What Is Dual Agency In Real Estate?
In a typical home sale, the buyer and seller each are represented by a real estate agent. The buyer’s agent works to get the best deal possible for their client, while the listing agent does the same for the seller. But what happens when one agent represents both parties? It’s called dual agency, and it has advantages and drawbacks, depending on your situation.
Key Takeaways:
- Dual agency is when the same real estate agent represents the buyer and seller in a single transaction.
- Dual agency can simplify the sale for buyer and seller, but both parties lose out on having their own agent representing their interests in the deal.
- Due to the risks associated with dual agency, the practice is illegal in some states.
What Is Dual Agency
Dual agency is when one real estate agent represents both the buyer and the seller in a home sale. This can simplify the transaction but it also can create a conflict of interest where the agent cannot fully represent both parties’ interests. As a result, dual agency is illegal in some states and rare where it is allowed.
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How Does Dual Agency Work?
In a typical real estate transaction, the buyer’s agent and the listing agent split the commission. The exact amount varies, but it’s usually 5% to 6% of the purchase price. That means that the listing agent and the buyer’s agent typically each walk away with 2.5% to 3% of the sale price. In a dual-agency scenario, the agent keeps the full commission.
Dual agency can work if you’re buying a home from a friend or family and have already agreed on a price. In that case, a dual agent’s role is to facilitate the transaction. A dual agency also may work if the home you decide to buy is listed by your agent. Or perhaps you found the home you want to buy before you found an agent of your own, so you contacted the listing agent and agreed to a dual agency arrangement.
However, it’s important to remember that using a dual agent means you may not get an agent who’s entirely focused on and representative of your interests.
“Dual agency is not ideal if either party needs dedicated representation, especially in negotiations,” says Erin Hybart, a licensed Realtor at Client’s First Realty in Baton Rouge, Louisiana. “Since the agent is trying to serve both sides, it’s tough to advocate for one party over the other fully. If the transaction is complex or either side wants extra support, a dual agent may not be the best fit.”
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Is Dual Agency Illegal In Some States?
Dual agency is illegal in the following states:
- Alaska
- Colorado
- Florida
- Kansas
- Maryland
- Texas
- Vermont
- Wyoming
In states where it’s legal, a dual agent may be required to get written consent from both the buyer and the seller before representing both parties in a transaction.
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Who Benefits From Dual Agency?
The person who benefits the most from a dual agency is the real estate agent because they get to take home double commission. If the buyer and the seller have worked out a deal on their own, then a dual agent can help them save both time and money.
“Dual agency can make sense when both parties want a quick, simple transaction,” Hybart says. “A dual agent can streamline communication in a competitive market where homes sell fast. It also works if both parties are confident in the property’s value.”
Risks Of Dual Agency
Dual agency can be risky for both the buyer and the seller. Since they’ll be paid a percentage of the purchase price, the agent may lack the incentive to get the best deal for the buyers. And if you’re a seller, your agent may push back on asking for a higher price because they also represent the buyer.
“I rarely do dual agency because I believe both buyer and seller lose out on full representation,” Hybart says. “It’s ‘hard to win a war against yourself’ and I don’t sleep well at night if I feel I haven’t fully represented each side.”
Who Pays Fees And Commissions With Dual Agency?
In a traditional real estate sale, the seller pays the agents’ commission — and the same is true with dual agency. However, some buyers and sellers may agree to split a dual agent’s commission since they split their services. It’s also possible to pay a lower percentage commission since the agent won’t have to split it.
What Is A Dual Agent vs. Designated Agent
A designated agent is different from a dual agent in real estate. Dual agency is when one agent represents both parties in a real estate transaction. Designated agency is when two agents from the same brokerage oversee a transaction, with one agent representing the seller and another the buyer. Designated agency allows each agent to perform their fiduciary duties to represent their client’s interests. As a result, designated agency is more common than dual agency.
Dual Agency Pros And Cons
Before agreeing to use a dual agent, knowing the potential benefits and downsides is important.
Pros And Cons Of Dual Agency
| Pros | Cons |
|---|---|
| Less negotiation. When the same agent represents both parties, there can be less back-and-forth. | Conflict of interest. A real estate agent can’t work to get a buyer the lowest price on the home if they’re also working to get the seller the highest price. |
| Faster closing. When the same agent prepares all the paperwork, it can expedite closing. | Possible bias toward a higher price. The real estate agent’s commission is based on a percentage of the purchase price, so they’re incentivized to close at a higher price. |
| The seller may be able to negotiate a lower commission rate. Since the agent doesn’t have to share the commission, they may accept an overall lower percentage of the purchase price. | Possible bias to rush the sale. If the agent represents both sides, they may be eager to close quickly, which could disadvantage the buyer and the seller. |
| More knowledge about the property. A listing agent will have more information about a home than a buyer’s agent, which could give you additional insights. | Neither the buyer nor the seller gets the agent’s full attention. If you have the same agent representing both parties, you’ll have to split their time and attention. |
FAQ
Here are answers to some frequently asked questions about dual agency.
Do you have to hire a real estate agent to buy a home?
No, hiring a real estate agent to buy a home is not required. However, an agent can help you negotiate a reasonable price and navigate the home buying process. Plus, the seller typically pays their fee.
What is an undisclosed dual agency?
Undisclosed dual agency is when the same real estate agent or brokerage represents both the buyer and the seller in a single transaction without the consent of both parties.
How much do dual agents make?
Dual agents can make a commission of 5% to 6% of the home’s purchase price. That amount usually is split between the buyer’s agent and the listing agent, leaving some room for the seller to negotiate a discount on the commission.
The Bottom Line
There are cases where dual agency can speed up and simplify a real estate transaction. However, it’s important to understand the potential downsides of not having your own agent to represent your interests in the deal. It can be a conflict of interest and lead to you overpaying for a home. Keep in mind that dual agency is rare and even illegal in some states.
