You’ve decided to buy a home. Luckily, you’ve found a real estate agent who can help you find homes to look at and assist with negotiations and inspections. But what if that agent also works for the seller? But what if that person also works for the seller? That is called dual agency, and there’s a lot to consider before agreeing to the arrangement.
Here’s what future homebuyers need to know about dual agency to help decide if it’s the right choice for them.
What Is Dual Agency?
A dual agent represents both the buyer and seller in the same real estate deal. Dual agents are also sometimes referred to as transaction brokers.
Dual agency can be controversial and is banned in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, Vermont, and Wyoming.
Other states do not explicitly make it illegal, but some do warn against using a dual agent.
For example, the New York Department of State issued a memo advising consumers to be extremely cautious when signing on with a dual agent because in doing so they forfeited their right to an agent’s loyalty.
However, in every state where dual agency is legal, the law requires agents to disclose their work with both the buyer and the seller. Both buyer and seller must agree to use a dual agent and sign a consent form indicating they understand what they are agreeing to.
Dual agency may also refer to deal-making of seller’s agents and buyer’s agents at the same real estate company.
For example, Keller Williams, one of the largest real estate firms in the nation, has both seller’s and buyer’s agents. If one of its seller’s agents puts a home on the market, there’s a decent chance that one of its buyer’s agents may have a client for the property.
This is less controversial and poses fewer issues as it is still two separate people overseeing the seller’s and the buyer’s interests.
Recommended: How to Buy a House Without a Realtor
What Are Agents’ Fiduciary Responsibilities?
Real estate agents are legally bound to represent the best interests of their clients. This means agents are to disclose any information they have that may or may not help their clients in the negotiating phase.
The obligation to disclose could pertain to information on home inspection reports, defects with the house, or anything else that affects the property’s value.
While representing a buyer, an agent must also disclose any existing relationship with the seller.
Be sure to ask real estate agents important questions about how they work and what they’ll do for you so you’ll know whether they’re the right agent for your needs.
A seller’s agent must disclose any relationship with potential buyers and all offers made on the property—unless, in general, the seller has instructed his agent in writing to withhold certain kinds of offers.
Real estate agents are also expected to put their clients’ financial best interests above their own. This could mean putting in an offer below asking price, which would reduce their own commission.
With all of that in mind, it becomes clear that issues of loyalty and confidentiality become challenging in a dual agency situation.
Pros of Dual Agency
Smoother communication: Having one agent representing both the buyer and seller could help create a smoother communication path. Because the person represents both parties, they may be able to speed up any negotiations. In this case, the dual agent may also better understand both the seller’s and the buyer’s timelines, their schedules, and any internal deadlines better than two separate parties could. Buyers wouldn’t have to wait for the seller’s agent to call back and sellers wouldn’t have to wait for a buyer’s agent to call back, because with dual agency they are the same person.
Potentially more information on the home: A dual agent may be able to obtain more information on the home than an agent just representing the potential buyer. In turn, they can relay any pertinent information, such as structural issues, inspection reports, and any updates made to the home, to the potential buyer.
Potentially more access to a larger pool of homes: Remember, dual agency also means a buyer’s agent and seller’s agent working for the same agency. That means, if one home doesn’t work out, the two agents could look internally to find more potential homes their agency represents for the would-be buyers. They may even be able to find a few homes that haven’t hit the market yet.
Possibility for a discount on commission: In a typical real estate transaction, the seller’s agent and buyer’s agent split the commission. A dual agent may be willing to negotiate down their commission since they are double-ending the deal.
Dual agents still have to do their job: In the end, even dual agents must present all offers, prepare all paperwork, present all disclosure agreements, and help to complete the deal.
Recommended: 6 First-Time Homebuyer Mistakes to Avoid
Cons of Dual Agency
Buyers (and sellers) won’t get special treatment: Agents only working for one side will likely be willing to go all out for their client to ensure that the client gets the best deal. An agent working for both sides may be more tempted to get the best deal for themselves to maximize the commission (hey, it’s just human nature to look out for No. 1). A buyer (and a seller) usually wants loyalty above all else when looking for a home. Homebuyers may want to seek out someone who knows what’s needed to buy a house and has their back.
Buyers (and sellers) may not get the price they want: Again, a dual agent’s allegiances are split down the middle during the deal-making process. A seller’s agent is meant to promote the home and get the seller the best price for the home with the fewest contingencies.
A buyer’s agent is on a mission to find every tiny thing that needs to be fixed with the home to get the buyer the best deal they can. If a person is representing both sides, how can they do both? It’s important to discern an agent’s allegiances before signing on the dotted line.
No pushback from the other agent: In a two-sided real estate deal, the two agents will typically go back and forth on the home’s price, any reductions the buyer may want in exchange for repairs, the home’s inspection report, and much more. This creates a system of checks and balances for both sides, which can be important when negotiating a fair deal. However, if one person is playing both sides, things may get muddled, hurting both the seller and the buyer.
The Takeaway
Dual agency is rare in the real estate world because most buyers and sellers want to find an agent who is loyal to them and has their best interests at heart. Still, if you find yourself in a dual agent situation, there is much to know.
There’s another important decision most homebuyers must make: getting the right home loan. Different lenders may offer different terms, rates, or perks that may fit a buyer best.
SoFi offers mortgage loans with competitive rates, an online application, and mortgage loan officers who can answer your questions.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOHL0623050