The Dual Agency Dilemma: Should a Buyer Sign a Dual Agency Agreement? 

In the world of real estate transactions, the concept of dual agency is a contentious topic, sparking debates and raising questions about the conflicts of interest and transparency. Dual agency occurs when a single real estate agent or brokerage represents both the buyer and seller in a real estate transaction. While it may seem like a convenient solution, it introduces complexities that can significantly impact the interests and decisions of the buyer.

A Balancing Act?

Buying a home is often one of life's most significant financial decisions. It requires careful consideration, research and trust in the individuals guiding you through the journey. In a dual agency scenario, that trust becomes a balancing act.

Conflicting Allegiances

The heart of the dual agency dilemma lies in conflicting allegiances. A dual agent attempts to serve the best interests of both parties: the buyer and the seller. This situation raises a fundamental question: Can one person truly advocate for the best outcome of both sides?

‍Information Equality

One of the primary concerns for a home buyer in a dual agency arrangement is the issue of clear communication and information. In a traditional buyer-agent relationship, the agent is the advocate, giving critical market insights, property history, and negotiating on the buyers behalf and best interest. 

 In a dual agency scenario, the agent acts more like a mediator for the transaction. The agent shares information that likely benefits one party over the other.

The Issue of Transparency 

Transparency and honesty are cornerstones in any healthy real estate transaction. These qualities are the foundation that form a trusting relationship. In a dual agency situation, however, transparency is muddled, leaving buyers in a vulnerable and precarious position.

Limited Disclosure

When a single agent is responsible for both sides, how is confidential information kept from the seller or the buyer?  For example, if the seller confides their bottom-line price to the agent, will the agent relay that information to the buyer? After all, the single dual agent can 'get the deal done' if this information is conveyed to the buyer. 

There are so many examples of why dual agency doesn’t serve the best interests of a buyer or a seller in a real estate transaction. 

Legal Implications

In some jurisdictions, dual agency is regulated, with laws requiring full disclosure and consent from both parties. But what if a buyer or seller doesn’t fully understand what is at stake? What if the dual agency agreement is presented as something to sign “if you want to buy or sell a property?” I have heard, from buyers, of instances where this happens. 

Some states and jurisdictions are better than others with regulating dual agency but the lack of uniformity throughout the country makes buyers vulnerable in many situations. I would argue that a buyer is at a disadvantage in all dual agency situations. 

Finally, a good friend and fellow member of NAEBA says "if there are no problems in a real estate transaction, buyers and sellers will say dual agency is fine. However, when problems arise and they frequently do, you want an advocate on your side." 

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Seek Independent Representation

Opting for separate buyer and seller agents is a smart move. Working with an exclusive buyer agent ensures undivided loyalty and advocacy throughout the process. The benefits in terms of transparency and protection are immeasurable. The members of the National Association of Exclusive Buyer Agents see the conflicts of interest that come up in dual and designated agency and they choose one side, the buyers, in every real estate transaction. 

Establish Clear Communication

Buyers should be upfront about their expectations and concerns, and agents should be diligent in answering questions and preparing their buyer for each step of the process. 

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UPDATE:

On March 15, 2024 the National Association of Realtors reached an agreement to resolve nationwide claims brought by home sellers.

The settlement is subject to court approval and NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule that was introduced in the 1990s in response to calls form consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately four years. Two important parts of the agreement; 1. The release of most NAR members and many industry stakeholders from liability and 2. The cooperative compensation (seller compensating the buyers agent) remains a choice for consumers when selling a home.

Another key point of the agreement-new MLS rules will prohibit offers of buyer broker compensation on the MLS. This means any offers of broker compensation (payment offered to buyers broker) cannot be communicated on the MLS. It will continue to be an option consumers can use as long as any communication is off the MLS.

My take as an exclusive buyer broker-This new rule will complicate the home buying experience. Buyer agents and buyer brokers will now be required to call, text or email listing agents and brokers and ask if the seller is offering compensation to the buyer's agent.

In addition, buyers will soon be required to have a signed buyer broker agreement with a buyer's agent before visiting any properties. The agreement will state the compensation to the buyer's agent, length of time for the agreement and terms for breaking the agreement. Buyer broker agreements have been required in Maryland for many years. Now, these agreements will be in place across the country including Washington D.C. and Virginia.

How can we help?

The exclusive buyer agents at HomeBuyer Brokerage specialize in serving home buyers. Please reach out with questions at info@homebuyerbrokerage.com.