owe a fiduciary responsibility to their client. This means many things, but among the most crucial are that they have to act in the best interest of their client's finances, and they cannot share confidential information with the other party or the other party's agent. Single agency agents must use care and due diligence to perform duties, disclose all material facts, and be honest.

The duty to disclose is a tricky thing in real estate. Agents may have a duty to tell their clients of some facts and not others, and these are ruled by state law. "Material" facts set the standard, defined as those that are crucial in the choice of whether to buy or sell a home. For instance, an agent must disclose issues with a building code, or pending lawsuit, but may not need to reveal that a house was the scene of a crime.

Buyer's Agents vs. Seller's Agents

Buying agents who work for people who are shopping for homes are acting in a single agency capacity as a buyer's agent. Seller's agents who work for people who are listing their homes to sell are acting in a single agency capacity as a listing agent.

Buyer's agents and the buyer will often sign a buyer's broker agreement, which lays out the duties and obligations of the agent. In some states, if buyers do not sign this form with the agent, that agent does not represent the buyer. Instead they become a sub-agent of the seller. Sub-agents owe the same duties to the seller as the listing agent. Seller's agents and the seller sign a listing agreement, which also lays out the duties and obligations of the agent. Listing agents and buyer's agents each owe their clients loyalty, confidentiality, and accountability.

Can My Single Agent Work for the Other Party?

Many agents work all angles: as a buyer's agent with buyers, and as a seller's agent with sellers. Some agents work as exclusive buyer's agents and never take a listing. Other agents work exclusively with sellers and never show a home. If you are looking to buy or sell a house, you may prefer to deal with these types of agents over general agents, because they can provide a more focused point of view, and you may have a more clear notion of what to expect in terms of duties of care.

Dual Agency With Two Agents

Because all real estate agents are licensed under a real estate broker, you may be able to work with an agent who is licensed by the same broker as the listing agent. When this happens, it creates a dual agency. The agents could work at two offices across town and be complete strangers to each other, but since they have a license from the same broker, they are still working under dual agency. Simply put, one agent represents the buyer, and the other represents the seller.

Should I Be on the Lookout for Conflicts of Interest?

At first, an agent may have created a single agency relationship with the buyer, but when the buyer chooses a home listed by that agent's broker, the agent's relationship with the buyer changes. This can be complex when loyalty is in play, because as your buyer's agent, their duty is to help you find a home, and they want to help you get the best price. But when the house is listed with their broker, they make more money on a higher sell. You can see how it becomes crucial to find an agent you trust.

If you have a single agent helping you buy a house, and you find a home listed with that agent's broker, your agent may end up working both sides. Not all single agents note the distinction. In the real world, most of these dual agents talk as dual agency, but act in a way that is closer to single agency.

How Can I Prevent my Agent From Working With the Other Party?

Laws vary from state to state, but for the most part, dual agency must be agreed to in writing between the parties. In California, for example, standard exclusive buyer's broker agreements contain terms that allow dual agency, so most buyers don't realize their buyer's broker could be subject to dual agency. If you want to be certain that your agent is yours and yours alone, ask for exclusivity. The only type of agent who will never work in dual agency are exclusive buyer's agents and listing agents whose practice consists only of listings.

Dual Agency With the Same Agent

A listing agent for a house who also represents the buyer is a dual agent. Dual agents cannot act in a fiduciary relationship with either party and must treat both sellers and buyers equally. They cannot share confidential information or provide confidential advice. The dual agent cannot advise on home price, terms, or negotiate on anyone's behalf. It can feel awkward to try to obtain the highest and best price for the seller, when the agent also represents the buyer.

Some buyers say they prefer to work only with listing agents because they know the agent gets two commissions—one as a listing agent and one as a buyer's agent. They feel the listing agent is motivated when a buyer makes a purchase offer to get that offer accepted. While some agents work in that manner, most do not. They might also ask the dual agent to further negotiate the real estate commission to increase the seller's profit on a low-ball offer.

How Neutral Transaction Agents can Help

To avoid dual agency, some agents will work as transaction agents. Transaction agents do not represent either party and do not protect the interest of the seller nor the buyer; they simply facilitate the transaction between the two parties, and make sure the process runs smoothly.

A transaction agent helps to fulfill the terms of the purchase contract and provides the paperwork needed for each side. Having an agent of this type can help all parties avoid any conflicts or issues around loyalty that may come up when working in a dual agent setup.