What’s dual agency in real estate, and is it a good idea?

There are two real estate agents involved in a typical real estate transaction: the listing agent and the buyer’s agent. Occasionally, however, the same real estate agent takes on both sides. When this happens, the dynamics of the deal change significantly.

Dual agency has certain benefits, like fewer logistical hiccups, but it also presents a conflict of interest. When an agent works on behalf of both buyer and seller, it’s impossible for them to fully advocate for either side, since the buyer wants the price to be as low as possible while the seller wants the opposite.

Below, you’ll learn what dual agency is, whether it’s legal, and when it might actually make sense. We’ll also cover how Better’s partner agents can guide you through the homebuying journey and potentially save you thousands in the process.

What does dual agency mean in real estate?

In the vast majority of cases, there’s one real estate agent for each party to a real estate transaction. The buyer has a buyer’s agent, whose role is to promote the best interests of the buyer — namely, finding and purchasing a property at the lowest price they can negotiate. The seller has a listing agent, who’s tasked with protecting the best interests of the seller, which means selling the property at the highest possible price.

From time to time, these two roles converge, and you end up with what’s called a dual agent. This might happen if you’re working with a listing agent to sell your home and another home they’re selling happens to catch your eye. A related concept to dual agency is designated agency, where the buyer and seller are represented by two agents from the same brokerage.

Dual agency has some advantages, like easier communication due to the lack of back-and-forth between the listing agent and the buyer’s agent. At the same time, the agent can’t properly carry out their fiduciary duties. After all, they can’t negotiate for higher and lower prices simultaneously. 

In fact, they’re incentivized to favor the seller over the buyer, since a higher price means a higher commission. That said, there’s little reason for them to spend much time on negotiations, since they’ll earn the entire commission once the deal closes instead of splitting it with another agent.

This conflict of interest is why some states ban dual representation in real estate completely. In states that allow it, the Realtor may be legally required to disclose the situation to everyone involved.

What are the pros and cons of dual agency in real estate?

While dual agency representation remains controversial and even illegal in many jurisdictions, it has both benefits and drawbacks for clients.

Benefits of dual agency

— A streamlined transaction: Working with just one agent is a lot simpler than working with two. There’s no communication lag, paperwork tag, or difficulty getting both Realtors to the negotiating table. That makes for a smoother, faster deal.

— Potential for lower commission: Some sellers balk at the idea of paying a standard commission rate when there’s only one Realtor involved. A dual agent may agree to reduce the commission percentage to keep the deal moving forward. Since they keep the full commission instead of splitting it with another agent, a small reduction doesn’t affect their bottom line too severely.

Drawbacks of dual agency

— Conflict of interest: The core problem with dual agents in real estate transactions is that they can’t carry out their fiduciary duties. It’s not possible for them to act in the best interests of the buyer and the seller at the same time.

— Favors the seller: While the bump in commission may be relatively small, there’s still an incentive for the agent to chase a higher closing price, since that will get them a higher commission.

— More work for the agent: Because they’re taking on the roles of both buyer’s agent and listing agent, dual agents have a heavier workload than normal, though this may be balanced out by not having to work with another client to complete tasks.

Is dual agency illegal in some states?

Due to the conflict of interest dual agency creates, dual agency is banned in eight states:

— Alaska

— Colorado

— Florida

— Kansas

— Maryland

— Texas

— Vermont

— Wyoming

Where dual agency is legal, Realtors may have to get written consent from both clients to represent them.

Who pays commission in a dual agency deal?

In dual agency, commissions are usually paid by the seller, just like in a standard real estate transaction. The fee is usually about 5 to 6 percent, which is also typical. The only unique aspect of dual agency commissions is that the agent keeps the entire fee instead of splitting it with another Realtor.

When can dual agency make sense?

The only time dual agency might truly be a good idea is when the buyer and seller are close friends or relatives but still want to go through a Realtor. In this situation, neither party is looking to drive a hard bargain — they just want to find a comfortable number both can agree on. 

That means the agent’s main job is handling the deal’s logistics rather than negotiating the price, which minimizes the conflict of interest. Nonetheless, they’ll need to comply with all state disclosure and consent regulations to keep on the right side of the law.

If you’re looking for a real estate agent, Better has you covered. Better’s in-house Realtors don’t work on commission if you pay in cash, so you never have to worry about conflicts of interest or misaligned incentives. With years of experience, they can guide you through the entire homebuying process, from nailing down what you’re looking for to signing on the dotted line.

If that’s not enough, you can save $2,000 on closing costs by financing with Better’s competitive rates. Get pre-approved in as little as three minutes to find out how much you can borrow.

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When is dual agency a mistake?

Dual agency is almost always a bad idea for everyone but the dual agent. The inherent conflict of interest means the Realtor can’t have either client’s best interests at heart. Unless the two parties have a close relationship, it’s usually best to have a separate agent for each one to make sure everyone gets a fair shake.

There are some situations when it simply isn’t possible to have different agents on both sides of the deal. This can be the case in small towns or rural areas where the pool of Realtors is small or for specific types of properties, like high-end luxury homes or commercial real estate. In these scenarios, dual agency may be your only option.

Choose Better to partner with top agents in your area

Don’t settle for a dual agent when you can have Better by your side instead. Better’s hand-picked partner agents come from top brokerages nationwide and work with you every step of the way for a stress-free homebuying experience. Plus, they work fast — the average Better Real Estate listing sells in 15 days, a full 23 days faster than the industry average.

Fill out the fully digital application in as little as three minutes to lock in a great rate and see how much house you can afford today.

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