Why Dual Agency in Real Estate Is Bad For Buyers and Sellers



What is Dual Agency and How Does it Work?

There are lots of things in a real estate transaction that a layman has no idea about. Most people do understand the basics of representation. For example a “seller’s real estate agent” represents a seller and a “buyer’s real estate agent” represents a buyer. Pretty simple and easy enough to understand.

In these scenarios, the real estate agent has their clients back. They are the ultimate guide in fulfilling their clients goals. Throughout the transaction they are a trusted advisor.

There is a third type of representation and it is not pretty. In fact, you could call it the dark side of real estate. It’s what’s referred to as dual agency.

Have you heard of dual agency and never knew what it meant? It’s when one real estate agent represents both a seller and buyer in the same sale. It may sound like a good idea, but it’s something you should avoid.

Why? Sellers and buyers have different goals and need different things, and it’s impossible for anyone to serve two masters. It would be like an attorney trying to represent opposing sides in a lawsuit. That sounds crazy right? Honestly, because it is, just like dual agency!

Here’s why a dual agency is not the brightest idea and should be rejected.

Lack of Advice

Whether you’re buying or selling your home, it’s nice to have advice about the potential dangers of each situation, as well as tips on accepting offers or giving offers. Unless you’re a real estate agent, the terms can be difficult to understand. How much should you offer on the home? Is the asking price fair? Are there any conditions about the property I should be made aware of?

You need someone who is on your side who can help you make smart decisions. You need an agent who will be with you every step of the buying or selling process to provide peace of mind. A dual agent cannot do this for you. Why? A dual agent by law must become a neutral party in the transaction. They cannot favor either party. What this means in the real world is that the real estate agent cannot give you any advice. Sounds great doesn’t it? NOT!

How can a dual agent advise you on how to get more money for your home while telling buyers how to get you to lower your asking price; this is what is known as a conflict of interest.

Here is a real world example so you understand what I mean. You list your home on Main Street for $300,000. You allow YOUR real estate agent to practice dual agency. The agent finds a buyer and becomes a dual agent. The buyer makes an offer of $280,000. Having never sold a home before you ask your agent on what you should do.

Should you accept the offer? Should you counter at some other figure? In dual agency you are out of luck. Your real estate agent is no longer allowed to counsel you. Sounds fantastic right? You are paying a real estate agent thousands of dollars and they can’t give you any advice!

The same holds true for the buyer. The real estate agent can’t give them any advice either. It is the blind leading the blind. Here is another sad fact – there are plenty of agents who have no problem with this arrangement. Why? It benefits them. The agent makes double the commission.

With dual agency, the agents incentive is to close the deal. In traditional seller’s agency or buyer’s agency the goal is to do what’s best for their client. Giving buyers and sellers advice in dual agency is illegal. Unfortunately, a significant percentage of real estate agents do it anyway. Some are unethical and some just don’t know the law. It’s a real shame.

A Departure From a Real Estate Agents Duties

When you are selling a home, your real estate agent should always remain as a seller’s agent. To be clear regarding the example above, your real estate agent doesn’t have to become dual agent and you should never let them. They can still work with the buyer but remain as a seller’s agent. They show the buyer the house but continue to work in your best interests.

Why do so many real estate agents not do this? It really is simple. They fool both parties into thinking there is nothing wrong with dual agency. What is the incentive you might ask? Well, that’s the easy part. A double real estate commission!

Bring On the Confusion

The dual agency topic may be difficult to understand because it’s confusing. Having a person work for you and against you is insane. Having a dual agent comes with great feelings of uncertainty.

Here is one of the worst parts of dual agency – the person explaining dual agency has a vested interest in you agreeing to it. What do you think happens in kitchens across America when real estate agents who practice dual agency explain it?

I will tell you what happens and it is one of these three things:

  • The agent doesn’t explain it properly.
  • The agent makes it sound like there is nothing wrong with dual agency.
  • The agent doesn’t discuss it at all (totally illegal).

Dual agents fool buyers and sellers all the time with inaccurate information on what they can and can’t do. Believe it or not, some real estate agents don’t even understand dual agency. I have run into many who falsely believe they are allowed to counsel both parties. Many do and it is illegal!

Don’t Believe the Hype

Some real estate agents will argue there are pros and cons of hiring a dual agent.  The cons outweigh the pros by such a significant margin it’s hardly worth discussing. Although saving money is a possibility when you hire a dual agent, it’s not worth getting stuck with something you don’t want or lining the pockets of a dual agent with your hard-earned money.

Will it be worth it to save a couple of thousand dollars in commission but overpay by over ten thousand for a home? The math doesn’t sound great does it?

You need one real estate agent that will get the job done with your best interest in mind. You don’t have to worry about a conflict of interest because a real estate agent is there to help you get what you need when you need it without a bunch of malarkey.

You deserve the best whether you’re buying or selling your home. Hire a real estate agent that does not practice dual agency. If you are selling a home, make sure you’ve got a seller’s agent. When buying, only accept having a buyer’s agent. Having someone in your corner is vital when buying or selling a home.

Don’t settle. Get what you need by hiring a real estate agent.

Designated Agency VS Dual Agency

Another confusing part of the term dual agency is that it can mean different things. In the example I provided above, dual agency is described as one agent working with a buyer and seller. In some states, dual agency is referred to as two agents from the same office working with a buyer and seller.

In my humble opinion, there is nothing wrong with that. Each party has their own real estate agent in their corner representing their interest. Many states don’t call this dual agency but designated agency. The broker/owner designates one agent to work for the seller and one to work with the buyer. There is no sharing of information between agents. Each party has full representation.

States That Have Banned Dual Agency

Some states have been smart enough to make the practice of dual agency illegal. Here is where you cannot be a dual agent:

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

Frankly, dual agency should be banned if every state. There are a number of consumer groups that are pushing for that to happen.

Final Recap

When buying or selling a home you should always have your own real estate agent in your corner. Someone who is going to represent you to the fullest. An agent who is going to fight hard to meet all your objectives. You should never allow dual agency where the agent you’re working with can do none of those things legally.

Other Helpful Real Estate Articles Worth Reading

  • Avoid these first time home buyer mistakes – when you have never purchased a home before it is very easy to make mistakes. Take a look at some of the places where buyers get tripped up and avoid them.
  • What to ask a lender when buying a house – see some of the most frequently asked questions that a lender gets asked by home buyers. The answers to these questions will be a key part of your on-going financial success when buying a home. Make sure you do your due diligence.

Use these additional resources to make solid decisions when you are buying a home.

Bill Gassett About Bill Gassett

Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys writing helpful articles for buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and here at Realty Biz News. He was the #1 RE/MAX agent in Massachusetts for 2018.

Comments

  1. It’s legal in California. But I usually have a buyer’s agent to represent the buyer when I’m the listing agent.

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