Never Allow a Dual Agency Agreement in Real Estate

Why You Should Never Accept Dual Agency

Our homes are likely to be the most significant investments we ever make in our lives. It is essential to get the best “deal” possible, but we often forget it is also important to get the best representation available as well. That is not something that you are going to get with a dual agency agreement.

When you are buying or selling a home, dual agency should be avoided. You should never allow your real estate agent to stop exclusively represent YOU. This is precisely what happens when you allow dual agency. YOUR real estate agent you hired becomes a neutral party in the transaction. They are no longer permitted by law to represent you as they would if they were an exclusive buyer’s or seller’s agent.

Does that sound stupid? Of course, you are nodding your head YES because it is ridiculous! Lots of real estate agents fail to explain this simple fact to their clients. Why? Simple – they want you to agree to it so they can double side a sale.

These are the kind of agents you want to avoid in real estate. Just because something is legal doesn’t make it right. You should be looking for a real estate agent who has your best interests at heart – NOT their own.

What Is a Dual Agency Agreement?

The term dual agency agreement means the seller and buyer are both represented by the same real estate agent in the transaction. In some states, it could also mean two agents working for the same company each representing a buyer and seller. Many states refer to that scenario as designated agency.

There are some strict terms which apply to the broker during a dual agency transaction, like full disclosure. However, there are still a lot of downsides and pitfalls for both parties when it comes to being represented by a dual agent.

Think about it this way. If you were unfortunate enough to experience a legal claim, would you use the same lawyer as the other party? The answer to that question is no. It just would not be in your interest to do so. How could the lawyer represent both? It sounds pretty stupid, right? That’s because it is and the same is true for dual agency.

Dual agency agreements have caused a lot of concerns, especially in recent years. The financial crash of 2008, highlighted many of the problems associated with dual agency transactions. As a matter of fact, the following states have banned the practice of dual agency:

• Alaska
• Colorado
• Florida
• Kansas
• Maryland
• Texas
• Vermont

Why did these states ban dual agency? The answer is simple – it does not benefit consumers!

Who Benefits From a Dual Agency Agreement?

There is one person who benefits from the dual agency agreement, and that is the agent. This is all about the “bucks,” and an agent transacting a dual agency agreement will earn more money. He or she is more likely to favor the seller and keep the price high. Like Michael Douglas said in the 1987 movie Wall Street “Greed is good.” It may be but only for the dual agent.

In a standard transaction, there is a “buyer’s agent” representing the buyer and a “seller’s agent” representing the seller. The agents in these scenarios work for the respective parties. They are there to protect their best interests.

In a dual agency relationship, there is no protection of interests. The agent must remain completely neutral. What this means is the consumer is not afforded the same service they would receive if they had their own respective agent. It is almost like the unrepresented buyer who decides to purchase a for sale by owner home without a real estate agent. There is nobody for the client to get a clear perspective from.

When dual agency is practiced, the agent has an incentive to close the sale, NOT to do what is best for a client.

Downsides For the Seller and Buyer

The disadvantages are similar for both the seller and the buyer. When it all comes down to it, we have all sorts of reasons for selling and buying a home.

Confidence and Confidentiality – when it comes to property transactions, these two go hand in hand. The agent may, for instance, know the seller needs to sell his property quickly because of financial reasons. Letting this information slip to the buyer could potentially allow the sale of the property for a lower price.

It works the other way around as well. If the agent knows the buyer has access to more cash, he may keep the price artificially high. That could lead to a buyer paying too much for the property.

You need to have confidence that your agent is working for YOU.

Full Disclosure – an agent should always disclose all of the facts which could affect the transaction. If he knows that a new road is going to be built on the other side of the garden wall in a couple of months, he should tell the buyer. Not very likely to happen if you enter into a dual agreement with an agent.

Accounting – all financial dealings must be accounted for at the end of the transaction.

Reasonable Care – the agent must show what is known as reasonable care to both parties. That can be tough to achieve when you are representing both the seller and the buyer.

A dual agent is not really an agent at all in the true sense of the word. He or she will end up being more of a middle man than an agent. It is a bit like walking a tightrope. When you stop and think about the situation, you will soon realize that there are three people in the transaction who all want to get something out of it. The agent, buyer, and seller are the three parties.

If a real estate agent offers you a dual agreement, you should always say no as the buyer. Get your own buyer’s agent who will truly represent you. Working with both parties simply does not work.

There is a HUGE difference in the terms of working with vs. representing. In a worst case scenario, you may end up in a situation which could take you a long time to unravel, and even being forced to change your agent. The process would then have to start all over again.

If you are selling a home, it is a no brainer. Never allow your agent to practice dual agency. They should always be representing YOU. You are paying your agent thousands of dollars to serve your interests. There is not one good reason they should become a neutral party.

Some real estate agents will try to entice you to agree to dual agency by offering a commission discount. Do you really want to save a couple thousand dollars in commission only to make a huge mistake by overpaying by ten thousand or more? A common real estate agent myth is going directly to the listing agent is a smart move. WRONG!

Final thoughts

Selling and buying a home is stressful enough without having to worry about if you are receiving the right kind of representation. Losing confidence in the agent is a terrible thing. It may cost you the loss of the sale, or you could end up with serious legal problems.

Do yourself a favor and reject dual agency when you are buying or selling a home!

_