[M03/S08] Dual Agency

Dual Agency in a real estate transaction happens when an agent or broker represents both the buyer and the seller in the transaction. In California, this is perfectly legal, and many people wonder just why that is. After all, a lawyer cannot represent both sides in court, so why can a real estate agent represent both parties in the sale of real estate?

The answer is simple: in a court room, there’s going to be a winner and a loser, it is by definition an adversarial relationship between plaintiff and defendant. A real estate transaction however is completely different: both parties are looking for the same result (the sale of the property from one to the other) and are looking for a win-win outcome.

While perfectly legal, dual agency is not without its problems – so much so that many agents in fact will not represent both parties, and will refer one of the parties to another agent. What makes it difficult is that with dual agency, the agent or broker cannot favor one party over the other, and must represent both parties equally. They must be fair and honest, and they have a fiduciary responsibility to look out for each client’s best interests.

Also, they must not disclose any confidential information from one party to another. For example, the agent may not share how low an offer the seller would accept, nor the highest price that the buyer would pay.

While representing both parties in a real estate transaction can get complicated, it doesn’t have to be if the agent is trusted by both sides. The agent must give his best advice to both parties without disclosing any confidential information, and the parties are then free to make their own decisions based on that advice.

Of course, when an agent represents both parties in the transaction, he typically is paid the full commission. In a case like this, some agents may agree to accept a lower commission, to entice the buyer and/or seller to agree not to use another representative. This is legal too, but if a listing agent will agree to do this, it should be written into the listing agreement and noted on the MLS.

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