Despite its lawfulness in most states, the practice is controversial among the real estate community. How can one agent keep both the buyer\u2019s and seller\u2019s interests at heart when their goals are at odds?<\/p>\n
Opponents of dual agency don\u2019t believe an agent can represent both the seller and the buyer without compromising the best interests of one, or both parties. Among those opponents are the eight states that have made dual agency illegal: Alaska, Colorado, Florida, Kansas, Maryland, Texas, Wyoming, and Vermont.<\/p>\n
Proponents do not believe that dual agency inherently compromises consumers\u2019 interests. They even argue that dual agency can make a transaction more efficient.<\/p>\n
Then there\u2019s the group in between: those who see dual agency as a sometimes necessary, though not optimal, part of doing businesses. For instance, The National Association of Realtors (NAR), the real estate industry\u2019s largest agent association<\/a>, has opted for a neutral stance<\/a>, neither promoting nor disagreeing with the dual agency relationship.<\/p>\n \u201cI don’t think it’s really a beneficial or negative situation. It’s just a byproduct of agency relationship,\u201d notes Kurt Thompson<\/a>, past president of the Massachusetts Association of Realtors.<\/p>\n To understand how dual agency works and why it\u2019s controversial, we dug into research and asked Thompson, who has 24 years of industry experience, for additional insight. We\u2019ll walk you through how this type of relationship can affect a real estate agent\u2019s duties and, ultimately, home sellers.<\/p>\n How does dual agency differ from other agency relationships? Instead of representing either the buyer or seller, an agent represents both at the same time. \u201c[Dual agency] just indicates that we have two clients that we have a fiduciary responsibility to<\/a>,\u201d explains Thompson. And as a fiduciary, the agent must put their client\u2019s (or clients\u2019 in this case) interests first<\/a>, even above their own interests.<\/p>\n The potential problem with dual agency is that sellers and buyers inherently have opposing interests. Sellers want the highest price and best terms, while buyers want the lowest price and best terms for themselves. Can a single agent fully represent both a seller\u2019s and a buyer\u2019s interests simultaneously?<\/p>\n Detractors<\/a> believe that sellers won\u2019t get the same advice or counsel during the negotiation process if the listing agent also represents the buyer.<\/p>\n For example, <\/i><\/b>say Candice lists her home for $500,000. As Candice\u2019s listing agent, Anya knows that Candice is willing to accept an offer as low as $475,000. Anya also represents Joey, who wants to bid on Candice\u2019s home. Joey wants to get the best price, so he asks Anya for her advice. What would be a good offer?\u00a0<\/i><\/p>\n As a dual agent, Anya\u2019s required to maintain confidentiality for both parties. She can\u2019t tell Joey that Candice will accept $475,000, which would be in Joey\u2019s interest. Doing so would break her fiduciary duty to Candice.\u00a0<\/i><\/p>\n On the flip side, Anya can\u2019t disclose to Candice that Joey loves the house. He\u2019s willing to pay up to $515,000. Doing so would go against her fiduciary duty to Joey.\u00a0<\/i><\/p>\n Instead, Anya walks a tightrope between her two clients, maintaining a certain amount of neutrality. If Anya represented only Candice, while another agent represented Joey, the outcome could be different. Anya could aggressively negotiate with the other agent on Candice\u2019s behalf, potentially locking in a higher asking price than if she were simultaneously trying to deliver a lower asking price for Joey.<\/i><\/p>\n Another potential pitfall in a dual agency transaction results from an agent\u2019s commission. Real estate agent commission is typically around 6% of the sale price, divided equally between the listing agent and the buyer\u2019s agent<\/a>. But if your agent represents both you and the buyer, your agent would be entitled to the entire commission.<\/p>\n According to the CFA, \u201cagents also have a strong financial incentive \u2013 retaining the entire commission \u2013 to promote the sale to those buyers who will work directly with them. These buyers are not necessarily those who are willing and able to make a timely purchase at the highest price<\/a>.\u201d<\/p>\n Proponents of dual agency disagree: they believe that one agent managing a transaction means there\u2019s less back-and-forth, leading to faster communication and potentially faster closings<\/a>. Also, some brokers who recognize that they\u2019re not splitting their commission may agree to reduce their fee<\/a>, saving you money.<\/p>\n Despite dual agency controversy, the practice is legal in many states. Of those that allow dual agency, most require licensees to disclose the relationship \u2014 or risk losing their license<\/a>.<\/p>\n \u201cReal estate license laws in most states prohibit licensees from acting as undisclosed dual agents<\/a>,\u201d notes a NAR agent guide on agency. And NAR requires its Realtor\u00ae members, per the NAR Code of Ethics and Standards of Practice, to disclose dual agency relationships to buyers and sellers<\/a>.<\/p>\n Thompson also highlights the importance of disclosing a dual agency relationship. \u201cThe most important thing, in my opinion, is for all parties to know very early what dual agency is \u2026 and to understand how the relationship will be impacted,\u201d he says. \u201cWe get consent for designated or dual agency upfront in our contracts,\u201d he adds.<\/p>\n If an agent doesn\u2019t disclose dual agency in advance, the seller could feel tricked upon discovering their agent\u2019s relationship with the buyer after the deal is done. The seller might wonder if they would have landed on a better price if their agent hadn\u2019t been representing the buyer at the same time.<\/p>\n While most states allow dual agency, eight states have made it illegal for a single agent to represent both the seller and buyer as a fiduciary. However, some states that ban dual agency allow a similar agency relationship called designated agency<\/a>. Under a designated agency, two agents who work for the same firm or broker may represent the seller and buyer, respectively.<\/p>\n Each state and territory establishes its own agency laws and disclosure requirements<\/a>, says NAR. Since laws often change, check with your state\u2019s regulatory agency for the most up-to-date details.<\/p>\n As of 2021, dual agency is illegal in the following states:<\/p>\n Alaska: <\/b>Alaska statute<\/a> (the state allows designated agency when disclosed)<\/p>\n Colorado: <\/b>Colorado Department of Regulatory Agencies<\/a><\/p>\n Florida: <\/b>Florida statute<\/a>\u00a0<\/b><\/p>\n Kansas: <\/b>Kansas Real Estate Brokers\u2019 and Salespersons\u2019 License Act<\/a><\/p>\n Maryland: <\/b>Maryland statute<\/a> (the state allows designated agency when disclosed)<\/p>\n Texas: <\/b>Real Estate License Act<\/a> (the state allows agents to act as an intermediary)<\/p>\n Vermont: <\/b>Administrative Rules of the Vermont Real Estate Commission<\/a> (the state permits designated agency when disclosed)<\/p>\n![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/04\/dual-agency-is-illegal-in-some-states-woman-666x381.png\")
<\/a>Why dual agency is illegal in some states<\/h2>\n
Opponents of dual agency say it benefits agents, not consumers<\/h3>\n
Proponents of dual agency say it makes the transaction more efficient<\/h3>\n
![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/04\/dual-agency-is-illegal-in-some-states-talking-666x381.png\")
<\/a>Some states allow dual agency \u2014 if it\u2019s disclosed<\/h2>\n
States where dual agency is illegal<\/h2>\n