Definition of "Dual Agency"

Jaime Hart real estate agent

Written by

Jaime Hartelite badge icon

Watson Realty Corp

When we talk about agency as a real estate concept, we understand the relationship between the real estate agent and the client. However, the term dual agency defines a type of agency that is considered controversial in some states, while in others, it is acceptable if it’s acknowledged. So, precisely what is dual agency in real estate? We’ll cover the subject in the following response.

What does Dual Agency mean in Real Estate?

Through dual agency in real estate, we understand the duality of an agency relationship. This can occur when one agent or real estate brokerage company represents not one but two clients, both the seller and the buyer, during the same real estate transaction. The reason why this type of agency relationship is controversial is the fact that the agent must be neutral towards both clients they represent. The agent engaged in a dual agency walks a very narrow path as they must maintain trust with the client, confidentiality, and neutrality between the other two parties of the transaction.

However, anyone who entered a dual agency relationship should know to check their state’s view of dual agency because Texas, Colorado, Vermont, Alaska, Maryland, Kansas, Florida, and Oklahoma made it illegal. The other states require the agent to disclose that they represent both parties of the real estate transaction.

The benefits of a Dual Agency 

While several concerns surround dual agency relationships, they can be stabilized by some of the advantages that come with it. For those involved in a dual agency relationship, an advantage is that the transaction process might be going faster. There is no reason to wait for responses from the opposing party’s agent as the agent in a dual agency most likely already knows the answer. 

Sellers also have the opportunity to save up some money. When dealing with a simple agency, the real estate agent requires a commission that is generally around 6%. This commission is then split between the two agents, but in a dual agency, seeing as there is only one agent, the commission might be open to negotiation.

The disadvantages of a Dual Agency 

The most significant disadvantage of a dual agency relationship is that negotiations for the seller’s highest price and buyer’s lowest price are made unlawful or impossible by the fiduciary duties. Another unethical aspect of dual agency is that the agent might try to push for a higher selling price to increase their commission. There are ways through which agents can increase their commission, but not all are acceptable. It’s easy to understand how this type of agency can lead to a conflict of interest on the agent’s part. Following the agency’s fiduciary duties is a requirement of any real estate agent, and a dual agency makes real estate transactions more difficult for both sellers and buyers.

During a dual agency, only one agent represents both parties, which can lead to overlooked mistakes or missteps that might have been noticed and corrected by a single agent in a simple agency. Unlike during dual agency, single agents can negotiate far more irreproachable transactions, and they can create loyal agencies with their clients through a leveled playing field.

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