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Dual Agency: One agent Representing both Buyer and Seller – Good or Bad Idea?

by Karen Goodman on November 29, 2007

What is Dual Agency?

Dual agency occurs when one agent represents both the seller and buyer in the same transaction. It is most likely to occur when an agent takes a buyer to see one of the agent’s own listings and the buyer wants to make an offer. Another scenario that will result in dual agency is when the agent holds an open house on a listing or receives a call from the yard sign or an ad, and the potential buyer doesn’t already have an agent.

Dual Agency is a Bad Idea

The most important point for you to know about dual agency is that if your agent is also representing the other side, your agent cannot advocate for you in negotiations or give you advice on pricing. This means that when you hit a stumbling block in the negotiations, your agent can’t fight for your needs.

Let’s say that a buyer and seller are negotiating and they are $5,000 apart on purchase price. As a buyer’s agent, my job is to convince the listing agent/seller that my buyer will not pay more and that they should take my buyer’s offer because our offer is a fair one. As a seller’s agent, my job is to convince the buyer’s agent/buyer that the house is worth more than they are offering, and my seller needs the higher price.

But a dual agent can’t take either of these positions. The most a dual agent can do is present to each client what the other side has responded, and ask if the offer on the table is acceptable or if they want to make a counteroffer.

Who Benefits from Dual Agency if it is such a Bad Idea?

Buyers and sellers don’t benefit from dual agency. The only person who benefits from dual agency is the agent. Many agents are eager to act as dual agents because they get to keep the entire commission. When an agent is a listing agent, and another agent is representing the buyer in the home sale, then the listing agent has to pay a portion of the commission (usually about half) to the buyer’s broker. If the agent represents both sides, then they get to keep the entire commission.

How do I handle Dual Agency?

I don’t do dual agency except in rare situations. I think it is a bad idea generally, and not in my clients best interests.

If I have a listing and am contacted by an unrepresented buyer, I will offer to show the buyer the property and will explain that I represent the seller. I’ll let them know that they have 3 choices if they like the property and want to make an offer:

As a seller’s agent, I can assist them with the paperwork and the contract details just like a store salesperson can assist the people that are purchasing products from the store. I will be representing the seller and will encourage the buyer to accept the terms that the seller wants. By the way, this is exactly what new construction salespeople are doing when a buyer purchases a new home without a buyer’s agent.
I can refer them to another agent that can act as their buyer’s agent…an agent that can represent just their interests.
They can find a buyer’s agent on their own, and have that agent submit an offer on the house.

I had this situation come up just this week with a Central West End area condo that I have listed. An unrepresented buyer contacted me through a craigslist ad that I placed on the property. The buyer seems interested, and has decided to get his own agent and come back for another look later this week. If he makes an offer, my seller can be assured that I’ll be working in his best interests, and not trying to walk a tightrope by giving advice to the buyer too.The next time you are in a market to buy, make sure you have your own agent. If you discover a home through an ad or a yard sign, call an agent that will represent you and not try to sell you on dual agency. Rather than calling the agent working for the seller, contact me and I can arrange a private showing for properties anywhere in St. Louis, St. Charles or Jefferson County.