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Learn What Dual Agency Is & How It Works In Real Estate

Learn What Dual Agency Is & How It Works In Real Estate

In the business of real estate, agents play a key role in connecting buyers and sellers. Without a top real estate agent, people who want​ to sell their ​houses or buy ​a house would have a hard time ​connecting and negotiating the best deal. In your search you ​may have come across the term​ dual agency​. We'll cover that ​term and dive ​​deep into the pros and cons.

There are three kinds of real estate ​representation:

1)​ Listing Agent

2) Buyer’s Agent

3) ​Dual ​Agency

A listing agent is person working for the best interest of the seller of a house. They will help the seller market and negotiate the best deal to get the property sold. The listing agent represents and gives advice to the seller on any thing that needs to be done in order to get the highest price for the property being sold.

A buyer’s agent, as the name suggests, works for the buyer’s best interest. Just like a listing agent, the buyer’s agent will do all things necessary in order to get the sweetest deal for the buyer, i.e. to buy a house they want at the lowest possible price.

​Last but certainly not the least, dual ​agency are those working for both the buyer and the seller. Let’s take a closer look at this third kind of ​agency.

Dual ​Agency ​In Real Estate 

What is dual agency in real estate? Dual agents, which is sometimes referred to as transaction brokers, represent both the buyer and the seller.

Dual agency also covers the situation where the seller and the buyer are represented by two agents from the same brokerage. This kind of agency relationship is legal in some states provided that the agent discloses their representation to both the seller and the buyer.

​In Texas, there is no dual agent status but there is something called intermediary. Intermediary is when the buyer an seller are represented by the same ​broker BUT 2 different agents are assigned.

​There are definitely advantages as well as disadvantages in ​using dual ​agency. Before deciding if you should employ dual agency​, it is important to weigh ​the benefits ​vs the costs.

Advantages of Dual Agency

Makes ​The ​Negotiation ​A ​Faster ​Process

Because there will only be three parties ​in the transaction instead of four, meetings and house ​showings can be done faster. Which will be very helpful for those wondering ​how long it takes to buy a house.

There will also be less time spent on ​going back and forth with the negotiations compared to when there are two agents in the whole transaction. There will also be less time spent on waiting for the other party to prepare the documents needed to seal the deal.

All parties will experience less headaches when dealing with each other since all relevant papers for the sale of the real estate property is in the hands of one agent.

Simplifies ​The ​Communication

Related to ​negotiations, the communication over important aspects of the transaction will be smooth. There will be less room for miscommunications and misinterpretations.

​The usual scenario is that the buyer talks to one agent, the seller talks to another, and both agents talks to each other. In dual agency, the buyer and seller talks to one agent only and therefore, the step where two agents talk to each other is eliminated.

Saves ​On ​Commission

Usually, in a real estate transactions with two agents involved​ the seller pays​ their listing agent a commission. ​The average commission percentage is around 6% of the sales price. ​The listing agent​ then ​splits ​that commission with the buyer’s agent.

In transactions with ​dual ​agency, the agent takes everything and ​doesn't split it with another agent. ​Considering ​that there is no commission split, it​'s possible ​the agent is ​open to ​negotiating the commission below 6%. This is because​ they will end up ​getting the whole thing anyway.

Considering all of the closing costs associated with the sale of a house, saving on the commission is a welcomed ​concept.

Facilitates ​Full ​Disclosure

Because dual agency can be ​tricky, certain state laws mandate that the dual agent must disclose to each party that he is representing ​both parties. As a general rule, real estate agents are ​required to give full disclosure to their clients irregardless if dual agency or intermediary is involved.

​This allows both parties ​to assess the situation and ​decide to go for a more traditional set up if they are not comfortable with dual agency.

Disadvantages ​Of Dual Agency

Makes ​Neutrality ​A ​Problem

For ​dual agency to successfully work for the ​best interest of both parties, the agent must deal equally and in all fairness with both the buyer and the seller. In practice, however, staying neutral can be difficult.

One classic problem is when it comes down to commissions​. The dual agent may have the tendency to favor the seller since ​that is where the commission ​is coming from.

​Additionally, the dual agent must be careful when dealing with each party since there may be confidential information that ​cannot be revealed to the other.

​Limits The Potential During Negotiations

A buyer and a seller in a real estate transaction have two opposing goals: the ​buyer wants to get the property at the lowest possible price while the ​seller wants the ​​highest ​possible price.

​Because of this, the dual agent cannot help either party ​get the ​best deal​ since ​they must act in the best interest of both parties. ​There may be information ​that ​both parties can use to get a better ​deal, ​but may not have access to if there is dual agency.

​No Checks ​& ​Balances

Because only one agent works for both parties, there will be no “independent eye” to look for anything that the agent might have missed. In situations where there is a listing agent and a buyer’s agent, the two may work ​together in checking that all the ​details of the ​transaction is in order.

Both agents will be extra ​careful since their primary focus is to ​ensure that their clients are well taken care of. However, in dual agency, these kinds of checks are ​nonexistent.



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