It seems like I have recently had many conversations with clients and other realtors about dual agent scenarios. Although my stance on it is likely an unpopular one amongst my agent friends, it comes up all too often and should be addressed.
What is a dual agent? According the TREC website (https://www.texasrealestate.com/for-texas-realtors/legal-faqs/category/intermediary), a dual agent is a broker who represents two parties at the same time in accordance with common law obligations and duties.
Basically, a dual agent is when a realtor is representing both the buyer and the seller in the same transaction. In this scenario, the seller is paying the full 6% in commissions to their realtor since they are working for both sides. This is assuming that the seller and agent are following the traditional structure of real estate commissions. (To better understand my commission structure, read about it here.)
My broker taught me early on in my real estate career that being a dual agent is never a good idea. No matter what the commission might be. It all boils down to your obligation to represent your client with their best interest as your priority. I don’t see how this is possible if you are representing both the buyer and seller.
Here are two obvious examples:
1. Agreeing on a sales price during the initial contract negotiations. As a seller’s agent, you likely know before even listing the property your client’s bottom line. Of course, we know that number is fluid and will often change over time and based on their situation. Advising your buyer about fair market value should be based on comparable, recently sold properties. It should not be based on your knowledge of what a seller will or will not accept. This situation could easily result in a seller not getting as much for their property as a buyer was willing to pay. It could also result in the buyer paying a higher price than they really had to because of what they were told it would take to get the deal done. Neither of these scenarios keep BOTH parties best interest in mind.
2. Further negotiations based on inspections. In representing a buyer, it is my responsibility as their agent to help them navigate through the inspection process and evaluate the existing condition of the home. Plumbing is a prime example. I always suggest my buyers pay for an extra plumbing test if the home is older with cast iron pipes. A $300 pipe test can easily reveal a $10-$20K need for new plumbing. As a seller’s agent, of course, it is not my responsibility to give any guidance to the other party during their inspection period. How can you possibly be providing BOTH sides with ethical representation during the inspection period?
I have been in the situation a few times where I have met a couple at an Open House and they have asked me about representing them in putting an offer on that property. I have always responded that representing both sides is not something I am comfortable with but I would love to refer them to some other wonderful agents. It is easy to get wrapped up wanting that full 6% commission, but it is truly not worth it. Getting a referral fee is more than enough compensation for avoiding a situation that can easily turn ugly.
Moral of the story is simple….don’t use a dual agent if you expect your realtor to truly keep your best interest at heart.