What Is Dual Agency in Real Estate?
Agency laws allow your real estate agent to represent both parties
Dual agency means that the listing broker represents both the seller and the buyer in the same real estate transaction. A dual agent—sometimes referred to as a transaction broker—must not disclose confidential information to either party and must operate in a hands-off manner. It can be a little like walking a tightrope.
How Dual Agency Happens
Dual agency happens when the listing agent and the buyer's agent both work for the same brokerage firm. A broker and her agents are the same legal entity for business purposes. The broker's relationship with the buyer and the seller is what determines dual agency, not necessarily the relationship with the agent.
For example, a home on Main Street might be listed by Broker Betty Smith of the Betty Smith brokerage firm. Betty's agent Samuel brings an offer to her. Samuel's buyer is therefore represented in dual agency because of the linked relationship between Samuel and Betty's firm, making them the same business entity.
The offer is rejected by Betty Smith's seller so Samuel's buyer makes an offer on another property on Main Street. This property is listed by Joe Doyle's brokerage firm. Because agent Samuel does not work for Joe Doyle's firm, Samuel's buyer-client is now represented by one agency under a single agency agreement.
More complicated forms of dual agency can occur, such as when a real estate agent represents one client as the listing agent, finds a buyer for the home, and then signs a listing agreement with the buyer to help her sell the home so she can buy the agent's listing.
Dual agency relationships can cause legal issues because real estate agents are bound by fiduciary duties. These duties require undivided loyalty to their clients.
The fiduciary duties of real estate professionals are written into state, contract, tort, and licensing laws. Real estate agents must fully disclose dual agency relationships to ensure that all parties understand dual agency and consent to it and to remain compliant with the law.
Consumers should be aware that agreeing to dual agency means that they're giving up—to some extent—their right to their agent's undivided loyalty.
Dual Agency and Your Real Estate Contract
Dual agency circumvents a real estate agent’s fiduciary duty to be loyal to you. Although the agent continues to be legally obligated to keep your private information confidential, and although he can't use it to give his other client in the transaction an unfair advantage over you, an attorney might advise you to be cautious of what you say around your agent.
As a client, you have the right to refuse dual agency representation even when the clause is presented to you in a boilerplate real estate listing or buyer-agency agreement. You might consider hiring another broker to represent you if you're uncomfortable with a dual agency arrangement.
Can Dual Agency Be a Good Thing?
Very few things in life—and particularly in business—are purely good or completely bad. Although dual agency presents some unique concerns and problems, those potential problems can be balanced somewhat by a few advantages.
Maybe you're trying to purchase a home and you have a question for the listing agent. It's not a question that would divulge privileged information but rather something that any potential buyer would want to know. You won't have to cool your heels waiting for the listing agent to call your agent back with the information because your agent and the listing agent are one and the same.
Dual agency can go a long way toward streamlining the whole transaction process whether you're the buyer or the seller. Everyone is rowing the same boat, making the scheduling of various events a little easier.
You could also potentially save some money, particularly if you're the seller. Normally, you would have to pay a commission to your agent—often 6 percent—which would then be split with the other agent. You might catch a break if you're dealing with just one agency, agent, or entity by negotiating that percentage down a little.
When Dual Agency Isn't Such a Good Thing
Complications can arise in dual agency transactions that are problematic for all parties—including the agent. For example, a dual agent can't use her tough negotiating skills to get both the highest price for her seller and the lowest price for her buyer. It's impossible. This is one of a handful of reasons that dual agency isn't legal in all 50 states.
And how many times have you asked someone else to doublecheck your work product, to look at it with fresh eyes to catch something you might have missed? There are no fresh eyes in a dual agency situation. Having two separate agents, brokers, or entities involved can mean that one party might—or should—notice if another takes a misstep so the issue can be corrected.
This can make for a more flawless transaction and it can create a more level playing field. No single person or entity is holding all the cards. This can be particularly important when an agent isn't entirely scrupulous and might be willing to fly in the face of his fiduciary responsibilities.
In the end, it can come down to what's most important to you. Do you care more about saving money and a snappy, streamlined process or would you rather know for sure that your agent really has your back?
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.