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Dual Agency in Real Estate Should Be Avoided

Feb 8th 2019 at 11:43 AM

What is Dual Agency?

Buying and selling a home can be complicated when you don't do it everyday. Many consumers have no idea how things work in the various aspects of a real estate transaction. Consumers rely on a real estate agent explaining and guiding them through various processes.

What is fairly understood by most people is that real estate agents can work for buyers or sellers. For example, in real estate an agent working for a seller is known as a "sellers agent" while and one working for the buyer a "buyer's agent" simple enough.

Where it becomes complicated is when the discussion centers around a dual agent or dual agency as it is commonly referred to.

Dual agency is when the real estate agent works for both the buyer and seller in the same real estate transaction. You might be wondering how that is even possible. How can one agent truly represent the interests of two parties that have conflicting goals?

The honest answer is they can't! Dual agency is often referred to by honest agents as the dark side of real estate.

There is only one party who benefits in dual agency and that is the real estate agent.

How Dual Agency Works

Consumers end up on the short end of the stick when they participate in dual agency. The real estate agent you hired is no longer allowed to give you any advice. The agent by law must be a neutral party in the transaction. They cannot favor one party over another.

Let me give you a real world example. I will give it from the perspective of selling a home. You list your home with an agent who practices dual agency.

The agent gets an inquiry on your home and signs up the buyer telling them they will be a dual agent. The buyer makes an offer on your home that is listed at $400,000 for $375,000.

As a seller, when you ask your agent what you should do, the person you hired to be your trusted confidant is no longer allowed to help you. They cannot tell you what should be done. They cannot suggest a counter offer. Doing so would be illegal.

Are you starting to get the picture on why dual agency is so bad? Frankly, it should be banned in every state. Quite a few states have banned dual agency.

Numerous consumer advocacy groups have written about why dual agency deceives so many people and why it should be rejected.

More Problems With Dual Agency

  • Dual agency is often explained incorrectly to buyers and sellers.
  • Sometimes dual agency is not discussed at all which is illegal.
  • Quite often real estate agents have no idea what they can and can't do as a dual agent.
  • Worst of all is the fact that lots of agents will not follow the law and give both the buyer and seller advice.

Difference Between Dual and Designated Agency

Sometimes in real estate different states have different meanings for the same terms. Dual agency is one of them. What I described above is dual agency with one agent serving both a buyer and seller in the same transaction.

In some states dual agency can also mean two agents working for the same company each working for a buyer and seller.

Many states refer to that situation as designated agency.

Final Recap

When you are buying or selling a home, never allow dual agency. There is no benefits to buyers and sellers. The only winner in dual agency is the real estate agent who makes a double commission!

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