What is dual agency? And, what are its risks?

Typically, a real estate transaction involves separate agents for the buyer and the seller. However, there are instances where a real estate agent takes on a dual role, serving as both the listing agent and the buyer’s agent in a single transaction. But, is a dual agency advisable? Is engaging with a dual agent, even legal? What are the risks of dual agency? Let’s find out. 

What is dual agency?

Usually, when someone wants to buy a house, they get help from a buyer’s agent. This agent works specifically for the buyer, helping them find and buy the right home. On the other hand, the seller has their own agent, whose job is to market and sell the home at a good price.

In a regular situation, each agent works for their own party, following a rule called fiduciary duty, which means they have to act in their client’s best interests. However, in a dual agency, the same agent represents both the buyer and the seller. This happens when one agent works for both sides of the home sale.

If you really like a home that your real estate agent is selling, you can choose to work with a dual agent. It’s not mandatory, though, and some states even consider it illegal. If the idea of one person representing both the buyer and the seller makes you uncomfortable, you don’t have to go for it.

Is dual agent the same as a designated agent?

Unlike a dual agent, designated agents are two different people representing either the buyer or the seller. However, these designated agents might work for the same real estate broker or company.

Choosing designated agents gives you the assurance that you have someone looking out for your best interests. Because of this, lots of buyers and sellers prefer working with designated agents instead of dual agents.

How to choose the best real estate agent?

When interviewing a real estate agent, it’s essential to ask key questions to ensure they’re the right fit. Begin by inquiring about their experience in the local market and their track record of successful transactions. Understand their communication style and how often they will provide updates. Ask about their strategy for marketing properties and how they determine the right listing price. Inquire about any potential conflicts of interest, ensuring they prioritize your best interests. Don’t hesitate to get client references. A good real estate agent should be knowledgeable, communicative, and committed to guiding you through the buying or selling process with transparency and expertise.

Can two realtors list the same property?

Yes, it’s possible for two realtors to list the same property, a situation known as co-listing. In co-listing, both real estate agents collaborate to market and sell the property. This arrangement can offer advantages such as a broader network and increased exposure for the property. However, it’s crucial for the property owners and the realtors involved to have clear agreements on responsibilities, commission splits, and communication channels to ensure a smooth and coordinated selling process.

Who benefits the most from a dual agency?

If you’re buying a house and only dealing with one agent, it might seem easier. But, the person who benefits the most in this setup is actually the real estate agent. The agent wants to make a deal that works for both the buyer and seller, but they also want to close the deal quickly without worrying too much about negotiations. Since they get a commission, they’re motivated to close the sale at a high price, This can end up costing the buyers and sellers more in commissions.

How does dual agency work?

Dual agency often happens when the buyer and seller of a home use the same real estate company. It can also occur if a buyer contacts the agent selling the house directly, like through a for-sale sign or online listing, without having their own agent.

For instance, imagine you want to buy a house but don’t have a buyer’s agent yet. You go to an open house, really like the place, and talk to the agent who’s representing the seller. You get along well with that agent and decide to work with them directly to make an offer and buy the house. If the agent agrees, they become a dual agent, representing both you and the seller.

Whether you’re the buyer or the seller, it’s crucial to know how the agent is representing you. Both parties need to agree to this dual agency, and the realtor must get consent from both the buyer and the seller. If either the buyer or seller isn’t comfortable with the idea of having a dual agent, they can choose not to go through with the deal.

What commission does a dual agent work on?

In a dual-agency situation, the seller pays the agent commission. The exact amount, usually 5% to 6% of the purchase price, can vary. When both the buyer and seller have their own agents, the commission payment is split between them, each receiving 2.5% to 3% of the purchase price.

A dual agent has a financial incentive to handle the whole deal and keep the full commission. This is why it’s crucial to be careful when thinking about dual agency, as the seller’s and buyer’s interests may not align.

What are the advantages and disadvantages of hiring a dual agent?

Dual agency, where a real estate agent represents both the buyer and seller in a transaction, has both advantages and certain risks. One notable advantage is communication efficiency. With a single agent facilitating the deal, information flows more smoothly between the parties involved, potentially expediting the negotiation and closing processes.

A traditional listing process may take anywhere between three to six months, while a dual agent may be able to expedite the deal efficiently. Additionally, some argue that dual agency can lead to a more cohesive and streamlined transaction.

On the flip side, the primary disadvantage lies in the potential conflict of interest. The agent must balance the needs and priorities of both the buyer and the seller. There may be a situation where neither party feels entirely represented.

This dual role can raise ethical concerns, as the agent may face challenges in providing undivided loyalty to both sides. Transparency is crucial, and both parties must be well-informed and comfortable with this arrangement. 

Is dual agency legal throughout the U.S.?

Real estate dual agency is prohibited in these eight states: Alaska, Colorado, Florida, Kansas, Maryland, Texas, Vermont, and Wyoming. 

While dual agents are legally permitted in other U.S. states, there are typically restrictions in place that limit their powers. To work with the same agent, both buyers and sellers must provide written permission to the agent. Without written consent from both parties, a dual agent is unable to represent both sides.

Last thoughts

A dual agency transaction can help save time and avoid headaches for both buyers and sellers during a home sale. However, it’s a decision that requires careful consideration. Take your time to think about the advantages and disadvantages before committing to a dual agent. 

While it’s okay to have a dual agent representing both parties, it can be challenging to ensure that the agent is truly looking out for your best interests. Choosing your own listing agent might be a simpler way to make sure your needs are prioritized. And, your dream home comes to you at a fair price.

Written by Ramona Sinha. November 18, 2023

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.