What You Need to Know about Dual Agency? When the Agent Represent both Seller and Buyer
Most real estate transactions involve several parties. The primary parties are the home seller and the home buyer. Typically both home seller and home buyer are represented by an agent – Seller’s agents and Buyer’s agents to represent their client exclusively. Both Seller’s agent and Buyer’s agent owe the seller and the buyer a duty of fiduciary responsibility: loyalty, confidentiality and accountability, and are obligated to protect their client’s interests.
In some situation, it’s possible for the same real estate agent represent both the buyer and the seller in the same transaction. This scenario is known as dual agency, and it comes with benefits and problems for all parties.
What is a dual agency?
Dual agency occurs when the listing (seller’s) agent represents both the seller and the buyer in the same transaction. In theory, this should speed up transaction since there is only one agent handling all the communication. However, there’s also a downside. Because the agent is representing both parties, the agent cannot give their undivided loyalty to either principal in the transaction. For example, a dual agent cannot negotiate the highest, best price for seller and the lowest and most competitive price for buyer.
Dual agents must treat both parties equally and attempt to balance the interests of the buyer and the seller without compromising the position of either parties. The agent must clearly explain that they are acting for both the seller and the buyer in the transaction, and explain the possible consequences of dual representation.
How do I know if my agent is a dual agent?
Dual agency relationship is only permitted if both the buyer and the seller give their written consent. This sounds simple, but sellers and buyers often find themselves in a dual-agency relationship without realizing what is happening.
The only way to know for sure whether your agent is, or could be a dual agent is to ask.
What are the advantages of dual agency?
Quicker, more efficient transaction
Most agents will tell you that dual agency leads to a more efficient and effective transaction. Having one agent handling the transaction naturally unblocks any hiccup and can expedite a sale.
Potential costs savings
Home sellers typically pay 5 percent or 6 percent of the sale price as commission, which is split between the seller agent and the buyer agent. Since dual agent represent both seller and buyer, the agent will receive the whole amount. In this situation, seller may negotiate a reduced fee.
Buyer can potentially save the costs too. Reducing the brokerage fee means the seller gets to keep more of the sale price. The seller may be willing to reduce the sale price and pass some of the savings to the buyer.
What are the drawbacks of dual agency?
Potential conflict of interest
In typically transaction, there will time both parties disagree about something, especially in pricing. That puts the dual agent in a tricky situation. The seller may tell the agent what’s the lowest price they will accept, but the agent cannot pass the information to the buyer. On the other side, buyer may tell the agent what’s the highest price they will offer and the agent cannot rely the information to the seller.
Lack of advice
The biggest drawback is that a dual agent is extremely limited in the services they can offer to you. The agent cannot tell you how much to offer or counteroffer, or advise you whether to accept or reject an offer. When it comes to negotiating the deal, you basically are on your own.
Whether selling or buying a home, it is important to hire an agent to help you with negotiations. You hire an agent to negotiate the best price and terms based on you and your family situation. In dual agency scenario, this most likely not going to happen since dual agent only can provide very limited advice.
Final Thoughts
Dual agency is a tricky situation and it definitely isn’t for everyone. Working with a single agent may streamline the real estate transaction and produce faster, more efficient outcomes, but it also opens the door to some ethical issues. The bottom line is, if you’re not comfortable with your agent serving two masters, don’t hire a dual agent.
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