What's Dual Agency in a Real Estate Transaction and Why Should I Avoid It?

As a home seller, you want your real estate agent to represent your interests and help you achieve your goal: to sell your home quickly and smoothly, for as much money as you can get.

On the other side of the table is the buyer, who's hoping for nearly the opposite: to get the property for as little as possible.

Price isn't the only issue, either. Let's say, for instance, that you can't afford to buy another home until you've sold this one, but don't have a place to stay after the house is sold. You might be willing to go down a great deal on price in order for the buyers to grant you a "rent back," allowing you to stay for some weeks. But do you really want your agent to know that, and possibly to signal your desperation to the buyers?

As you can see, it would be difficult for one agent to represent the interests of both the buyer and the seller, in what's called a dual agency. Of course, you hired the agent, so his or her first loyalty is to you; but nevertheless, in a dual agency relationship, the agent is expected to attempt to serve both parties fairly.

Some agents prefer dual agency, because it means they don't have to split the commission with another agent. (The seller normally pays their agent a percentage of the selling price, as much as 5% to 6%, and then that agent splits the commission with the buyer's agent.) In some regions of the U.S., dual agency is quite common.

But if you're going to pay a full commission, don't you want someone who fully represents your interests? If an agent asks you to consent to a dual agency, make sure there's a compelling reason to go ahead with this.

Somewhat less onerous than the dual agency is a designated agency. In this situation, the buyer is represented by another agent in the same brokerage as your agent. Technically, this is a form of dual agency, because each agent works for the same broker. Unlike a dual agency, you get personal representation from a designated agent. But you must fully trust your agent to represent your interests and not divulge your bottom line to the buyer's agent.

If you're willing to participate in a designated agency, you might request a reduction in the commission, based on the fact that the brokerage will make twice as much as it otherwise would have on the deal.