Most people are uncomfortable with the thought of a real estate agent representing both the buyer and the seller in the same sale.
And understandably so.
That’s because a buyer and seller have opposite goals in a real estate transaction.
The seller wants to maximize their return on investment.
But the buyer wants to minimize what they pay for the home.
So how can a real estate agent negotiate the best deal for both parties?
They can’t.
This is why many home sellers feel anxious when their realtor suggests representing both sides.
Is it even legal for a realtor to represent the seller and the buyer?
How do I know I’m getting a fair deal?
Does my agent want to become a dual agent just so they can make more money?
The conflict of interest can be nerve-wracking.
That’s why it’s imperative that you know how to navigate a situation where an agent is representing both sides.
That’s what we’re going to discuss.
I’ll walk you through exactly how to handle a dual agent representation scenario, step by step.
Can a realtor represent both buyer and seller?
Real estate law is clear: A real estate agent can represent both the seller and the buyer in the same transaction.
This arrangement is known as “dual agency” and is permitted in most states.
But in some jurisdictions, dual agency is prohibited.
In these states, although a single agent cannot act as a dual agent, they can still assist both parties under the title of “transaction broker or agent.”
Here are the states where dual agency is illegal but an agent can still represent both parties in the same sale of a property:
- Alaska
- Colorado
- Florida
- Kansas
- Maryland
- Wyoming
- Texas
- Vermont.
What distinguishes dual agency from a transaction broker?
In dual agency, the real estate agent has a fiduciary duty to both parties.
But that duty is not enforced in states where dual agency is legally restricted.
Here’s what’s important…
The risks are the same whether you have a dual agent or a transaction broker/agent.
The real estate agent is working for two parties with radically different objectives.
So it creates a major conflict of interest.
But it’s not just a conflict between the buyer’s and seller’s interests.
It actually puts the real estate agent’s financial interests first.
Because they can now get two commissions from one sale.
And that sets the stage for all sorts of shady, unethical activity.
So while a realtor can represent a buyer and seller in the same transaction, it’s almost never in the best interest of either party.
How to navigate a sale when one realtor represents the buyer and seller
Knowing how to navigate a situation where a real estate agent represents both sides is crucial.
Because taking the right approach can help you:
- Decide whether you should proceed in a dual agent scenario
- Know what to be aware of as you maneuver through the transaction
- Determine if you should fire your agent.
Here are the steps you should follow when you’re considering having a single agent represent both the buyer and the seller in a real estate transaction.
1. Verify dual representation disclosure
The legal language around dual agency varies from state to state –– but undisclosed dual agency or representation is illegal in all 50 states.
That means your real estate agent must disclose the implications of a potential scenario where they represent both sides.
The “disclosure” is in the listing agreement you sign with your agent.
There’s a section in the agreement that outlines a real estate agent’s duties and responsibilities.
You’ll want to look for verbiage that discusses dual representation.
This language is going to outline what an agent can and cannot do when acting on behalf of a buyer and seller in the same sale.
For example, if you’re in a state that allows dual agency, then you might see something such as…
“In a dual agency situation, the agent has a fiduciary duty of utmost care, integrity, honesty, and loyalty in the dealings with either the seller or the buyer.”
And if you’re in a state that prohibits dual agency, then you might see language that reads something similar to…
“A transaction broker provides a limited form of representation to a buyer, seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent.”
Understanding the verbiage in your agreement about dual agent representation is the first thing you should do.
Because then you’ll have clarity about how a real estate agent is supposed to handle a two-sided transaction.
But more importantly…
This understanding will enable you to better gauge your agent’s response when you ask them to explain their approach in their own words.
2. Ask the prospective dual realtor key questions
Vetting the intent behind a potential dual agent sale is key.
Why?
Because knowing how this scenario came about — and how your agent plans on acting on behalf of the buyer and seller –– will help guide you in how to proceed.
You can do this by asking the right questions.
This can be done either while your realtor is discussing the buyer’s offer with you or afterward.
But this must be done before you accept the buyer’s offer, should you choose to do so.
The idea here is to spot critical red flags.
Ones that suggest the agent might prioritize earning dual commissions from a single sale over your best interests.
