Dual Agency
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.
Popular Real Estate Terms
Mortgage banker is the person or business that originates mortgages and receives payments. The mortgage banker typically sells these mortgages to investors and obtains service fees for the ...
Insurance coverage provided for an individual having a lease at a favorable rate, one which is less than the market value of the property. The insurance indemnifies the tenant for business ...
The definition of the price-to-rent ratio is very important for real estate investors. This ratio is a measurement for the affordability of a particular rental property and tells investors ...
Agequake is not the era of earthquakes! It’s a term that was coined by author Paul Wallace in his 1999 book “Agequake: Ridding the demographic rollercoaster shaking business, ...
Bank modifies the borrower's mortgage obligation, such as when the bank approves the homeowner's request for an extension of time to pay because of illness or loss of a job. One's ...
Personal income minus personal income tax payments and other government deductions. It is the personal income available for people to spend or save; also called take-home pay. It may be a ...
Combination of IRC 1034 and 121 dealing with the sale of a personal residence with the once-in-a-lifetime $125,000 exclusion that may be available for the "over-55" seller. Should the ...
Map presented to a municipality's planning agency by a real estate developer for consideration and approval. ...
A method of purchasing real estate whereby a maximum amount of leverage is used. Normally the seller will finance the down payment necessary to acquire a mortgage. Thus, the purchaser is ...

Have a question or comment?
We're here to help.