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How to Avoid Dual Agency in Real Estate

Bill Gassett's picture
What is Dual Agency

If you are going to be buying or selling a home this article will interest you. You are about to discover one of the hottest subjects in real estate. Learn about the real estate term known as "dual agency" and why this situation does not benefit consumers. Understanding how dual agency works is something most consumers don't understand. The same can be said for a fair amount of real estate agents as well.

What Is Dual Agency

When buying or selling a home it is quite common to work with a real estate agent. When buying a home it is smart to have a buyer's agent.

A buyer's agent becomes your fiduciary. Their purpose is to make sure you make smart decisions when purchasing a property.
When selling a home you also want an advocate in your corner who will protect your interests. This is what's known as a seller's agent.

In each scenario, the real estate agents purpose is to provide professional expertise so that you make sound decisions.

In real estate sales, there is another type of relationship that can rear its ugly head and it's what's known as dual agency. If you are buying or selling a home it makes sense to avoid dual agency at all costs. In the above reference you will see an outstanding explanation of how dual agency works in many states.

Why Avoid Dual Agency

So you might be wondering why you would want to avoid dual agency. In a nutshell when a Realtor becomes a dual agent they no longer exclusively represent a buyer or seller anymore.

The real estate agent becomes a neutral party. In the real world what this means is the agent can no longer guide either the buyer or the seller.

This is a lousy arrangement for both parties as the agent no longer can provide the services they would have if they were an exclusive buyer's or seller's agent.

Both the buyer and seller give up the very reason why you hire an agent - professional expertise.

What Does This All Mean?

Here is an example of what you give up. In dual agency, If you are a buyer and want to make an offer on a home, your agent CANNOT suggest what to offer.

If you are selling a home the agent also cannot suggest a counter offer. They cannot give you any advice or counsel you on price. The agent essentially becomes a paper pusher.

There is only one person that benefits from dual agency and that is the real estate agent who earns a double commission.
The buyer and seller, however, are left on their own to make huge decisions. The lack of guidance, by the way, does not end at the offer.

The agent also cannot guide either the buyer or seller when it comes time to negotiate the home inspection.
If you think your agent should be able to counsel you at all forget about it!

Important note: In some states dual agency refers to two agents from the same firm each representing a buyer and seller for the purchase and sale of a property. This is commonly referred to as designated agency. Each party is designated an agent from the same firm.

There is a big difference between dual agency and designated agency. In single agent dual agency the clients don't have someone in their corner. They have an agent who is not ALLOWED to provide the same services they would if they exclusively represented either party.

With designated agency both the buyer and seller do have someone in their corner guiding them.

What Should You Do?

Buyers and sellers often ask what they should do. The answer is simple - reject dual agency. If you are selling your home you want your agent to remain as a seller's agent if they procure a buyer.

The agent can refer the buyer to someone else who can become their buyer's agent.

If you are purchasing a home and your agent has a listing that they think is a match for you then have them refer you to another agent to show you the property.

You want a buyer's agent who will be able to suggest what to offer, help negotiate the home inspection and provide guidance on anything else that comes up during the sale.

Will this kind of advice make some real estate agents happy? No of course not. By doing so you will be taking money out of their pocket. Real Estate agents, however, who are not agent centric do not think this way. They always want what is best for their clients.

What Else to Know About Dual Agency?

Dual agency has actually been banned in a number of states. Real Estate agents are not allowed to work with both the buyer and seller in the same transaction. These are pro-consumer states.

They understand that dual agency serves no purpose for a buyer or seller.

Keep in mind you are bound to be told by some real estate agents that there is no problem with dual agency. They will say things like it is legal in their state or that they have done it many times with no problem.

Here is a great quote from real estate agent Alan May that summarizes dual agency very well:

" The only one who wins in dual agency is the real estate agent. If consumers truly understood the dynamics behind dual agency, they would never agree to allow it. Unfortunately, they don't understand and the one who's explaining it to them is the agent who will benefit from them saying yes to it."

If you are going to be buying or selling a home insist on having a real estate agent who will remain your exclusive agent throughout the transaction.

Be sure you understand how dual agency works in your state. You mean even want to do an online search to see exactly how the law is written. As previously mentioned, some agents will sugar coat what they can and cannot do or just ignore the laws all together.

Just say no to dual agency and you will be much better off. Buying and selling a home is a huge deal. Make sure you have someone who is your advocate throughout!

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