The pitfalls of dual agency

Whether you're buying or selling a home, dual agency is often something that you want to avoid. This occurs when the real estate agent for the home seller is also working for the buyer, or vice versa. The definition also applies when the two parties are working with agents from the same brokerage firm because those professionals can share information that would normally be confidential for personal gain.

Some real estate professionals believe that dual agency is common and not a bad practice. However, in some states it is illegal. When an agent or brokerage firm is playing for both sides, there's a conflict of interest. For the seller, the goal is to get the highest sale price possible, while the buyer's objective is to negotiate a lower price. As such, a dual agent likely won't be able to advocate for one side without slighting the other client.

In states where dual agency is allowed, real estate agents are required to inform their clients that they are working for the buyer and seller. Both parties have to consent to the arrangement and are allowed to end their relationship with an agent if dual agency occurs. They can also prohibit such an arrangement as part of the listing or buyer agency agreement.

Disadvantages of dual agency

In most cases, real estate professionals caution buyers and sellers against dual agency. Here are some reasons to avoid it:

• If you're selling, the agent can prevent other agents from showing the property to their clients.
• You won't be able to get the best possible price.
• You can't receive negotiation advice, such as whether you should push for a home inspection contingency. 
• The agent can convince you to take a bad deal to maximize his or her commission.

Benefits of dual agency

There are some advantages that can be realized via dual agency. If your home is a pocket listing, for instance, your agent can bring you buyers within his or her client pool who can give you the offer that you want. This can be particularly helpful when demand is slow. The transaction can also be faster, as there's no need for negotiations to pass through two real estate professionals.

Before entering into an agreement with dual agency, check your state laws to ensure the arrangement is legal. Also, find out if there are any disclosures that need to be completed.