The representation of both the buyer and the seller in a single real estate transaction by the same agent or brokerage is known as dual agency. This arrangement alters the traditional roles of advocacy. For consumers navigating a property purchase or sale, understanding this practice is complex and often leads to confusion regarding their representation. It challenges the expectation of having an agent focused solely on one party’s best financial interests.
Defining Dual Agency in Real Estate
Dual agency occurs in two distinct ways, both resulting in a single party holding responsibility for both sides of the transaction.
Single-Agent Dual Agency
This occurs when one individual licensed real estate agent works directly with both the seller and the buyer of the same property. In this direct relationship, the same person facilitates the transaction for both principals. This is the most straightforward and often most scrutinized form of dual representation.
Brokerage-Level Dual Agency
This form is often referenced as an in-house sale. It occurs when two different agents within the same brokerage firm represent the buyer and the seller, respectively. Even though separate agents are involved, state law recognizes the managing broker as the holder of the license and the ultimate fiduciary responsibility for both transactions. Because responsibility traces back to a single broker, the law classifies this situation as dual agency for regulatory purposes.
The Legal Status of Dual Agency Across Jurisdictions
The ability of a broker to represent both sides of a transaction depends entirely on the laws and regulations of the state where the property is located. Most jurisdictions permit dual agency, provided there is full, written disclosure and informed consent from both the buyer and the seller. This framework acknowledges the practice while imposing stringent requirements for transparency.
A smaller number of states heavily restrict the practice, often allowing only the brokerage-level model while banning the single-agent dual agency scenario. These regulations aim to reduce the conflict of interest inherent in one person trying to serve two masters. Requiring two separate agents attempts to provide a greater level of separation and representation for the clients involved.
A few states have banned dual agency entirely, believing the inherent conflict of interest is insurmountable. States such as Florida, Kansas, Oklahoma, and Alaska prohibit an agent or brokerage from representing both parties in a transaction. Regardless of the regulatory environment, the one consistent requirement across all states that permit dual agency is the mandatory use of a specific disclosure form signed by both the buyer and the seller before the arrangement can proceed.
How Dual Agency Limits Fiduciary Duties
Entering into a dual agency agreement fundamentally alters the relationship by limiting the traditional fiduciary duties owed to each party. Standard agency relationships require an agent to uphold six duties: Loyalty, Confidentiality, Disclosure, Obedience, Reasonable Care, and Accounting. When an agent represents both parties, the full application of these duties becomes impossible, necessitating a shift in the agent’s role.
The duty of Loyalty is the most compromised, as the agent cannot fully advocate for the best financial outcome for either the buyer or the seller. For example, the agent cannot push the seller to accept a lower price, nor can they advise the buyer to offer a higher price, as this would violate the duty owed to the opposing party. The agent transitions from an advocate to a neutral facilitator, managing the transaction details rather than actively negotiating on behalf of a single client’s interest.
The duties of Confidentiality and Disclosure are also restricted under a dual agency agreement. An agent is typically privy to confidential motivating factors, such as the seller’s lowest acceptable price or the buyer’s highest offer ceiling. In dual agency, the agent is legally prohibited from sharing this confidential information with the other party, even though knowing it would benefit the opposite side. This limitation means the agent’s primary function becomes ensuring the transaction closes, rather than maximizing the financial leverage of either party.
Potential Risks and Practical Benefits for Clients
The primary risk to clients in a dual agency scenario is the unavoidable conflict of interest that arises when one representative attempts to serve two opposing financial goals. This situation leads to reduced negotiation strength because the agent cannot aggressively advocate for either side, potentially leaving money on the table for both the buyer and the seller. Buyers may perceive the agent is favoring the seller, while sellers may feel the agent is pushing for a faster sale at a lower price to secure a quicker commission.
Despite the conflict, there are practical benefits for consumers who prioritize efficiency. Dual agency can result in streamlined communication, as all information is channeled through a single point of contact, which often speeds up the negotiation process. This simplified structure can lead to faster closing times and less complex paperwork, especially when both parties are motivated to transact quickly.
The brokerage also has a financial incentive, as it may receive the full commission rather than splitting it with an outside firm. While this benefits the broker, it can motivate the agent to dedicate more time and resources to ensuring the transaction moves smoothly and closes without delay.
Alternatives to Traditional Dual Representation
Because of the limitations imposed by dual agency, several states offer alternative representation models that avoid conflicts of interest.
Designated Agency
This common model, sometimes called Appointed Agency, applies exclusively to the brokerage-level dual agency scenario. The managing broker designates one agent to represent the seller and a separate agent to represent the buyer, even though both agents work for the same firm. The designated agents are legally “siloed” from each other and maintain full fiduciary duties, including loyalty and confidentiality, to their respective clients. The managing broker still holds the ultimate license, but the individual agents are empowered to act as full advocates. This structure allows the brokerage to retain the in-house sale while granting clients dedicated representation.
Transaction Broker
This model is often called a Facilitator or non-agent, defined by the absence of fiduciary duties to either party. The transaction broker acts merely as an administrative manager, handling contract paperwork, coordinating timelines, and ensuring all regulatory requirements are met. This role is preferred by clients who are confident in their own negotiating abilities and require a neutral party to manage the logistical complexities of the sale.
Essential Steps for Navigating Dual Agency
Consumers presented with a dual agency agreement must engage in a detailed discussion with their agent to fully understand the limitations placed on the relationship. A buyer or seller should ask specific questions, such as “Which traditional fiduciary duties are you required to drop in this scenario?” and “How will confidential information I share be protected?”
It is important to read the required dual agency disclosure forms carefully, as these documents legally outline the agent’s altered responsibilities and the specific duties they can no longer perform. If any aspect of the arrangement causes discomfort or confusion, the client should consider seeking independent legal counsel to review the terms before signing. A client always retains the option to switch to an alternative agency model or seek representation from an outside brokerage if they feel the limitations of dual agency will compromise their financial goals.