Everything You Need To Know About Dual Agency

Oct 12, 2022 By Susan Kelly

A dual agent has to walk a fine line to maintain their impartiality toward both sides, and they are not allowed to provide private information to any side. Dual agency happens when the same person or organization acts as both the listing agent and the buyer's agent. In this scenario, the entity might be a single agent acting on behalf of both the buyer and the seller, or it could be two agents working for the same brokerage business. The latter scenario, in which two agents are working for the brokerage, results in the brokerage profiting on both sides of the transaction.

How Does Dual Agency Work?

When a single real estate agent or firm represents a house's buyer and seller, this situation is known as a dual agency. The agency will benefit from this arrangement because, based on the rules and customs of the state in question, it will collect a charge from both parties involved in the transaction. Although the dual agency is legal in most states, the practice is subject to stringent regulations designed to protect buyers and sellers from exploitative business practices. For instance, the state of Alabama mandates that both the buyer and the seller must agree to be represented by the same agent or agency.

Consider the following scenario as an illustration of dual agency: Betty Smith, an agent, working for the Smith Brokerage business, offers a property on Main Street as available for purchase. If one of Smith Brokerage's other agents, John Doe, offers an offer on behalf of a buyer, then Smith Brokerage functions as a dual agent in this transaction. The business stands to earn profits on either side of the transaction. There is also the possibility of dual agency taking on a more complex form. For instance, Betty Smith is the listing agent for one customer (the seller) and locates a suitable bidder for their property. The only catch is that the buyer must first sell their present residence before purchasing the property from the seller.

The buyer then has Betty Smith sign a listing agreement to assist them in selling their property so they may purchase the home the seller is selling. As a dual agent, Smith and the company stand to profit from the sale of two separate homes.

Fiduciary Responsibilities

Because fiduciary responsibilities bind real estate brokers, the dual agency might result in legal complications. These responsibilities call for total dedication to the satisfaction of their customers. Both the buyer's agent and the seller's agent are obligated to behave in the best interests of their respective clients while representing their respective parties in a transaction. It would be difficult, if not impossible, for a single individual to function as a dual agent since they would be required to be loyal to both parties at the bargaining table. A state's contractual, tort, and licensing statutes all include provisions for real estate agents' fiduciary obligations. As a result, real estate agents need to disclose any dual agency ties they may have completed. If a dual agency goes forward, all parties involved must fully grasp the rules and provide their written approval.

The Advantages of Dual Agency

Although dual agency raises a few distinct issues and concerns, a few benefits may help mitigate the negative effects. Certain response times may be shortened if you are involved in a dual-agency partnership. Your agent can respond to your inquiries without waiting for the agent representing the opposing party to get a response from their clients.

Whether you are the buyer or the seller, using a dual agency may help make the transaction go more smoothly. You may be able to keep some of the money you earn, especially if you are the one selling the item. You will often be required to pay a commission to your agent, typically 6% of the sale price, which will be divided with the other agency afterward. If you are working with one agency, agent, or business, you may be able to negotiate a somewhat lower percentage rate for the service you are receiving.

Dual Agency Disadvantages

A dual agent cannot bargain in such a way as to get the greatest price possible for the seller while also obtaining the lowest price possible for the buyer. In addition, a dual agent may feel the need to push for a higher selling price to bring in a larger commission check at the end of the transaction. In a case involving two separate agencies, there are no new perspectives. If two different agents, brokers, or companies are involved, one of them may notice if the other makes a mistake, or at the very least, it is expected that they will need it to fix the problem. A "single agent" is an agent that acts on behalf of just one party, and their devotion to one side is far more obvious as compared to commitment to several parties.

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