Is your Downbeach real estate agent working for the seller even when you think they’re on your side? That’s called dual agency.
The central conflict in dual agency arises from the impossibility of an agent providing 100% loyalty and advocacy to two parties with opposing goals.
While legal in 42 states, dual agency prevents agents from advising on critical transaction terms, such as offer prices, and risks the disclosure of a buyer’s confidential motivations to the seller.
To mitigate risks, consumers are advised to seek a Buyer Agent.
“How do you fairly represent both parties when they’re on opposing sides… the agent can’t fully advocate for either party.” — Andi DeFelice
Risks and Realities of Dual Agency.
The relationship between a real estate agent and a client is defined by the type of agency established.
1. Dual Agency
Dual agency occurs when a single agent represents both the buyer and the seller in the same transaction.
- Agent can’t fully advocate for either party. They’re legally restricted from advising buyer on terms, such as suggesting offer below the asking price.
- Confidentiality Risks: Info shared with a dual agent—such as buyer’s maximum budget or a mandatory relocation timeline—can be legally shared with seller, significantly weakening buyer’s negotiating position.
- Loyalty Conflict: Functionally impossible to fairly represent parties on “opposing sides” of a transaction.
2. Designated Agency
Two agents under the same broker representing different sides of a transaction.
- In real estate, all clients legally belong to broker, not individual agent. Broker maintains a fiduciary responsibility to both the buyer and the seller simultaneously.
- Info Sharing: Within large brokerages or “teams,” buyer specialists and listing agents often share info during internal meetings.
As of August 17, 2024, a major National Association of REALTORS® (NAR) settlement prohibits buyer agent compensation offers on Multiple Listing Service (MLS) platforms. Buyers must sign written agreements outlining agent fees before touring homes, and buyer agent fees are no longer automatically covered by sellers, increasing negotiation and transparency for buyers.
Key Changes from the Ruling (Settlement):
No MLS Compensation Offers: Listing agents cannot post buyer agent commissions on the MLS, separating buyer agent pay from the platform.
Written Buyer Agreements: Agents must have a signed written agreement with buyers before touring a home, which explicitly states the fee the agent will receive.
Negotiable Commissions: Buyer agent compensation is now explicitly negotiable, rather than a predetermined amount.
Seller Concessions Possible: Sellers may still choose to offer buyer agent compensation, but it must be negotiated off the MLS (e.g., in a contract offer) rather than advertised.
Transparency: The changes aim to increase competition and ensure buyers understand the costs of their representation.
The settlement stems from class-action lawsuits challenging the old system of broker commissions, aiming to reduce the total costs of buying and selling homes.