The real estate market can be complicated and difficult to comprehend at times. Real estate deals usually involve two agents, one representing the seller and the other representing the buyer. However, at times, the same agent might represent both the buyer and the seller in the same real estate transaction. This situation is known as a dual agency in the real estate sector. This situation might be beneficial at times. However, additional problems may arise in some cases for both buyers and sellers as a result of dual agency.
Generally, in the real estate market, a buyer and seller have different real estate agents. There are some cases where the same agent represents both parties. The concept of dual agency creates possible conflicts of interest.
How Does Dual Agency Function?
A dual agency occurs when a real estate agent represents both parties during a transaction. The term also applies when an agent represents a landlord and tenant or if a real estate company represents two parties in a sale or rental transaction. Most agents only represent one party during a transaction. In this way, all they have to do is worry about acting in the best interest of their clients. The dual agency may also occur if a buyer does not already have a real estate agent and request the seller’s agent to represent the buyer in the transaction as well.
Examples of Dual Agency Situations
When you hire a real estate agent, you have the option to decide if you want to work with a dual agent. You must understand all of the risks associated with using a dual agent. You’ll likely have to sign a disclosure from the department of real estate. There are a few states where you can choose not to sign the form. Many of these forms include complex language that impacts potential agent-client relationships. States such as Colorado, Florida, Texas, Vermont, Maryland, Wyoming, etc., prohibit dual agency. Sometimes, mistakes happen, and a dual agency situation might occur. Perhaps you find a home you are interested in, but the house is listed through the same agent or the same agency representing you.
Possible Scenarios When Dual Agency Can Be an Asset
Many real estate analysts believe that dual agency should never be an option. They don’t believe that a dual agent can remain neutral while completing a transaction. It’s seen as impossible because the seller wants to sell their home for the highest profits while the buyer is looking for a good deal. Those in favor of the concept believe that it speeds up the process and helps both parties finalize the transaction. Sometimes dual agency must occur if there are only a few agents in a town.
New constructions can cause dual agency. Some buyers will hire one agent to represent them when they are purchasing a new building. An open house is another example. You may have a sign-in sheet so that people can write down their phone numbers if they are interested in buying the house. If visitors want to buy the open house and have an established relationship with the listing agent, they may hire them without thinking about possible conflicts of interest. If you are shopping for a home online and find a property you like, perhaps you decide to reach out instead of an agent. In such cases, you unintentionally may find yourself in a dual-agency situation.
Things to Consider in a Dual Agency Situation
Complex state laws about a dual agency situation can leave buyers and sellers misinformed. Ask your agent if they will be working solely on your behalf. You don’t want to reach the closing stage and then find out that they are a dual agent. Dual agents may consider a lower commission. When the seller’s costs are low, it’s possible that they will accept a low price from the buyer. The buyer, seller, and agent benefit from this arrangement. However, agents representing both parties can lead to complex negotiations, and the dual agent might find it increasingly difficult to remain neutral. You may have to look out for your best interests without speaking with your agent.
Your agent should always keep you properly informed and act in your best interests. Dual agency can complicate those matters, but there are some positives to consider as well. If you have any questions about dual agency, contact our home loan specialist team at Andraya Coulter.