Working With a Dual Agency Real Estate Agent

by on October 28, 2012The Realestate.com Team

Buyers and sellers sometimes have the option of entering into a dual real estate agency relationship with their real estate agent. Although this is not necessarily a problem, you should be aware of exactly what a dual real estate agency means and what restrictions it can place on your real estate agent.

What is a Dual Real Estate Agency?

dual real estate agencyThe term “agency” refers to the relationship that you, as a buyer or seller, have with your real estate agent. Dual agencies can occur with two agents or with a single agent.

A dual agency with two agents can occur because all agents are licensed by brokers, and the buyer’s agent and the seller’s agent may be licensed under the same broker.

In a dual agency with a single agent, the seller’s agent who also represents the buyer is operating under a dual agency. When potential buyers who don’t have a buying agent contact a seller’s real estate agent, they can ask the selling agent to submit an offer on their behalf. In this case, the agent is acting as a dual agent.

Dual Real Estate Agency Disclosure

Because dual agencies represent a conflict of interest for the buyer and seller, some states don’t allow them. In states where dual agencies are legal, however, the law requires that a dual real estate agent must inform both the buyer and seller of a dual real estate agency. These two parties must also sign consent forms indicating that they understand the concept of dual agency, as well as the restrictions imposed on the real estate agent by this type of agreement. If either the buyer or seller refuses to sign the dual agency agreement, the transaction cannot continue. Once the dual agency agreement is executed, the real estate agent becomes known as the disclosed dual agent.

Restrictions to Dual Agency

Dual agency imposes some restrictions on a real estate agent. The agent is required to treat both buyer and seller with fairness and honesty. “It comes down to how professional you are and how you understand what you should and shouldn’t say and what you can or can’t say,” said Debbie Rose of Prudential New Jersey Properties.

The agent is required to provide full disclosure concerning the property to the buyer but cannot reveal confidential information about the seller. When the time comes to make an offer, a dual real estate agent cannot advise the buyer on how much to offer nor can the agent advise the seller to accept or reject an offer.

“Dual agency does have limitations. It doesn’t mean that the buyer won’t be represented, but the buyer will be treated equally and it comes out fine in the end,” Rose said.

Disadvantages of Dual Agencies

In a New York Department of State memo, consumers are advised to be wary of dual agency relationships. The memo states that when a person enters into a dual agency relationship, they are forfeiting their right to that agent’s loyalty. The agent then cannot advance the interests of either party.

{ 7 comments… read them below or add one }

singer700 March 11, 2014 at 8:42 am

I am a Sellar………………will my Fiduciary who is a Dual-Agent bring in competing offers
for Her Client the Buyer………..no..its in her interest… the seller who wants as much money for her home as possible..will be shut out when my RE person pleases her best interest by selling to her client the Buyer meaning…………unintentionally keeping the price the lowest possible,..and moving it………..…what ever happened to bidding…what a scam!

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L. Matos February 2, 2014 at 2:06 pm

In attempting to sell my home, I agreed to sign an exclusivity agreement with my agent. One day before the end of the sales contract period, my agent brought two offers. One written from a buyers’ agent, which I explained was too low to counter, and another verbal from buyers without an agent. The verbal offer was marginally higher and was soon followed by a written offer and a signed document by the buyers for my “exclusive” agent to act as a dual disclosed agent. Since I had no knowledge of that, nor would I have agreed to it, I turned away all offers from my “exclusive” agent and terminated my contract. NO WAY can anyone convince me that he would be acting in anything but his own interest.

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Robert Higgins October 1, 2013 at 3:17 pm

Being a Dual agent or Intermediary is very simple if you have Ethics, Integrity and Honesty. If you don’t uphold high values, then you are right, it can’t be done.

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Paula Brown January 25, 2013 at 11:58 am

Jim,

I gather you are an agent looking to better understand how to navigate the dual agency role. I agree with Debbie Rose’s statement in the article: “It comes down to how professional you are and how you understand what you should and shouldn’t say and what you can or can’t say.” Shannon, I admire your frankness in the “to get both sides of the commission” motivation; that certainly is an incentive! But I cannot agree with “there is no way to be a successful dual agent.”

The seller should know that he might be better off working with you as the buyer’s dual representative than competing blind against a professional advocate of the buyer; also, when you’re working as well with the buyer, you know what else the buyer is up to and can petition them, for example, to be responsible and fair about submitting multiple bids, for instance. Many of these considerations straddle non-implicit interpretations of the law vs. voluntary business practice/risk management. It is up to the broker to determine how these practices are interpreted or dictated. But most attorneys will agree that licensees are to be guided by “the spirit of the law,” which can never cover every imaginable circumstance.