Here are four questions you can ask to dig into the prospective dual agent’s motives:
Can you represent me in the same way as you would if you were not also representing the buyer?
This is a critical test right out of the gate.
Why?
Because it’s a red flag if what your agent says doesn’t somewhat align with the language in your listing agreement.
Say your agreement talks about the agent’s fiduciary duty, for instance.
Does your realtor use that term? If not, why?
It’s not necessarily a deal breaker.
But you need to have a clear understanding of what dual representation means and how your agent plans on approaching it.
Is this the buyer’s highest and best offer?
An immediate “yes” could be cause for concern.
Of course, it could actually be the buyer’s best offer.
But a better response from your agent is, “I don’t know.”
You want to see that your real estate agent is willing to put in the effort to get you a better deal.
Because a transparent realtor will lay out your options and explore ways you might be able to pursue a better offer.
Are there any other interested buyers?
A hard “no” here is a major red flag if your agent presents you with an off-market offer.
At a minimum, you want to hear that putting your home on the market could get other buyers interested.
But you should be on high alert even if your house is already listed for sale.
What you’re looking for is some willingness to discuss the situation.
The agent should provide reasons why there aren’t any other interested buyers or why this offer may be your best bet.
Is the buyer a real estate investor?
This is the biggest red flag of all because it’s one of the shadiest tricks real estate agents play.
This almost always means the investor is striking a deal to buy the house and then flip it with the same real estate agent.
Dual representation in these scenarios can triple the agent’s commission: one for representing the seller, another for representing the buyer, and a third for acting as the listing agent for the investor.
3. Weigh the pros and cons of dual agency
You’ve done your due diligence.
And you’ve asked the potential dual agent the right questions.
But you still need to understand the pros and cons of having the same realtor as the buyer.
Here are the advantages and disadvantages of proceeding in a dual agency transaction.
Benefits of dual representation
Potential advantages of having the same agent represent both sides include:
- Smoother communication: Having one fewer intermediary could streamline both the process and negotiations.
- Paying less commission: A dual agent might accept a lower commission, potentially saving you money. While this doesn’t entirely eliminate the conflict of interest, it could reduce it.
- Expedite the sale: You may leave money on the table in a dual agency situation. However, the trade-off could be worth it for a faster, simpler home sale.
Drawbacks of dual representation
Here are the disadvantages of dual agency:
- Conflict of interest: How does a dual real estate agent decide whose interests to put first? And how do you know whether they’re putting in 100% effort on your behalf? There’s no clear answer to these questions — and that’s a problem.
- The agent may favor a higher commission over your best interests: An opportunity for a real estate agent to earn two commissions from one sale is the ultimate carrot on a stick. I’ve seen agents pull all sorts of maneuvers to make this happen. The common result? A lower sale price for the seller –– but a higher commission for the realtor.
- Lack of transparency: When representing both parties, agents have information about both sides that they normally wouldn’t have. They’re not supposed to share that information — but it may leave both the buyer and the seller wondering if private details about their financial interests and motivations are truly confidential.
4. Negotiate a lower commission
There’s always a conflict of interest when the same realtor is representing the buyer and seller.
But there’s a way to eliminate the loyalty conflict.
How?
By maintaining the agent’s original commission.
In other words, keep the commission unchanged, as if the listing agent were not receiving additional compensation for also representing the buyer.
This removes the agent’s incentive to compromise their integrity for extra financial gain.
Which puts you in a stronger position to get a fair deal.
Plus, it saves you from having to pay a commission to the buyer’s agent.
Most real estate agents aren’t going to initiate a conversation about reducing their fee.
So if you’re comfortable with letting your real estate agent represent both sides, negotiating a lower commission should be your next step.
But you need to propose it the right way.
Your impulse may be to ask, “Would you consider lowering your commission?”
That approach just sets you up for a hard “No.”
Instead, have a conversation about your concerns, and introduce commission as a way to resolve them.
You might say, “I appreciate you bringing the buyer, but I do have a concern with you representing both parties. How much are you willing to reduce your commission to make this work?”
That phrasing puts the impetus on your agent to accept a reduction.
