Let’s talk about dual agency in real estate. This is when one agent represents both the seller and the buyer. I’ve personally bought three homes this way, saving a significant amount of money each time. But it’s not for everyone. While it might seem like a win-win, there’s also more room for mistakes. So, let’s dive deeper into the pros and cons.
Dual agency happens when the listing agent also represents the buyer. This could mean the agent earns double the commission. As a seller, you usually pay a 5% – 6% commission, half of which goes to the buyer’s agent. This can feel a bit unfair when you’re the seller.
For experienced homebuyers who feel that paying a 5% – 6% commission is wasteful, dual agency becomes more attractive. Savvy buyers can negotiate with the listing agent to cut their commission down to 2.5% – 3% and pass the savings onto the buyer. This is especially common when a property has been on the market for a while and can’t find a buyer.
However, most real estate agents I’ve spoken to are against dual agency. They cite reasons like double the liability, double the work, difficulty in being transparent and fair to both sides, and potential conflicts during negotiations.
I recently had a chat with a top listing agent who shared her dislike for dual agency. She felt that it didn’t allow her to give 100% honest feedback to the buyer. She also mentioned that some agents dislike dual agency because it prevents them from colluding to make more commission dollars.
Interestingly, while this agent was against dual agency, she was okay with me using one of her co-workers to put in an offer. This is called “double-ending a real estate transaction.” The brokerage earns double the fees in this scenario, so they often encourage it.
So, what does a listing agent do? They price the home, market the property, communicate with the seller and potential buyers, ensure that the buyer is qualified, negotiate terms, oversee inspections and fixes, arrange staging, and recommend other vendors to help the buyer complete escrow. They represent the seller and aim to get the most money for the home.
On the other hand, the buyer’s agent represents the buyer’s interests. They help identify suitable homes, keep the buyer’s real estate FOMO in check, connect the buyer with a lender if needed, provide expertise and knowledge of the local real estate market, give an honest assessment of the state of the real estate market and the pros and cons of each home, act as the main negotiator on price and terms, walk the buyer through disclosures, recommend a home inspector, and analyze the layout and verify the square footage of the house.
Given these roles, you can see how dual agency could be difficult for one agent to manage. They have to be honest, truthful, and fair to both parties, which is no easy task.
Dual agency has its pros and cons. On the plus side, it can streamline communication, potentially save on commission, increase the chances of the seller getting a buyer, and give the buyer a potential discount. On the downside, dual agents are often more loyal to the seller, offer less helpful advice, and there’s more potential for errors.
Only veteran home buyers who’ve purchased at least one home, but preferably two or more homes, should consider using a dual agent. After buying your first home, you’ll understand the intricacies of the home-buying process. If you thoroughly understand the real estate market, understand all the downsides of the home you want to buy, and are a master negotiator who can keep your emotions in check, going the dual agency route can be worth it.
Dual agency is illegal in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont. These states have found there are too many unscrupulous agents who don’t provide full disclosure.
Sellers should be okay with dual agency if the agent agrees to cut their commission to save the seller money or to help close a transaction, the seller trusts the listing agent will be a good fiduciary to the seller and still provide tremendous advice and insights, or the seller has no offers after several months and has no other choice but to take on a savvy buyer who wants dual agency representation.
The more you know about real estate, the more confident you will be in buying and selling property. You might get to the point where you are comfortable going the dual agency route.
Finally, it’s worth noting that real estate commissions are likely to come down due to a recent settlement by the National Association of Realtors (NAR) with groups of homesellers. This will likely make dual agency more popular.
So, are you a real estate agent who hates dual agency as well? Or a buyer who’s gone the dual agency route to get a better deal? Or a seller with problems with dual agency? I’d love to hear your thoughts!
