Learn About Single Agency in Real Estate
In real estate, the term "single agency" indicates that a broker or agent will represent the interests of either the seller or the buyer—as either the listing agent or the buyer's agent. In other words, the agent will sit on only one side of the transaction. Single agency is the most commonly used form of real estate representation.
A dual agency exists when a broker or agent represents both the buyer and the seller of a property. Dual agency is forbidden in some locales. In a dual agency relationship, many experts feel that neither the buyer nor the seller receives adequate representation. For many, it appears to be a conflict of interest when brokers or agents represent their clients through dual agency.
Aspects of Single Agency
Under single agency, a broker representing a buyer is prohibited from showing the buyer properties listed by the broker's agency—in-house listings—without the buyer's express permission.
If that buyer wants to purchase a property listed by the agency representing, and if the seller agrees, then it becomes a dual agency relationship. That means the broker's agency is representing both the buyer and the seller at the same time.
In parts of the country where dual agency is not allowed, some brokerages specialize in single agency, operating as exclusive buyer's agents. In this situation, they do not work with sellers at all. On the other hand, there are other specialty brokerages that work exclusively with sellers.
In most other types of agency relationships, the agent owes their client fiduciary duties of loyalty and obedience. That means that, if we are the buyer, we can expect the agent to place our interests ahead of their own, provide services with honesty and good faith, and avoid conflicts of interest.
In some cases, real estate agents actually have no legal obligation to look after their clients' best interests. Laws in 25 states now allow brokers to provide services to buyers and sellers as "transaction brokers" or "facilitators," without the traditional fiduciary duties of loyalty and obedience.
In the other 25 states, the agent is required by law to:
- Deal honestly and fairly
- Show loyalty
- Respect confidentiality
- Exhibit obedience to the best interests of their client
- Give full disclosure, always
- Account for all funds
- Exhibit skill, care, and diligence in the transaction
- Present all offers and counteroffers in a timely manner, unless a party has previously directed the agent otherwise in writing
- Disclose all known facts that materially affect the value of a residential real property and are not readily observable
Because fiduciary duties are written into real estate licensing laws, real estate agents are required to fully disclose dual agency relationships. All parties involved must give full and express consent to the terms in order to remain compliant with the law.
Transaction Broker Agency Relationship
A transaction broker is the default role of a broker or agent; they do not represent the buyer or seller, but instead they as a neutral go-between to help both parties complete a home sale. Here, the broker is representing the transaction and acts as a neutral party.
The transaction broker owes both parties limited confidentiality. That means that the transaction broker cannot tell the buyer that the seller would really agree to a lower price, or the selling that the buyer would go higher, without the express permission of the party in question.
Is Single Agency the Right Choice?
While dual agency is not allowed in some parts of the country, you may live in a place where you're able to choose between single agency and dual agency. Is single agency the right choice for you?
In general, buyers and sellers are better served by single agency.
If you want to be sure your real estate agent is acting in your best interest, you're better off with single agency. In dual agency, the agent is required to act in the best interest of both the buyer and the seller, and it's basically impossible to do both things at the same time.