What is Dual Agency in Real Estate?
Dual agency occurs when a single real estate agent or brokerage represents both the buyer and seller in the same transaction. Instead of each party having their own advocate, one agent or firm acts as a neutral facilitator. Dual agency is legal in most states but is banned or restricted in several, including Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.
The core issue with dual agency is the inherent conflict of interest. An agent's fiduciary duty requires acting in their client's best interest. When you represent both sides, you cannot fully advocate for the buyer's lowest possible price while simultaneously advocating for the seller's highest possible price. The agent's role shifts from advocate to facilitator.
How dual agency happens
Dual agency most commonly occurs when a buyer contacts the listing agent directly about a property, rather than working through their own buyer's agent. It can also occur within a brokerage when one agent has the listing and another agent in the same office represents the buyer (called designated agency in some states, which has different rules than true dual agency).
Risks of dual agency
- Reduced negotiation: The agent cannot advise either party on price strategy, negotiation tactics, or how far the other side might go. Both parties lose the benefit of having a skilled negotiator in their corner.
- Information asymmetry: The agent knows both sides' motivations, urgency, and financial situations. While they are legally required not to share confidential information, the knowledge itself creates an uneven dynamic.
- Commission incentive: In dual agency, the agent earns both sides of the commission, doubling their income on the deal. This creates a financial incentive to close the transaction regardless of whether the terms are optimal for either party.
Dual agency and investors
Experienced investors sometimes prefer dual agency situations because they are confident in their own negotiation abilities and may receive priority treatment from the listing agent who stands to earn double commission. The listing agent has extra motivation to get the deal done and may favor the investor's offer over competing offers where they would split the commission.
However, less experienced investors should be cautious. Without independent representation, you are relying entirely on your own knowledge to evaluate the deal, identify issues, and negotiate terms. For complex transactions involving wholesale assignments or unusual terms, having your own agent who understands your strategy is often worth the cost.