Dual Agency: What Home Sellers And Buyers Should Know

In most real estate transactions, the buyer and seller are represented by different real estate agents. The buyer’s agent works with the buyer, and the listing agent works with the seller.

But what happens if one agent represents both parties? Can that agent represent the best interests of both the buyer and the seller? This article will explain how dual agency works and why it’s risky for everyone involved. 

What Is Dual Agency In Real Estate?

In most real estate transactions, the buyer and the seller have a separate agent representing their interests. In a dual agency situation, a real estate agent works simultaneously on the seller and home buyer's behalf. This arrangement can work, but a dual agency transaction might introduce a conflict of interest.

Dual Agency Can Split Allegiances

Real estate brokers have a fiduciary duty to act in the best interest of their clients, but this can get tricky if they’re representing both parties in a home buying process. For example, a buyer’s agent is responsible for helping their clients find the house they want at the lowest price possible.

Meanwhile, the seller’s agent is supposed to help the sellers make the most money possible from the sale of their home. If a dual agent is representing both parties, the best interests regarding the price of the home are directly at odds.

A real estate agent can represent both parties fairly, but the potential conflict of interest makes it difficult. That’s why some states have made dual agency illegal.

How Does Dual Agency Work?

Dual agency scenarios are rare, but they can occur if you live in a smaller real estate market. For example, it can happen when the listing agent finds a buyer at an open house who doesn’t have an agent representing them.

If the agent becomes a dual agent, they don’t have to split the commissions with another agent. This means the dual agent can keep the entire 6% commission paid since they helped the seller sell the home and helped the buyer find the home. Dual agency is also common in For Sale By Owner (FSBO) and rural property transaction scenarios.

For Sale By Owner

Dual agency sometimes happens with FSBO properties – this means the home was listed without using a listing agent. In this scenario, the buyer’s agent may end up representing the seller as well.

This may help the sale proceed more smoothly but can create a conflict of interest. Regardless, most FSBO sales that include an agent are usually single agency situations, because the agent only represents the buyer, and the seller represents themselves.

Rural Areas

If you live in a rural area, there are probably fewer homes and fewer real estate agents to choose from. This lack of resources increases the likelihood that dual agency will occur. For example, when a new home is listed, it’s more likely that prospective buyers either don’t have an agent or already hired the listing agent.

The Ethics Of Dual Agents

The National Association of REALTORS^® allows for dual agency in its code of ethics but states that agents must disclose this information to the buyer and seller. Dual agents are also required to obtain written consent from both parties.

In most cases, dual agency increases the risk of conflicts of interest, but there are some instances where it can make the process easier. For example, when it comes to the sale of homes between family members, a dual agent can save both parties time and money.

Why Dual Agency Is Illegal In Some States

Real estate brokers are considered fiduciaries, which means they’re responsible for disclosing all information to the client and putting the client’s interests ahead of their own. This is hard to do if an agent represents clients with competing goals and agendas. So even though the NAR allows for dual agency, some states have outlawed it.

States That Ban Dual Agency Or Regulate It

The following states have banned or severely limit the practice of dual agency:

• Wyoming
• Alaska
• Vermont
• Colorado
• Florida
• Maryland
• Texas
• Kansas

The laws vary slightly from state to state, so you’ll have to research the guidelines in your location. For example, Alaska outlaws dual agency but allows for designated agency. In comparison, Kansas and Oklahoma banned dual agency outright.

Designated Agency Vs. Dual Agency

In dual agency, one agent represents both the buyer and the seller in the same real estate transaction. Designated agency means two agents from the same brokerage can represent the buyer and seller in a real estate transaction. This is also sometimes referred to as appointed agency.

The benefit of designated agency is that the buyer and the seller have their own real estate agents. The risks of a conflict of interest are much lower, especially at a large brokerage where the agents may not even know one another.

Pros And Cons Of Dual Agency

If you’re in the process of buying a house, should you consider using a dual agent? Maybe, as there are advantages of dual agency. Here are the biggest pros and cons to consider about dual agency.

FAQs: Dual Agency In Real Estate

Here’s some additional information about dual agency in real estate.

Is it ethical to act as a dual agent?

Assuming you live in a state that allows it and the buyer and seller have both been informed and given their written consent, it’s ethical to act as a dual agent. However, a real estate agent is tasked with serving the best interest of their clients, which is difficult in dual agency.

What is the difference between single agency and dual agency?

Single agency means that the real estate agent or broker works with only one party involved in a real estate transaction. In dual agency, the agent represents both the buyer and the seller during the real estate transaction.

If You’re Selling, Work With A Seller’s Agent

An exclusive seller’s, or listing, agent is a real estate agent who focuses on assisting their clients through the process of selling a home. If you are selling your home, this agent owes the seller reasonable care, undivided loyalty, obedience to lawful instruction, disclosure, confidentiality and accountability. A seller’s agent must also negotiate terms acceptable to a buyer and must always put the buyer’s interest first. You should be able to expect your seller’s agent to do things like:

• Extensive marketing of your property
• Price your home correctly
• Make sure the buyer is qualified
• Communicate with buyer’s agent throughout the process
• Negotiate the best term
• Negotiate home inspection repair requests for the seller
• Attend the home appraisal
• Finalize loose ends for closing
• Attend the home inspection to represent the seller

Much like a buyer’s agent, but unlike a dual agent, a seller’s agent is only going to be responsible for the person selling a home. Again, they will only get a 3% commission to do their job.

The Bottom Line: Avoid A Dual Agency Scenario When Possible

Choosing the right real estate agent can make all the difference in your home buying journey. Your agent can help you find a home that meets your needs, negotiate for the lowest price and walk you through the closing process.

Though it may be unavoidable in some cases, dual agency in real estate is a conflict of interest and should be avoided. You want to work with a real estate agent who can advise you and act on your behalf, and that gets tricky with a dual agent.

If you’ve found the right real estate agent and are ready to find your dream home, you can start an application online and get preapproved today.