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Dual Agency Real Estate: An In-Depth Analysis

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Dual agency real estate transactions are increasingly becoming common in the industry. With more and more agents opting to offer dual agency services, buyers and sellers need to understand this.

In this article, we will discuss dual agency in-depth – including what a “dual agent agreement” entails, how it differs from traditional representation agreements, why these types of relationships can be beneficial for some clients, as well as potential drawbacks of using a dual agent broker.

Dual Agency Guide: What is a dual agency in real estate? What do dual agents do?

A dual agency agreement is when one agent represents both the buyer and seller of a property. However, they must provide an informed disclosure statement outlining what duties their different clients expect from them for the transaction to be ethical.

There has been much debate over whether this type of representation should be allowed. It can result in conflicts between buyers and sellers who may not have even known that they were dealing with agents on opposite sides of the table.

The most important aspect of these agreements is understanding how they affect clients and their expectations regarding service levels before signing any papers.

Especially if you’re trying to decide which form or level of representation works best for you, make sure you understand fully beforehand what these different types of agreements entail.

Levels of Dual Agency

No Dual Agency

In this agreement, one agent acts as the “buyer’s agent,” and another agent represents both parties (or all three parties) on behalf of a seller. It can be difficult to determine your primary point-of-contact for service needs because it relies heavily on how the two brokers have divided their duties.

Limited Dual Agency

A Limited Dual Agent agreement in real estate transactions means only representing the buyer’s interests with regards to inspecting properties, negotiating offers on behalf of both parties, drafting agreements between buyers and sellers for financial arrangements related to the purchase price – all without disclosing any information about their role as an agent for the seller.

The important distinction here is that they cannot reveal anything confidential regarding the offer details/negotiations unless the client is authorized in writing.

Full or Unlimited Dual Agent Agreement

The most common type of dual agency agreement is a “full” or “unlimited” agent agreement. It means they represent both the buyer and the seller without restrictions on discussing confidential information with either party.

In this case, it doesn’t matter if you’re making an offer to buy a property. Your real estate agent can negotiate that deal and discuss terms for selling their own home simultaneously because they are representing both parties during negotiations/walkthroughs.

Just looking around properties together may not be a sufficient requirement before signing anything. Ensure everyone understands what each one expects when engaging with these agents (i.e., how often they will be available for showings and what type of services they are providing).

How to Achieve a Dual Agency Transaction

Dual Agency Real Estate_An In-Depth Analysis

A dual agency transaction is when a real estate agent represents both the buyer and seller or, in some cases, just one of them. These agreements are rare but can benefit all parties involved because they reduce conflicts of interest or reliance on luck to get the best deal possible.

In a dual agency relationship, the agent representing the buyer (the listing agent) also represents the seller. The listing broker will typically give written consent to allow this type of relationship, but sometimes it’s implied by contract or required under regional real estate law.

Dual agency agreements are not allowed in all states and can be restricted depending on where you live. For example, some communities do not permit them at any time because they see agents as favoring their interests over those of either party involved in a transaction.

In general, dual agency transactions should only be attempted if there are two separate agencies: one managing the sale of property and another managing its purchase.

Dual Agents

Dual agents are real estate agents who represent both the buyer and seller in a real estate transaction. In simple terms, it’s one real estate agent acting as a go-between who negotiates the terms of both parties. Dual agents may also be called “dual agency” or “double agents.”

Dual agents can help make transactions more efficient and save time since it’s the same agent working for both the seller and the buyer.

But it requires additional work from two agents instead of one and is often discouraged by real estate agencies because they see it as risking conflicts of interest.

For this reason, the arrangement should only be used when there are two separate agencies with written consent for each side to use their designated agent.

The seller’s agent works as the buyer’s agent. That also means a single real estate brokerage represents both parties. A real estate broker who practices dual agency has a higher risk of financial and moral conflicts.

Challenges of being a dual real estate agent

The dual agency relationship allows each agent to represent their client’s best interests when negotiating the transaction, but not if they are interested in protecting or promoting one side over another.

For this reason, both agents must be transparent about any conflict of interest that may arise during negotiations so as not to mislead either party on what might happen at closing time.

Challenges of working as a dual agent include:

  • One must be very flexible: The agent must be on top of the entire process and coordinate with both sides.
  • Communication can get complicated because there are two agents instead of one.
  • Transaction Complexity: An additional layer in the already complex real estate transaction: buyers will want their agency representation for various reasons, like someone who speaks their language or is familiar with local customs. They may also think it’s more difficult to trust an agent they don’t know if that person isn’t part of their initial meeting where everything from price points to property features was discussed firsthand at length. So now you have double the work and efforts going into this sale by adding another party into negotiations when trying to find a buyer – but without getting any more commission.
  •  A real estate broker who practices dual agency has a higher risk of financial and moral conflicts.
  • Any agent can confuse new buyers. They would need extra time to get used to the process while trying to understand how their interests will be represented when negotiating with someone on their side.

Advantages of Dual Agency Arrangement

A more streamlined transaction

The primary advantage of the dual agency is that it provides a more streamlined transaction. With one agent representing both parties, there are fewer opportunities for conflicts to arise in negotiations and legal documents, which can impede progress on getting an agreement finalized.

In a dual agency situation, it’s the same real estate agent standing in for both a buyer and a seller. It will be in their best interest, therefore, to make sure both parties are satisfied. It will not help them if one party is happier than the other.

