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Never Allow a Dual Agency Agreement in Real Estate

Never Allow a Dual Agency Agreement in Real Estate

Why You Should Never Accept Dual Agency

Our homes are likely to be the most significant investments that we ever make in our lives. It is essential to get the best “deal” possible, but we often forget that it is also vital to get the best representation available. That is not something that you are going to get with a dual agency agreement.

When you are buying or selling a home, dual agency should be avoided. You should never allow your real estate agent to stop exclusively representing YOU. It is precisely what happens when you allow dual agency. YOUR real estate agent whom you hired becomes a neutral party in the transaction. He or she is no longer permitted by law to represent you as he or she would as an exclusive buyer’s or seller’s agent.

Does that sound stupid? Of course, you are nodding your head YES, because it is ridiculous! Lots of real estate agents fail to explain this simple fact to their clients. Why? Simple – they want you to agree to it so that they can double side a sale.

These are the kind of agents whom you want to avoid in real estate. Just because something is legal doesn’t make it right. You should be looking for a real estate agent who has your best interests at heart – NOT his or her own.

What Is a Dual Agency Agreement?

The term dual agency agreement means that the seller and buyer are both represented by the same real estate agent in the transaction. In some states, it could also mean two agents working for the same company, each representing a buyer and seller. Many states refer to that scenario as designated agency.

There are some strict terms which apply to the broker during a dual agency transaction, like full disclosure. However, there are still a lot of downsides and pitfalls for both parties, when it comes to being represented by a dual agent.

Think about it this way. If you were unfortunate enough to experience a legal claim, would you use the same lawyer as the other party? The answer to that question is “no.” It just would not be in your interest to do so. How could the lawyer represent both? It sounds pretty stupid, right? That’s because it is, and the same is true for dual agency.

Dual agency agreements have caused a lot of concerns, especially in recent years. The financial crash of 2008 highlighted many of the problems associated with dual agency transactions. As a matter of fact, the following states have banned the practice of dual agency:

  • Alaska
  • Colorado
  • Florida
  • Kansas
  • Maryland
  • Texas
  • Vermont

Why did these states ban dual agency? The answer is simple: it does not benefit consumers!

Who Benefits from a Dual Agency Agreement?

There is one person who benefits from the dual agency agreement, and that is the agent. It is all about the “bucks,” and an agent transacting a dual agency agreement will earn more money. He or she is more likely to favor the seller and to keep the price high. Like Michael Douglas said in the 1987 Wall Street movie, “[Greed] is good.” It may only be the case for the dual agent.

In a standard transaction, there is a “buyer’s agent” representing the buyer and a “seller’s agent” representing the seller. The agents in these scenarios work for the respective parties. They are there to protect the parties’ best interests.

In a dual agency relationship, there is no protection of interests. The agent must remain completely neutral. What this means is that the consumer is not afforded the same service that he or she would receive if he or she had his or her own respective agent. It is almost like the unrepresented buyer who decides to purchase a for sale by owner home without a real estate agent. There is nobody from whom the client can get a clear perspective.

When dual agency is practiced, the agent has an incentive to close the sale, NOT to do what is best for a client.

Downsides for the Seller and Buyer

The disadvantages are similar for both the seller and the buyer. When it all comes down to it, we have all sorts of reasons for selling and buying a home.

Confidence and Confidentiality

When it comes to property transactions, these two go hand in hand. The agent may, for instance, know that the seller needs to sell his or her property quickly due to financial reasons. Letting this information slip to the buyer could potentially allow the sale of the property for a lower price.

It works the other way around, too. If the agent knows the buyer has access to more cash, he or she might keep the price artificially high. That could lead to a buyer paying too much for the property.

You need to have confidence that your agent is working for YOU.

Full Disclosure

An agent should always disclose all of the facts that could affect the transaction. If he or she knows that a new road is going to be built on the other side of the garden wall in a couple of months, he or she should tell the buyer this. However, it is not very likely to happen if you enter into a dual agreement with an agent.


All financial dealings must be accounted for at the end of the transaction.

Reasonable Care

The agent must show what is known as reasonable care to both parties. That can be tough to achieve when you are representing both the seller and the buyer.

A dual agent is not really an agent at all, in the true sense of the word. He or she will end up being more of a middle man than an agent. It is a bit like walking a tightrope. When you stop and think about the situation, you will soon realize that all three people in the transaction want to get something out of it. The agent, the buyer, and the seller are the three parties.

If a real estate agent offers you a dual agreement, as the buyer, you should always say “no.” Get your own buyer’s agent who will truly represent you. Directly working with both parties does not work.

There is a HUGE difference in terms of working with someone vs. representing someone. In a worst-case scenario, you might end up in a situation which could take you a long time to unravel, and you might even be forced to change your agent. Then, the process would have to start all over again.

If you are selling a home, it is a no-brainer. Never allow your agent to practice dual agency. Your agent should always be representing YOU. You are paying your agent thousands of dollars to serve YOUR interests. There is not one good reason that the agent should become a neutral party.

Some real estate agents will try to entice you to agree to dual agency by offering a commission discount. Do you want to save a couple of thousand dollars in commission only to make the colossal mistake of overpaying by ten thousand dollars or more? A typical real estate agent myth is that going directly to the listing agent is a smart move. WRONG!

Final Thoughts

Selling and buying a home is stressful enough without having to worry about whether you are receiving the right kind of representation. Losing confidence in the agent is a terrible thing. It might cost you the loss of the sale, or you could end up with serious legal problems.

A real estate agent who is representing you does quite a bit to make sure that the transaction goes as smoothly as possible. The agent is there with you every step of the way and tying up all of the loose ends. Never lose sight of the importance of an exceptional agent.

Do yourself a favor and reject dual agency when you are buying or selling a home!

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