Dual agency is a kind of affiliation in which only a singular agent represents both the buyer and the seller. Representing the offer of the customer apart from the client will make you a dual agent as you are working for the interest of both parties either on purpose or involuntarily.
Dual Agency In Real Estate
Suppose a listing agent comes across a buyer. The buyer likes the house, he offers the listing agent to make an offer to the owner of that house. That way he will be representing the buyer as well. If he agrees to do so, he will be performing what we call the dual agency.
In some cases not the customer but the agent offers to engage in dual agency.
Another version of dual agency is that an agent is hired to sell a property. And another agent from the same brokerage organisation is hired from the buyer side. If they indulge in a transaction, dual agency occurs.
An agent is solely hired for the betterment of prices and a legal and secure transaction. Having a single individual or organization as the representative of you and the opposite party is a bittersweet pie.
Is Dual Agency Illegal In Some States?
Dual agency is a phenomenon that is quite complicated to judge if things go wrong. Certainly, people may have used it to their advantage and to cheat other people. In the US, the laws regarding dual agency are variable. In some states it’s totally illegal, in some states it’s legal in some strict conditions.
Where Dual Agency Is Legal?
Following are the states in which dual agency is legal. Keep in mind that the terms and conditions regarding dual agency in each state are different.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Dakota
- West Virginia
Where Dual Agency Is Illegal?
Following are the states in which dual agency is illegal for some reason:
Dual agency and its important parts
Dual agency is very complex to adhere to. Many agents don’t want to engage in such a type of transaction. Following are some points that are very important to keep up.
The agent is bound to treat both the buyer of the property and the seller of the property with fairness, honesty and justice.
Agents may never reveal any personal and confidential information or deal strategies to either of the parties.
And the agent must explain and clarify to each side that none of the information or discussion will be disclosed to the other side that will provide any side an unfair advantage over the other. Their confidence is important for the transaction to be completed smoothly. Most of the time people only participate in dual agency with a known and trusted agent which is a wise and quite satisfactory decision.
Agents must be loyal to both of the parties and should not suppress the interests of any party.
Agents must not speak or act biased to any side and make a deal with total neutral actions.
Agent must understand the technicalities and keep the interest of both of its clients prior. Either he was initially hired by the buyer or the seller.
The initial client before hiring must be acknowledged that their agent might be working as a dual agent with the other party. It should be the decision of the buyer or the seller whether they want a dual agent for their real estate transactions or not.
Not just the initial client but also the other client must be acknowledged and in fact a legal declaration document is required to perform such action. If any of the clients disagrees. It’s a criminal offence to continue a non disclosed dual agency.
It is the most important component that both of the parties must be on the same page or the results will be devastating for any person or party involved in the transaction if anything comes unpleasant.
It is really important for the agent to decide that he can make a deal by representing both sides with totally different interests and being unbiased the whole time. It is very difficult to believe that a person will land on a point where both of the parties are benefited.
It’s like deciding the results of a match played by a player from both sides, or like the decision of a case in which the prosecution and defence is done by the same lawyer.
Pros & Cons of Dual Agency
The effects of dual agency on a transaction depends upon the nature and ethical values of the agent as well as the parties involved. Dual agency has its own benefits and could certainly turn out to be way more better than a normal transaction. But it can also become a nightmare as the disadvantages and risks come alongside.
Advantages of dual agency
1. Linear efficient communication
Usually, in a normal transaction, communication is slower. The buyers make an offer to the seller then they either make a deal or turn down the offer and show their desired price. While in dual agency, since there is only 1 person or organization involved. The communication is faster and could really help to understand the demand unambiguously.
2. Commission can be negotiated
Most of the time people engage in dual agency because of low commission charges. Because a single agent is involved and he gets all the commission. The percentage can be negotiated and agents also show flexibility because either way they are getting more than they can earn from a normal transaction.
3. Important facts about property
A dual agent will provide you real facts about the house than an agent that you’ve hired since the seller agent is very much familiar with the property. And it’s very significant to get the deep information, pros, and cons of the house before deciding to buy it. Generally speaking, the agent wants you to accept the house by telling you the imperfect parts of the house.
4. Reasonable price of property
In a normal situation, the seller agent will try to sell at the highest price, while the buyer agent will do the opposite it. In a dual agency, the price can be reasonable that the seller will be satisfied as well as the buyer, it’s a total win-win situation. Dual agency transaction prices can not provide you the highest price or the lowest price as the buyer and seller usually try to derive.
5. A healthy business
Usually, in a dual agency transaction, the relationship between the buyer and the seller becomes less stressful. Both of them think that they are more benefited in the deal. The smooth transaction also convinces people to choose a dual agency for further deals as well.
6. Double income
For real estate agents, dual agency is a gold mine and helps them generate comparatively larger amounts from a transaction than a normal transaction in which the buyer’s agent and the seller agent share the commission. In this way, they make income of two deals in one deal and work less. Not to forget that dual Agency is far more stressful than a normal transaction.
Disadvantages of dual agency
1. Overlooking important documents
A dual agent is also a human being and he can mistakenly or purposely loosen up the documentation. As for a normal transaction, since there are two separate people checking the documented procedure, there are fewer chances of improper documentation.
2. Better options available
A dual agent will always make you accept a proposal that is lesser than you could actually have. Since the dual agent is bound to keep the interests of both parties he might want to seal the deal on a moderate price. If you want the highest price as a seller, or the lowest price as a buyer dual agency is not the perfect decision.
3. Extraction of complicated information
Any party involved in the transaction can offer a bribe to the agent and gain knowledge that an Agent is bound to protect. If the agent is not ethical, the dual agency will be worse and you will regret choosing a dual agency.
4. Agents may lie for commission
For the sake of double commission, the agent will try its best to work things out even if any of the parties is not benefited, or not satisfied by the price. The results will be unpleasant and legal conflicts may occur as well.
5. Hardest to protect both sides
For the agent, it is very difficult to stay honest and fair to both sides, as the representative of both the buyer and the seller a lot of tension is applied on the only middle man. It’s a very stressful job and that is why many state agents don’t even want to engage in such transactions.
6. Risks of unfaithfulness
The agent can be loyal to only one party and the other party will end up in disadvantages. If you don’t think that the agent can be trusted, it is best to hire a separate agent to represent your interests.
Is dual agency fair?
People in the real estate world have different opinions about the dual agency. Some people say it is impossible for a person to do not only two jobs, but jobs that are totally opposite. A seller wants the highest price for his property while the buyer wants the best house to live on at the lowest price.
While some people prefer dual agency because it’s much more efficient than a normal transaction. So it’s all about the opinions.
Should you consider Dual Agency?
Is dual agency a good idea? Probably not!. Dual agency is not the most practical way to carry out a transaction. People may tell you that dual agency worked out for them. That does not mean it will work out for you as well.
It’s your legal right to reject dual agency and if you are inexperienced in real estate business. Dual agency is not a good idea.
Always choose after contemplating all the factors, the merits and the drawbacks and then decide what is going to work for you