Isn't dual agency inherently a conflict of interest?

Question

After all, if 2 people are involved in a lawsuit against each other, they wouldn't hire the same lawyer to represent them now, would they?

Many folks believe that dual agency helps neither the buyer nor the seller but instead simply assures agents of "double dipping" into that 6-7% commish.

From an online dictionary, the definition of dual agency is the following:

"Dual agency occurs when the same brokerage represents both the seller and the buyer"

Answer 1

This is not true. In a dual agency situation the agent is contractually obligated to the SELLER and working in their best interest.

Buyers should never tolerate this situation, they are the losers here.

Answer 2

Of course it's a conflict. Some people quip that it's the only situation where the clients get half the service and the agent gets twice the pay. True in far too many cases. There is a pro and con, but the most important thing is that both the buyer and seller need to understand the exact nature of their relationshop with the agent (in my State dual agency has to be spelled out and agreed to in writing before service proceeds.) An agent cannot render full service in bargaining to the buyer and seller clients at the same time - that's the conflict, of course. Negotiating for your client's best interest, in dollars, is often the most important aspect of representation. It's one of the most important reasons why customers are better off using a Realtor. (The problem in our industry is that you can't ever prove how much better off the client was than if they were not represented.) But that's another question.

Now, there are rare cases where both clients would benefit from a dual agency situation. First, both the buyer and seller most know they are standing alone in negotiations without the benefit of thier agent's input. A "friendly" transaction with no anticipated conflicts throughout the execution of the purchase contract comes to mind. (I think I remember one of those once - smile). If the purchase transaction is anticipated to be more comlicated than usual and both parties are truely capabable of self representation, having one agent represent both sides can be a benefit because less people are involved. The agent becomes a facilitator, dedicated to the process. It can be a smoother transaction with one agent.

The bottom line for consumers is to know your relationship with a Realtor from the first contact throughout the process. It's a matter of trust, as well as legality. If you don't know, ask, ask, ask. The question is simple - "Who do you represent and how does that work?"

Answer 3

Dual agency occurs only when the agency is contracted to BOTH seller and buyer. In other words, the agency has the property listed for sale, and the buyer involved has entered into a buyer agency contract with the same agency. The real estate laws of my state required, until recently, that any such dual agency be handled in a manner fair and equitable to both parties, with no representation of one contracted party over the other contracted party. My state has recently switched to 'designated agency' in which such situations are now handled by two different agents within the same agency. One handles the seller (normally the agent who listed the property), and the managing broker selects another disinterested agent to represent the interests of the buyer.

When real estate agencies were smaller in size, that would have been difficult to do. Now that agencies have merged and have literally hundreds of agents in different branch offices, it's very easy to find such a 'disinterested agent'.

Answer 4

There have been many debates on this subject. And I agree, there are times when "dual agency" shouldn't be, your example of attornies is a good one. But in real estate it can be beneficial to both parties. And there isn't double dipping, if the commission agreed to is 6% and the listing agent assist the buyer in purchasing his listing, then the transaction yields 6%. But keep in mind, that is divided between broker and agent. If you were the seller, and your agent were successful in securing a sale of your property wouldn't you pay them for that expertise? Look if it were easy to sell your own home, no one would need Realtors. But it just isn't the case. There are very few times when agents sell their own listings or assist in a sale that they play the dual agency role. So it's really no big deal. If you're honest and fair, there shouldn't be a problem

Answer 5

Dual agency does exist and buyers do accept it.

It amazes me how many buyers will contact the selling agent on a property and then purchase from that agent without representation of their own. I recently talked to a gentleman who has purchased many homes over the years and always buys from the seller's agent.

In dual agency, you have to be fair with both parties, then there are no problems.

Answer 6

In most states, contractually the agent represents the seller.
In a dual agency, sometimes the buyer is able to lower the commission rate, by having the agent apply a portion of the buy commission to the price. Agents are often willing to do this, as they still command a higher than normal rate.
I done this, and saved 2% of the negotiated purchase price.

Answer 7

Not an issue, as long as both parties understand that the broker must deal honestly and fairly with both buyer and seller, and disclose all things material to the value of the home, and the offer. On an aside, remember most agents do not actually get the full fee, as it is paid to the broker, then the broker pays the agent, and that potion that the broker keeps can vary from agent to agent based upon volume of business.