Avoid dual agency representation in real estate deals

It is considered the dark side of the real estate industry – representation by two agencies.

The term means that an agent represents both sides in a single real estate transaction: the buyer and the seller. Legal in only a few states, dual representation is a choice open to both parties.

Nevada is one of the few states that allows dual representation. Several states do not allow this because it is essentially a conflict of interest.

Understanding the problem starts with knowing the ins and outs before hiring an agent. This awareness is vital in the luxury market as it can impact a client’s bottom line.

A potential benefit of being represented by two agencies is that the process is streamlined since one agent handles all communication. In addition, a brokerage commission could be negotiated on a lower percentage of the sale. Typically, a seller pays 5 to 6 percent of the sale price, which is split between the bid and the selling agent.

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However, the disadvantages seem to outweigh the advantages. In choosing a single agent to represent both parties, each gives up certain client rights.

Traditionally, an agent’s fiduciary responsibilities include confidentiality, counsel, fair negotiation, evaluation of value, and recommendation of preferred vendors. Dual agency circumvents the duty of loyalty and demotes the agent to a middleman.

“The agent has to pull himself out of this a bit. They just end up making the transaction easier. In my opinion, there is no advantage for either the buyer or the seller at this point.

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A dual agent must remain neutral and support both sides equally, balancing the interests of the buyer, the seller, and their own in the transaction.

I always ask my salesperson this question, especially in the luxury space: if you were in litigation with someone, would you want your attorney to represent both you and the person you are dealing with?

It is the same with a real estate transaction. If I represent both parties, how can I really fight for you and get you the best deal if I represent both sides?

In addition, agents may not disclose any information from either party. For example, if a seller is desperate to sell, they cannot share that information with the buyer, or vice versa.

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In a situation where I am representing the seller and I find out that there is a buyer’s motivation, I will use that in my negotiations. But if I represent both, I can’t share that motivation with my seller.

The bottom line is that dual agency representation may sound appealing, but it’s best to avoid such an arrangement. It negates the rights of both the buyer and the seller. Most agents are not qualified or experienced enough to manage a two-agency transaction.

At the end of the day, both sides need to ask themselves: Did they give me the best offer, or did the other side get the better offer?

Darin Marques is President and Founder of Darin Marques Group, Huntington & Ellis.

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