My comments here will somewhat address the perspective of both the agent and the buyer.

To be honest, some buyers actually prefer to work directly with the seller’s agent, because (a) they believe that’s who is most knowledgeable about the property, (b) they find having a “middle man” obtrusive, or (c) they like the challenge of negotiating on their own (this is often the case with seasoned home buyers). More often, buyers end up working with the seller’s agent simply because that’s who ran the ad for the property or conducted the open house. After all, only the listing agent can advertise or run OH’s and 80-90% of home buyers initiated their search on the Internet and contacted listing agents directly. Then if that home turns out not to be exactly what they’re looking for, and they have developed a good report with the listing agent, the listing agent could become their buyer’s agent on another property.

In the majority of cases, buyers prefer – and are best represented – if they have their own exclusive buyer’s agent. It is valuable to note that loyalty works both ways, and to get the most diligent work out of your buyer’s agent, it’s advisable to sign an exclusive with them, even if it’s only for a short term (i.e., 30 or 60 days). That’s an incentive for the agent, as they know you’re not “cheating on them” with other agents who have access to the same listing information, and also if they have a deadline for exclusivity they’ll work extra efficiently. You can still search online for your own listings, but you’d owe it to your buyer’s agent to allow them to contact the seller’s agent on your behalf. Also, buyer’s agents can save you wasted time by interpreting “code words” in ads that might indicate a feature contrary to your needs, or locate MLS information that’s unpublished to consumers.

Before entering into any agency relationship, in New Jersey it is vital for both consumers and all licensed agents to read and fully assimilate the Consumer Information Statement on Real Estate Relationships. Of particular note is the provision that a seller’s agent can work directly with a buyer without being a “dual agent.” It is important to have that distinction made explicitly when working with a seller’s agent. The statement quotes: “Seller’s agents often work with buyers, but do not represent the buyers. However, in working with buyers a seller’s agent must act honestly. In dealing with both parties, a seller’s agent may not make any misrepresentations to either party on matters material to the transaction, such as the buyer’s financial ability to pay…(etc.).” Buyers should also note that a seller’s agent is equally prohibited from revealing confidential information about the seller’s interests to any buyer’s agent.

When working as a buyer with the seller’s agent, if you wish to have actual “representation,” as opposed to simple coordination, you must sign an “Informed Consent to Disclosed Dual Agency” agreement with the seller’s agent. Otherwise, you are agreeing to work directly with the seller’s advocate, as your own advocate.

What works best for you as a buyer depends upon who you are, your level of experience, your level of trust. There are some distinct advantages of disclosed dual agency, such as (1) same as in buyer agency, you are guaranteed that your confidential information such as negotiability will not be revealed to the seller; (2) the seller’s agent will know exactly what’s going on with potential competing offers whereas a buyer’s agent would not, and unless the other offer is from another dual agency buyer client, they can advise you on how to best compete with the other offer without compromising your interests; (3) you do have direct access to an expert on the property and can avoid possible delays, misinterpretations, and miscommunications that occasionally occur with an additional agent in the mix; and (4) the comparable sales data provided to the seller and the buyer are one and the same.

None of this is to detract from the advantages of having a dedicated buyer’s agent, just to address certain misconceptions about disclosed dual agency. The bottom line is, a buyer should work with an agent who inspires confidence that they are professional, trustworthy, and most importantly – who has taken the time to explain the roles and rules of agency. There are good agents and bad agents out there. A true professional will work with you honestly and with integrity, and in compliance with the law.

Hope this helps.

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Bridget January 10, 2013 at 4:35 pm

This can be a little tricky. You mainly represent the seller in this case. So disclosing certain information can get you into a lot of trouble. I would tell agents to speak with their broker when dealing with a dual agency.

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Shannon O'Brien December 22, 2012 at 11:16 am

Hi Jim,

An agent would become a dual agent to make the entire commission on a transaction instead of half the commission.

In my opinion, there is no way to be a successful dual agent. It is impossible to get the most money possible for the seller and, at the same time, save the most money for the buyer in the same transaction.

Dual agency presents a clear conflict of interest.

Thanks for the questions!

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Jim McLaughlin December 22, 2012 at 6:01 am

Why would an agent become a dual agent?
What is the best way to be a successful dual agent?
What steps are necessay to be a successful dual agent?

Thank you for your response.

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