What is a Dual Agency in Real Estate?

What is a Dual Agency in Real Estate

In most typical transactions of buying or selling a home, one real estate agent represents the buyer, while the other represents the home seller. These agents do a large number of tasks involved with the buying and selling of a home.

Most notably, they help monitor and relay communication between the buyer and seller. This includes offers and counteroffers. While having real estate agents isn’t required (like in the case of a for sale by owner), it is the most common route that buyers and sellers take.

What is a Dual Agent?

A dual agency is when one real estate agent or realtor represents both the buyer and the seller in the transaction of a home. This is rare, as most home selling and buying is done with separate agents to avoid conflicts of interest. While dual agency has a simple definition, the specifics of it can get a lot more complicated. Let’s take a further look into dual agency to see exactly how it works.

Dual Agency vs. Separate Agents

The key factor between dual agencies vs separate agents is in who benefits from the transaction. While both options look to try and close a deal on a house, the dynamic between buyers, sellers, and agents can change drastically between both situations.

With separate agents, both agents are working on behalf of their clients, meaning they have their client's best interests in mind. While they are looking for their commission in the end, they work to strike a deal that works the best for the client. For a seller’s agent, this means bringing in buyers and selling the home for as much as possible. For buyer’s agents, this means finding homes and getting them at the best deal possible.

Pros and Cons of Dual Agency

When it comes to dual agency, the lines start to blur. In many cases, the agent is still working to get the best deal for both parties in the buying and selling of a home, but this can be tougher to do. Advocating a higher price for the seller, and a lower price for the buyer can be a tough task. Another factor that comes into play is time.

Since the agent is working for both parties, it is in their best interest to get the deal done as quickly as possible. While a fast deal may be attractive for some, it could mean the agent is looking past some of the client's wants and needs to close. Here is a further breakdown of the benefits and drawbacks of dual agency.

Benefits of Dual Agency

Better communication can come as a result of dual agency. With the agent representing both sides, there is less communication involved between parties. In a normal situation, for example, where there are two agents, one party could tell their agent an offer.

The agent is then responsible for relaying this offer to the other party's agent, who is in turn responsible for notifying the other party of the offer. With dual agency, an offer goes to the agent, and then directly to the other party. This means faster communication and a better understanding of how the transaction is working as a whole.

Alongside this, having one agent means there is a high potential to save on agent fees. It's likely to see a real estate agent commission between 5 and 6% of the cost of the home. This percentage is then split between the two agents.

In a dual agency, the real estate agent gets to cash in on both sides, effectively doubling their commission for one transaction. Because of this, dual agents can often be negotiated with to lower the commission, especially if it means progress towards a faster close. The agent will still make more on the transaction, and both parties may benefit from reduced closing costs.

Drawbacks of Dual Agency

The interest between the agent and both parties can be misaligned. Like stated before, the agent is trying to help both sides. With both the buyer and seller looking for seemingly opposite answers, the agent is more inclined to close fast rather than deal with a negotiation where they have to monitor and advocate for both sides.

This can lead to a conflict of interest. In many cases, agents are required to advise buyers and sellers to get the deal they want. With one agent advising two parties, it can be hard to find an agreement when the agent is advocating for opposite goals.

Lastly, it may be harder to work with an agent while they also work with the other party. With two agents in a deal, each agent can cater towards one specifically. In a dual agency, the agent is essentially taking on two clients, meaning double the workload.

This means the agent will be busier and may be under more stress. While these conditions are manageable, you may find that the agent isn’t able to give the quality they are normally capable of.

The Legality of Dual Agency

While a dual agency can be common, it is very important to note that it is illegal in some parts of the United States. On top of this, dual agency can be harder to start in areas where it is legal.

To start, there are some states where dual agency is outright illegal. These states are Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont. The reason that dual agency is illegal in these states is to avoid any of the ethical issues that have the possibility of turning into legal issues. Things like a conflict of interest and some of the other drawbacks we mentioned above are enough for these states to decide to not allow dual agency at all.

In states where it is legal - such as Nevada where a real estate agent can offer dual representation when selling a house in Las Vegas - there are a few more hoops that need to be jumped through as compared to having two agents.

If dual agency is an option a buyer and seller want to pursue, both parties are required to fill out a consent form. Without this, the agent is not able to help both the buyer and the seller. 

Conclusion - What is a Dual Agency in Real Estate?

Overall, dual agency is a method that is viable in some states and can come with some benefits. While there are drawbacks, if you have everything planned out accordingly and are confident you can avoid, or effectively deal with, these problems, it may be a good option for you. 

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