Dual agency: What to know before you buy

In most real estate transactions, there’s usually a buyer’s agent and a seller’s agent. However, there are some instances where the same real estate agent represents both parties. This is known as dual agency.

Is it a good idea to work with a dual agent? Is this even legal? Let’s take a closer look at the advantages and disadvantages.

What is dual agency?

Dual agency occurs when a real estate agent works on behalf of both the home buyer and seller. In most real estate transactions, it’s much more common to have separate agents represent each party, as this helps avoid the conflict of interest that can happen when an agent negotiates for both sides.

You can work with a dual agent, especially if you fall in love with a home that your real estate agent happens to have listed. However, you’re not required to if working with someone representing both the seller and the buyer makes you uncomfortable when you’re ready to buy the house. In some states, dual agency is illegal.

Who benefits from a dual agency?

As a buyer, you may be attracted to the ease of a dual-agent arrangement. With only one agent involved in the deal, you may be able to streamline communications between you and the seller. Although there are some benefits for the buyer, the person who benefits the most from this type of agreement is the dual agent.

The dual agent will be interested in closing the deal without too much concern over the negotiation details. Why? They’ll get a commission from both the buyer and the seller, so it’s in their best interest to close the sale as near the asking price as possible. This makes it difficult for the real estate agent to satisfy their fiduciary duty and act in the best interest of both clients. This puts buyers and sellers at risk of paying more than they should in commissions.

The drawbacks of dual agency

If you are considering a dual agency situation, there are some drawbacks that you need to be aware of. These include:

• Misaligned interests between the agent and the buyer. Because the agent commission is based on the sale price, a dual agent may not be inclined to help the buyer negotiate a better price.
• Misaligned interests between the agent and the seller. Although the agent and the seller want the best price, the agent may feel pressure to close the deal more quickly.
• Conflicts of interest. Dual agents can’t advise either side they represent without creating a conflict of interest.
• Increased workload for the agent means limited availability. Dual agents take on twice the work compared to an exclusive agent, meaning buyers and sellers must battle each other for the agent’s attention.

Are dual agents illegal in certain states?

Even if you want to work with a dual agent, it’s not possible in all states. Dual agency is illegal in these states:

• Alaska
• Colorado
• Florida
• Kansas
• Maryland (unless you sign a document giving permission to the real estate agent)
• Texas
• Vermont
• Wyoming

Although dual agents are legal in most states, there can be limits on dual agency powers. The buyers and sellers will need to provide written permission to the agent to move forward if dual agency comes into the picture. Without written consent from both parties, a dual agent cannot represent both parties.

How does the commission work with dual agency?

The seller will pay the commission in a dual-agency scenario. Although the exact amount of the commission varies, it is between 5% and 6% of the purchase price.

When the buyer and seller have their own representation, the agents must split the commission. Each agent would receive only 2.5% – 3% of the purchase price.

A dual agent has a financial incentive to run the entire transaction and pocket the commission. Therefore, it’s important to be cautious when considering a dual-agency scenario because the seller’s interests don’t align with the buyer’s.

What is a dual agent vs. a designated agent?

It’s easy to confuse dual agents with designated agents. Unlike a dual agent, designated agents are two separate individuals representing the buyer or the seller. However, the designated agents may work for the same real estate broker or brokerage.

With designated agents, you’ll know that you have someone with your best interests at heart working with you. With that, many buyers and sellers prefer to work with a designated agent to ensure their REALTOR^®️ has their best interests in mind.

Is working with a dual agent the right decision for you?

Dual agency can save buyers and sellers time and frustration when navigating the home sale process. However, it’s not an agreement you should enter lightly. Before deciding, you’ll want to consider how a dual agent will affect your experience. Here’s how to tell if a dual agency arrangement is right for your real estate transaction.

For buyers

Dual agents can be more beneficial for buyers than sellers. Working with a dual agent may increase the number of available homes you can view easily and simplify communication with the sellers since they’re already working closely with them.

Dual agents may earn a higher commission representing both the buyer and seller. The commission is usually split between the buying and listing agents. In the case of dual agents, the entire commission is theirs.

If you’re worried about communicating with sellers or want to be able to view the most homes possible before making an offer, working with a dual agent may be a good idea.

For sellers

Dual agents can streamline the home sale process, helping you sell your home faster and with less hassle. However, since they represent the buyer, too, your real estate agent may not be willing to negotiate a higher price with the buyer. This can eat into your profit and keep you from getting the terms you want.

Working with a dual agent may be an acceptable option if you’re in a hurry to sell and aren’t worried about maximizing your potential profit.

The bottom line: Dual agency can be challenging to navigate

Although there is nothing wrong with working with a dual agent – in states where it’s legal – it can be tricky to confirm that your real estate agent is working for your best interests. It may be easier to work with your own agent to ensure that your interests are being taken care of.

Take your time to weigh the pros and cons before working with a dual agent. Once you’re ready to look at homes and find a trustworthy real estate agent, start the mortgage process. This way, you can make an offer as soon as you find a house you love.