What Does Dual Agency Mean In Real Estate?
Dual agency is the term for when a real estate agent represents both parties in a real estate transaction. This usually happens when an agent is representing someone with property for sale and then a potential buyer comes along and asks that same agent to also represent them, too. This is not a common (or advisable) situation, but it does occur from time to time.
One example of where it worked out rather nicely was back (before I became a licensed Realtor®) when my mother was selling her home. There was a gentlemen whom lived in our neighborhood and expressed interest in buying the property a few different times over the last 20 years or so. When mom decided to sell and find a new house, that neighbor was the first one in line with an offer. Ironically, my mother’s house was on the market for less than a day!
Well, the neighbor that wanted to buy the property made mom a generous cash offer that was above the asking price, so she just took it and never looked back. And the agent that was representing my mother (also a very good friend of mine) was hired by the buyer to also represent him. In this instance things worked out very nicely because she knew the property, knew all of the details, and there really was no negotiating or best-interests to be protected — so she was basically just handling all of the paperwork for both parties involved. A short and smooth transaction for a very simple situation.
However, very few real estate situations are so simple and neat. Often the sellers and buyers are complete strangers with different needs and goals. Therefore, it is rarely a good idea for an agent to represent both parties involved in a real estate sale. And, if both parties elect to proceed with just one agent between them, then they should first take great care to make sure that they understand any potential conflicts that might arise from such an arrangement. To properly effect this understanding, both parties should seek outside counsel from separate Realtors® or attorneys. Then, if they are still okay with the idea of one agent handling everything, they can proceed without worry.
To be clear, if one agent is representing both parties, then that agent has become neutral and will no longer be able to fully represent either party’s best interest, but rather only what is required by law and a professional code of conduct. Speaking of law, not all states allow for real estate agents to function in this dual role. So, if you’re reading this outside of Ohio, you may need to check your own state’s laws to find out if dual agency is even possible. And, even if state law permits dual agency, there are often many other laws and professional codes of conduct that will limit what the agent can now advise either party about when it comes to anything beyond paperwork and procedure.
A common misconception amongst newer sellers is that, if an agent represents both parties then they will be more motivated to close a deal. First off, any real estate agent is often motivated to close a deal simply because that is the only way they get paid. Next, while a dual agency situation often works to the seller’s advantage more-so than for the buyer, the seller also will experience some new and interesting handicaps in regards to exactly what the agent can now advise them on or negotiate for on their behalf (since they now represent both party’s best interest in a limited capacity.) In other words, don’t be fooled into thinking that this is the best scenario for a home seller to be in because they may still need to seek advice elsewhere if any complications arise.
So, there is much to consider before just agreeing to have an agent represent both parties. Also, when you speak with any agent about any property, make sure one of the first questions you ask is if they represent anyone else in regards to a particular property or if they are currently representing any buyers in regards to a particular property. Sometimes dual agency really can make some situations smooth, simple, and efficient. The deciding factor is really just a matter of taking all of the unique variables of a situation into account and making sure that everyone involved is going to benefit from dual role representation.
