Dual Agency

DUAL AGENT!! Sounds like something out of a James Bond thriller, doesn’t it? Sadly, dual agency in real estate is not that exciting.

Dual Agency can actually come up in your real estate career quite a bit.

The laws vary on dual agency depending on where you are located. Regardless, everybody needs to know what it is.

So let’s start with a simple definition. Simply put, dual agency is when the buyer and the seller are both represented by the same real estate broker. Dual agency usually comes about when potential buyers don’t have an agent, so they contact a seller’s real estate agent directly when they are interested in a property. They ask the seller's agent to submit an offer on their behalf, if the agent does this, voila! Dual agency.

Here’s where problems can arise. Agency relationships usually involve a fiduciary duty. This means the agent must have a sense of loyalty to their client. If the agent is representing both sides on the same transaction, who gets their loyalty? This potential conflict of interest is why dual agency is frowned upon in some areas and is straight-up not allowed in others.

Think of dual agency this way. You take your kid to a party and there is one cookie left. As a parent, you are your kid’s agent, so you are getting your kid the cookie! But what if the other kid wants the cookie as well and is also your kid? Uh oh. You want to be loyal to both of them, now you are caught in the middle of them... this is a DUAL AGENCY!

To protect against these conflicts of interest, dual agency imposes several restrictions on real estate agents. When dual agency is allowed, a real estate agent must inform both the buyer and seller in writing. The agent is required to treat both buyer and seller with fairness and honesty and must provide full disclosure regarding the property and its material condition. But the agent can’t reveal any confidential or personal information of either party involved.

The agent has to look out for both parties' interests. When it’s time to make an offer, the real estate agent can’t advise either the buyer or the seller on the price to offer or the price to accept. In short, the agent’s fiduciary duty of loyalty is now gone - they are not allowed to try and advance the interests of one party over the other. The agent has to stay neutral.

A dual agency can also be created when the buyer and seller have their own agent, but both of those agents work under the same broker. Remember that listing agreements and purchase contracts are signed with the broker, not the agents working under the broker. So the agent is not really the one who is being hired, the broker is.

This may seem odd since many times the client only has contact with the agent. They may never even see the broker. But the fact remains that the agent works under a broker so technically speaking, the agent is soliciting business on behalf of the broker.

When a transaction is completed, the broker is the one who actually gets paid a commission. The broker will then share the commission with the agent who solicited the business and completed the transaction.

This is why although there may be two separate agents working on the transaction if they both work for the same broker  then that broker’s name is on the seller and the buyer’s side hence creating that dual agency.

Knowing this will help you understand how a dual agency can occur when there are two real estate agents involved. The buyer’s agent and the seller’s agent may be licensed under the same broker. If one agent from the brokerage has a home listed and another agent from that same brokerage has a buyer-brokerage agreement with someone who wants to buy the listed property, dual agency occurs.