In the real estate market, there are many instances where real estate companies use a dual agency in a listing agreement. The agent involved is given full authority to handle both clients.

Agents involved get double commission

Some agents might see this as a way to double their commissions, but in the end, it’s not because they’re going to have twice the work. There are some drawbacks for the buyer and the seller of using dual agency arrangements.

One is that both parties will want their agent who speaks their language or knows local customs from the start, so there will be two more points where negotiations can get stalled before they even get started.

Since the real estate agent works on both sides, buyers and sellers pay the same persons for the services. More commission goes to this same brokerage from where the agent came from.

A dual agent may have more information on the property

One of the positive aspects of one person or a single agency handling one case is that they may have more information on the house. They will see it a lot more often than an agent that only comes in for the showings.

If one agent is handling both parties, they’ll already know everything about what’s going on with every property at all times and can include any new information or updates quickly as they come up.

Flexibility in conflict resolution

A secondary benefit of this arrangement may be greater flexibility to work around conflicts that arise during negotiations. They work better on scheduling issues if the agents can meet face-to-face with their respective clients outside of business hours.

The same broker represents both parties; they have a better chance of resolving issues than different agents. This could potentially save time and offer reasonable care for both the seller and the buyer.

Dual Agency Agreement Disadvantages

The disadvantage when using dual agencies is time spent understanding how these two individuals’ interests will be represented throughout negotiations–especially since there are so many things you need to go over before making your offer.

Working in a dual agency means you lose the fiduciary responsibility of working with a real estate agent. Most buyers trust real estate agents because they understand the market, and working as a dual agent can reduce that confidence.

Conflict of interest in dual agency

There could also be a conflict of interest for the same company or broker representing both parties because they are often in competition. They may not always have your best interests at heart.

Also, you might find yourself dealing with a situation where their real estate company’s priority is getting them to close on this property, no matter what it takes.

You should only allow dual agents if there is an agreement between all interested parties, such as buyers, sellers, and brokers. Ensure everyone fully discloses how things work before making any commitments, so every party understands the terms of engagement into negotiations in the future.

Transaction brokers negotiate the terms of the transactions, and this agent will have experience with both buyers and sellers to represent their interests in negotiations. It’s not easy for the same person to focus on the welfare of their clients as with a designated agency.

Fiduciary duty issues

A fiduciary duty is the duty of a real estate agent to act in the best interest of their client. They need to have your interests at heart, not theirs, and it is essential for those who buy houses from an emotional standpoint and a long-term financial perspective.

If you’re working with two agents that don’t share information or talk about each other’s clients, then there might be more opportunities for one party to benefit over another.

It could create conflict when negotiations occur because both parties may want different things, even if they work together on transactions all the time without any issues between them. But this isn’t always possible when negotiating contracts.

These fiduciary duties may be compromised where the buyer agent is still the seller agent. We have a situation earlier where the seller has put up an overpriced house, which isn’t always, and the buyer has no clue.

The dual agent knows it all, but they cannot disclose confidential information. Each client trusts them to have their best interests at heart.

A dual agent can potentially overlook crucial details

Often, dual agency agreements are used when there is an urgency to sell or if one of the parties involved has better experience in these negotiations. Doing this can cause a fiduciary duty violation that could affect the transaction outcome.

It’s not always easy for agents representing both sides at once – they may have trouble focusing on their clients’ best interests. Hence, it would be best to make sure this arrangement benefits all parties involved before making any decisions.

A dual agent cannot negotiate the least price or inspection reports

Dual agents may not get you the best deal because they have to represent both parties. Also, it’s hard for them to be objective with their clients when negotiating contracts–especially if there is a conflict between what each party wants.

It can also lead to fiduciary duty issues that affect your transaction result. So careful consideration should go into who purchases the property from this type of arrangement.

One way to avoid all these problems in the future is by using an agency broker on either side. The buyer/seller agent would then only work in representing one person instead of two separate interests at once, which means less focus given away from quality service with full disclosure where necessary upfront before negotiations commence.

Where dual agents can negotiate the least price and inspection reports–they cannot control who is represented. It’s essential to have a clear understanding of how they will be compensated so that there are no surprises in terms of how much you’re going to pay for their services, including any negotiated commissions, fees, or other compensation.

Suppose a buyer/seller agent doesn’t disclose this information upfront. In that case, it could lead to fiduciary duty issues and conflicts between what each party wants when negotiating contracts with one another.

This is why an agency broker may represent both parties on either side instead of working towards securing the best agreement possible while managing conflict resolution if necessary alongside direct communication channels in place.

Should I hire a dual agency?

Dual Agency Real Estate_An In-Depth Analysis

If the law permits you to do so, then it would be beneficial for you if you’re looking to sell or buy property quickly and at an affordable price, especially in competitive markets where there are multiple listings available on the market.

There could be legal implications in some areas where information is shared without the seller’s consent. So, it’s upon you to consider the pros and cons discussed above before deciding.

Conclusion

Dual agency is legal in some states but illegal in others. Keep this in mind when deciding whether or not to use a dual agent and the type of compensation they will receive – whether it is commissions, fees, etc. If you are a seller looking for an agent to get your property sold quickly and at the highest price possible, consider working with a broker that represents both parties.

Also, there must be direct communication channels in place between each party to avoid any conflicts during negotiations. If you have any questions about the dual agency or would like to know more about the process, contact us today.

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