After listing a home for a seller, you’ll speak with many buyers who are interested in the property. In some cases you’ll likely meet a buyer who’s serious about the transaction but doesn’t have an agent to represent them. There is a very likely chance they’ll ask you for advice and to also be their agent.
This scenario offers you the potential to take part in what is known as dual agency. Though many agents may be aware of it, they may not fully understand it. We’re here to explain what it is and whether or not you should avoid it.
What are Dual Agencies?
By definition, dual agencies or a dual agent is when the same real estate agent or two agents from the same brokerage represent both the home buyer and the home seller.
The scenario above refers to when a single agent represents a buyer and seller at the same time. For this to occur, both parties have to agree that it is ok. This is the far more concerning form for many because a single agent stands to collect the commission, usually split by two. Many believe this aspect can influence their actions in either role and often calls for ethical concern.
Another form of dual agency is when two agents from the same brokerage represent both parties. This is a much smaller call for concern than the first form in the eyes of many. But because the brokerage stands to profit from either agent’s commission, it can still be considered a dual agency.
Benefits of Dual Agency
The obvious benefit of a dual agency is the increase in commission for the real estate agent. In any transaction, the buyer’s and seller’s agent split the commission. A single agent collects the entire commission with a dual agency in place, effectively doubling their income. It also offers the advantage of streamlining communications between the parties, speeding up the whole process.
The benefits of dual agency for the home buyer and home seller is that the agent can work to close the deal more quickly. They don’t have to wait for the other agent to return calls and can work with both parties to reach an official agreement and go to closing.
Risks of Dual Agency
A dual agency is often associated with scams. An agent working on either side of the fence is susceptible to sullying their name. At the very least, you can expect to deal with some uncomfortable situations. You will walk a fine line to prevent taking any action that is detrimental to the buyer or seller. You may not influence or advise negotiations in any way. Of course, there is the risk of lawsuits if either party feels you have influenced negotiations to their detriment.
Is Dual Agency legal?
There are ethical concerns with dual agencies. It is an open door for an agent to take advantage of the buyer and seller. Because of this, some states outlaw the practice. It is important to check where you live and where you operate to find out if it is legal to be a dual agency.
General law according to each state at the time this post was researched*:
- Alabama- Legal with Written Consent
- Alaska- Illegal
- Arizona- Legal with Written Consent
- Arkansas- Legal with Written Consent
- California- Legal with Written Consent
- Connecticut- Legal with Written Consent
- Delaware- Legal with Written Consent
- Florida- Illegal
- Georgia- Legal with Written Consent
- Hawaii- Legal with Written Consent
- Illinois- Legal with Written Consent
- Indiana- Legal with Written Consent
- Iowa- Legal with Written Consent
- Kansas- Illegal
- Kentucky- Legal with Written Consent
- Louisiana- Legal with Written Consent
- Maine- Legal with Written Consent
- Massachusetts- Legal with Written Consent
- Michigan- Legal with Written Consent
- Minnesota- Legal with Written Consent
- Mississippi- Legal with Written Consent
- Missouri- Legal with Written Consent
- Montana- Legal with Written Consent
- Nebraska- Legal with Written Consent
- Nevada- Legal with Written Consent
- New Hampshire- Legal with Written Consent
- New Jersey- Legal with Written Consent
- New Mexico- Legal with Written Consent
- New York- Legal with Written Consent
- North Carolina- Legal with Written Consent
- North Dakota- Legal with Written Consent
- Ohio- Legal with Written Consent
- Oregon– Legal with Written Consent
- Pennsylvania– Legal with Written Consent
- Rhode Island– Legal with Written Consent
- South Carolina- Legal with Written Consent
- South Dakota- Legal with Written Consent
- Tennessee- Legal with Written Consent
- Utah- Legal with Written Consent
- Vermont- Illegal
- Virginia- Legal with Written Consent
- Washington- Legal with Written Consent
- West Virginia- Legal with Written Consent
- Wisconsin- Legal with Written Consent
- Wyoming- Legal with Written Consent
Although the call for a dual agency rarely surfaces, you must familiarize yourself with your local laws. Before engaging, you should refer to your local real estate commission to determine if it is legal and what the rules are regarding conduct. Furthermore, even if it is permitted, you almost always need to inform and receive written consent from both parties before proceeding.
Frequently Asked Questions About Real Estate Dual Agencies
Is dual agency bad?
Dual agency can create a harmful conflict of interest and is viewed by many as a shameful practice. The agent involved may not make advancements or provide advice on the part of either party. Instead, they work to handle communications and paperwork while collecting double the commission. Unfortunately, it also opens the doors for a dishonest agent to influence negotiations to scam the buyer or seller.
Should I consent to dual agency?
If it is at all possible, a dual agency should be avoided. It removes the agent’s ability to represent you exclusively. Furthermore, it provides the opportunity for conflict of interest between the agent and the transaction. Because of this, they cannot influence negotiations or provide advice that is in your best interest if it is detrimental to the other party in either way.
How much commission does an agent charge for dual agency?
It is typical for two agents to charge around 6% for commission and split it between them. In a dual agency, the single agent may stick to the entire 6% and collect it entirely. Because they are working for both sides, their workload is double. Therefore, many think it’s only fair to collect double. However, an agent who understands ethical concerns may be willing to drop a percent or two to preserve the sale’s integrity. It ultimately comes down to the agent you are working with and what they believe is fair.
Is dual agency ethical?
Dual agency is illegal in every fiduciary profession other than real estate (state laws allowing) because of the risks it creates. Therefore many folks outside and within the real estate industry view it as unethical. However, the even National Association of Realtors allows it in their code of ethics leading many to view it as ethical.
Do I need to disclose dual agency with clients?
In almost all states, you are legally required to disclose dual agency with your clients. Both clients must also give consent before you proceed. In virtually every instance, you are also required to receive written permission by law. To ensure you are within legal practice, you may want to refer to your Local Real Estate Commission for your area’s exact laws.