With housing inventory still lagging, sellers continue to have the upper hand.
What is dual agency?
Dual agency is a term that refers to a situation when one real estate agent represents both the home buyer and seller in a transaction. Dual agency is allowable, but pros and cons exist for homebuyers.
Dual agency is not as common as homebuyers and sellers being represented by their own agents, but it is possible in most areas. The biggest advantage to such a situation is a potential reduction in the real estate agent’s fees, but this is not always true.
In most instances, the agent would receive a commission from the buyer as well as the seller.
There are several drawbacks to dual agency. When an agent represents both the buyer and the seller, there are limitations to the information that he or she can share with each party.
In this situation, it can be difficult for the homebuyer to know if he or she has all of the information available about the seller’s ability to negotiate a lower home price. At the same time, the seller may not have all of the information about the buyer’s ability to negotiate better terms.
It’s important to recognize that dual agency does not apply in situations where the buyer and seller are represented by different agents working under the same broker. When this happens, each agent represents his party fully.
Dual agency example
Alex lists her home to sell with a real estate agent. During an open house, a homebuyer comes to look at the property and may wish to buy it. That buyer does not have his own real estate agent and asks the seller’s agent to represent him as well in the transaction.
The homebuyer wants to place an offer that is 10 percent below the asking price. In this situation, the agent knows that Alex is willing to reduce the price, but cannot share just how much with the buyer.
Moreover, the agent cannot inform Alex if she should counter the offer provided by the buyer or agree to it, or even whether the agent knows the buyer’s ability to pay more.