The ideal scenario is that they agree to drop the buyer’s commission entirely.
However, some real estate agents won’t do this.
They may agree to a partial reduction — but then you’d still have a conflict of interest.
If this is the case, you’ll have a decision to make…
Proceed with the sale of your home and stay cautious throughout the transaction.
Or think about hiring another real estate agent.
5. Decide whether to proceed with a dual agent transaction
Now, it’s decision time.
You’ve got three options at this point:
- Stick with your dual agent.
- Ask them not to represent the buyer.
- Fire your agent and hire one who avoids dual agency.
Let’s go over each of these so you have clarity about how you’d like to proceed.
Staying with your realtor
You should have a clear understanding of your real estate agent’s intentions regarding dual representation after asking the right questions.
And you might feel fine moving forward at this point — especially if they’ve dropped the buyer’s commission entirely.
You and the buyer may even know each other and feel comfortable with the situation.
If so, great.
But you should still proceed with caution and watch for lingering signs of a conflict of interest (more on that below).
Asking your agent to let someone else represent the buyer
Another option is to keep your agent on the condition that they stop working for the buyer.
Most agents work with other realtors on transactions.
Which means they should have no problem recommending someone else to represent the buyer.
Simply tell your agent you would feel more comfortable if they let another agent step in to take care of the buyer’s side.
The conflict of interest won’t be eliminated entirely because your agent will still be incentivized by the agent-to-agent referral fee.
Especially if both real estate agents are from the same company.
But it should reduce some of the risk.
What if they say no to having another agent assist the buyer?
Then it’s time to consider the final option.
Hire a new agent
I get it. This isn’t the step you want to take.
Firing your realtor and starting over can be a pain in the butt.
But sometimes it’s the right move because you’re risking your home’s equity if you don’t.
Working with a seller’s agent who puts your interests first should be your top priority.
And usually, those are not the realtors who have a track record of prioritizing dual agency.
Because those agents prioritize a higher commission above a higher sale price.
You’re much better off hiring a new agent.
Someone who prioritizes securing the highest sale price for the seller, rather than chasing a higher commission.
Even if it means starting over.
But don’t sign a new listing agreement without having confirmation about the history of the next agent’s double-sided sales.
Why?
Because a higher-than-average percentage of dual agent sales is one of the signs of a bad real estate agent.
There are two ways you can make sure of this:
- Get the numbers in writing from the agent by having them print out all of their sales from their local MLS (divide the number of double-ended deals by their total number of listings sold).
- Work with a no-cost service like SoldNest, whose realtor screening process takes care of this for you.
6. Monitor the transaction process closely
If you do decide to work with a dual agent, you need to keep your eyes open throughout the entire transaction.
Keep watching for warning signs that your agent’s priorities are out of whack.
Pay close attention to how your realtor handles requests for anything other than what you agreed to in the purchase contract.
For example, say the buyer requests repairs after the contract has already been ratified.
How does your agent approach the situation?
Do they present the request as something you can negotiate and offer you options, or just as a to-do that you have to accept?
Or, say the buyer requests a 10-day extension on their inspection contingency.
Again, you want your realtor to offer you options rather than presenting it as a request that you have to accept.
The big idea?
Monitor your home sale carefully and promptly discuss any concerns with your agent.
You want to see that they still have your back throughout the entire process.
Put your interests first in a real estate transaction
Dual representation can occasionally work for a buyer and seller.
But it’s best to work with a real estate agent who has a reputation for avoiding it.
Why?
Because a lower-than-average percentage of dual-sided sales is a key indicator that an agent has good character.
In other words…
These are the agents who are much more likely to put your interests before their own.
But a realtor who has an alarming track record of representing both parties?
They’re much more likely to put their commission first.
This is why many home sellers who get stuck using the same agent as the buyer end up selling below market value.
The agent is focused on earning more commission rather than maximizing their effort to get the highest sale price.
And that’s the reason why SoldNest evaluates an agent’s history of dual representation.
Our no-cost (and no-obligation) service will only match a seller with a top local agent who avoids these conflicts of interest.
And you should ensure your agent has a history of doing the same.
