Is a Dual Agency Relationship Risky?

Buyers and sellers sometimes have the option of entering into a dual agency relationship with their real estate agent. Although this is not necessarily a problem, you should be aware of exactly what a dual real estate agency means and the restrictions it can place on your agent.

What is a dual real estate agency?

The term “agency” refers to the relationship that you, as a buyer or seller, have with your real estate agent. Dual agencies can occur with two agents or with a single agent.

A dual agency with two agents can occur when the buyer’s agent and the seller’s agent are licensed under the same broker.

In a dual agency with a single agent, potential buyers may ask a seller’s real estate agent to submit an offer on their behalf. In this case, the agent is acting as a dual agent.

Dual real estate agency disclosure

Because dual agencies represent a conflict of interest for the buyer and seller, some states don’t allow them.

In states where dual agencies are legal, however, the law requires that a dual real estate agent inform both the buyer and seller of a dual real estate agency. These two parties must also sign consent forms indicating that they understand the concept of dual agency, as well as the restrictions imposed on the real estate agent by this type of agreement.

If either the buyer or the seller refuses to sign the dual agency agreement, the transaction cannot continue. Once the dual agency agreement is executed, the real estate agent becomes known as the disclosed dual agent.

Disadvantages of dual agencies

Dual agency imposes some restrictions on a real estate agent. The agent is required to treat both buyer and seller with fairness and honesty.

The agent is required to provide full disclosure concerning the property to the buyer, but they cannot reveal confidential information about the seller. When the time comes to make an offer, a dual real estate agent cannot advise the buyer on how much to offer, nor can they advise the seller to accept or reject an offer.

In a New York Department of State memo, consumers are advised to be wary of dual agency relationships. The memo states that when a person enters into a dual agency relationship, they are forfeiting their right to that agent’s loyalty. The agent then cannot advance the interests of either party.

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