What You Need to Know About Dual Agency in a Real Estate Transaction

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In typical real estate transactions, buyers and sellers are usually represented by their own separate agents. Each agent has a fiduciary duty to protect the interests of their clients.

But what happens in a scenario when one single real estate agent represents both the buyer and the seller in a transaction?

It’s called “dual agency,” and it occurs when one realtor has the role of acting on behalf of opposing parties. It’s not very common, but it does happen. For instance, it can happen if a buyer who does not have an agent visits an open house and falls in love with the home, and the seller’s agent agrees to take on the buyer as a client. 

Dual agency also occurs when the buyer and seller each have their own separate agents, but both work for the same brokerage. This is more common with large agencies with lots of agents and listings.

Not every state in the country allows dual agency, but in California, it’s permitted as long as the buyer and seller are both made aware of the situation, and consent to it in writing. Before entering into a dual agency agreement, it’s critical to fully understand its legal implications and how it could impact your ability to get the best deal on a home purchase.

Obviously, the goal of a buyer is to pay the lowest amount for a home, while a seller’s goal is to get the highest possible amount. This is where it can get a little sticky when one agent represents both parties. How can a dual agent adequately represent both competing matters? Some situations can actually benefit from a dual agent, while other scenarios call for separate representation.

California’s Required Disclosure and Consent for Dual Agency Representations

In the state of California, buyers and sellers must obtain a written contract confirming the professional relationship and representation during a real estate transaction. Just about every broker in the state will present clients with a “Disclosure Regarding Real Estate Agency Relationships” document at some point before an offer is made on a property.

This form dictates the broker and agents involved in the real estate transaction, and outlines the duties of the buyer’s and seller’s agent, or an agent who represents both the parties – the dual agent.

The form will also describe the fact that all agents owe their clients a fiduciary duty to act in that party’s best interests, including being honest, acting in good faith, exercising reasonable care, and acting in full competence. The agents must also disclose all pertinent facts within the scope of the agent’s knowledge that would impact how desirable the property would be to the client.

Dual agents are in a precarious position: they need to walk a fine line that does not compromise either party’s best interests. Balancing these interests is essential, and failure to do so could put the agent at risk for infringing upon the fiduciary duty of one of the clients.

Why Would You Agree to Dual Agency?

Despite the potential downfalls of dual agency, there are some possible upsides to this scenario as well:

Streamlined process – A dual agency scenario can definitely streamline the home-buying process. When both buyers and sellers are working with the same agent, there’s one less schedule to have to work around. Documents can be signed more promptly, and all communications can be made more quickly. With one agent out of the picture, the entire process can be faster and easier.

Save on the commission – If there’s only one agent involved, the commission won’t have to be split two ways. Instead, a dual agent will keep the entire commission payment. As such, dual agents might be a little more willing to slightly reduce the commission, saving the seller (who typically pays this amount) a little bit of money.

The Bottom Line

Whether or not you agree to a dual agency, your decision should only be based on the specific details of your real estate transaction. Every situation is a little different; what may work in one situation may not necessarily work for another. For instance, if the market is somewhat slow, or you’re a newbie who’s just starting out on a home hunt, having your own separate representation might be best.

However, if the market is hot where you are, there could be a number of scenarios where dual agency can be considered, such as when you’ve done your homework and have a solid idea of what homes in the area are worth, or if you feel that you can get a better deal by using the same agent who’s representing the other party. Either way, make sure that the agent representing you has plenty of experience, and is a trustworthy figure who will ensure that your best interests are met.