The Dual Agency Dilemma: Should a Buyer Sign a Dual Agency Agreement? 

What is dual agency? 

Dual agency occurs when one real estate agent 'represents' the buyer and the seller in a transaction.

Picture this, a lawyer walks into a courtroom and says, “Hello Plaintiff, I’ll be defending you and protecting your best interests in this case.” and then turns and says, “Hello Defendant, I’ll be defending you and protecting your best interest in the case.

Pretty obvious conflict of interest, right?

In real estate, this happens every day. 

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A Balancing Act?

Buying a home is often one of life's most significant financial decisions. It requires careful consideration, research and trust in the individuals guiding you through the journey. In a dual agency scenario, it's difficult if not impossible to have trust in your real estate agent. In most cases, the agent is representing the seller in a real estate transaction. An unrepresented buyer wants to make an offer on the property. At this point, in many states including Virginia and Washington D.C., the listing agent becomes a dual agent. The buyer and seller sign a dual agency agreement. Both are agreeing to limited services from their real estate agent.

Conflicting Allegiances

The heart of the dual agency dilemma lies in conflicting allegiances. A dual agent attempts to serve the best interests of both parties: the buyer and the seller. This situation raises a fundamental question: Can one person truly advocate for the best outcome of both sides?

‍Information Equality

One of the primary concerns for a home buyer in a dual agency arrangement is the issue of clear communication and information. In a traditional buyer-agent relationship, the agent is the advocate, giving critical market insights, property history, and negotiating on the buyers behalf and best interest. 

 In a dual agency scenario, the agent acts cannot advise on offer price, home inspection, appraisal or navigating the process. In short the dual agent is serving their best interests, not the buyer or the seller.

The Issue of Transparency 

Transparency and honesty are cornerstones in any healthy real estate transaction. These qualities are the foundation that form a trusting relationship. In a dual agency situation, however, transparency is muddled, leaving buyers in a vulnerable and precarious position.

Limited Disclosure

When a single agent is responsible for both sides, how is confidential information kept from the seller or the buyer?  For example, if the seller confides their bottom-line price to the agent, will the agent relay that information to the buyer? After all, the single dual agent can 'get the deal done' if this information is conveyed to the buyer. 

There are so many examples of why dual agency doesn’t serve the best interests of a buyer or a seller in a real estate transaction. 

Legal Implications

In some jurisdictions, dual agency is regulated, with laws requiring full disclosure and consent from both parties. But what if a buyer or seller doesn’t fully understand what is at stake? What if the dual agency agreement is presented as something to sign “if you want to buy or sell a property?” I have heard, from buyers, of instances where this happens. 

Some states and jurisdictions are better than others with regulating dual agency but the lack of uniformity throughout the country makes buyers vulnerable in many situations. I would argue that a buyer is at a disadvantage in all dual agency situations. 

"If there are no problems in a real estate transaction, buyers and sellers will say dual agency is fine. However, when problems arise and they frequently do, you want an advocate on your side." Victoria Ray Henderson

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Seek Independent Representation

Opting for separate buyer and seller agents is a smart move. Working with an exclusive buyer agent ensures undivided loyalty and advocacy throughout the process. The benefits in terms of transparency and protection are immeasurable. The members of the National Association of Exclusive Buyer Agents see the conflicts of interest that come up in dual and designated agency and they choose one side, the buyers, in every real estate transaction. 

Establish Clear Communication

Buyers should be upfront about their expectations and concerns, and agents should be diligent in answering questions and preparing their buyer for each step of the process. 

UPDATE:

On August 15th, 2024, new real estate rules go into effect. These changes are the result of the NAR lawsuit settlement.

Home buyers will be required to have a signed buyer broker agreement with a buyer's agent before visiting any properties. The agreement will state the compensation to the buyer's agent, length of time for the agreement and terms for breaking the agreement. Buyer broker agreements have been required in Maryland for many years. Now, these agreements will be in place across the country including Washington D.C. and Virginia.

The settlement is subject to court approval and NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule that was introduced in the 1990s in response to calls form consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately four years.

Two important parts of the agreement;

1. The release of most NAR members and many industry stakeholders from liability

2. The cooperative compensation (seller compensating the buyers agent) remains a choice for consumers when selling a home.

Another key point of the agreement-new MLS rules will prohibit offers of buyer broker compensation on the MLS. This means any offers of broker compensation (payment offered to buyers broker) cannot be communicated on the MLS. It will continue to be an option consumers can use as long as any communication is off the MLS.

My take as an exclusive buyer broker-If a seller subsidy is not offered to compensate a buyer agent, many home buyers, who do not have additional funds to compensate their agent, may forego representation. Remember, the home buyer finances the entire transaction, including paying the seller and listing brokerage. There's been talk of buyers financing their buyer agent representation through the loan but so far, lenders say this is not and never could be an option.

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How can we help?

The exclusive buyer agents at HomeBuyer Brokerage specialize in serving home buyers. Please reach out with questions at info@homebuyerbrokerage.com.