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Madison-Milwaukee Blog

The Dual Agency: What it is and Why You Should Care

January 31, 2018

A dual agency is a real estate scenario where a single agent or broker represents both the buyer and seller or tenant and landlord in a transaction. In other cases, a dual agency may be a single firm instead of a single agent; some states refer to this as a designated agency. The question then becomes, what does this mean during the transaction process?

In recent news, controversy was sparked after a California bill, that would have banned dual agency practices in the state, was blocked. The legislation was recently turned back after several notable real estate lobbyist groups stopped the bill from reaching the Assembly Judiciary Committee for debate.

Several red flags arise in a dual agency transaction. The most evident is that the same agent is expected to uphold their fiduciary responsibilities to both the buyer and seller. A common analogy that points out the absurdity of this is to imagine a lawyer representing both the plaintiff and defendant in a lawsuit. It becomes inevitable that a conflict of open communication and trust will arise between the agent and their clients. 

Breaking down the arguments

Ask anyone not familiarized with real estate and it is likely that they are not aware of what a dual agency is. This unwilling ignorance is why dual agencies are illegal in some states. Firms usually operate under a law that says they must first explain to their clients what a dual agency is and if they would still like to continue with the business relationship, a contract must be drawn up. Laws like this reveal a history of distrust and alternative motives behind the idea of the dual agent; why would these state laws exist otherwise?

From this perspective, clients can seem like prey to an ill-intended (or simply indifferent) broker. Defenders of dual agency make claims such as, a single dual agent will allow for better communication between parties or that the listing agent will have more information about a property than the tenant’s agent would. Careful observation can show how these claims do not hold up.

The first point claims that the communication process will be easier if one broker is involved. This is a ridiculous exchange of forfeiting the solid advice given by an exclusive agent vs. having slightly faster communication conducted by a dual agent. Bias aside, most agents are quite competent at keeping timely and accurate communications with all parties during the transaction process. If an agent fails at maintaining the flow of communication (especially in our age of rapid communication technology) then it would be best to find a new agent. Quality agents will help you save both money and time; be sure to hire the agent that will represent your interests with the best intentions.

The second point claims that, since a dual agent will be acting as both the listing and buyer’s agent, they will have more information on the seller’s property(s). If an agent is working as the buyer’s agent, then they might not have all the information on the seller’s property immediately. All this would take is some phone calls and emails to find the needed information; a non-issue for any capable agent. After viewing the situation from this perspective then we reach the same exchange of forfeiting solid advice vs. just waiting a little while longer for your agent to find the requested information on the property.

Why Cresa opposes dual agency

Cresa presents three core points of the benefits with using tenant-exclusive representation.

  • Confidentiality
  • No Incentives
  • Unbiased Opinions.

All three of these points are something space users could lose sleep over during a dual agency transaction. Tenant-only firms aim to fix this by focusing all their resources on the buyer. This allows the broker to provide their tenant with unbiased opinions on financial and property decisions that help save money, time, and stress.

Competitors in the industry believe that tenant exclusive firms jeopardize their earnings by unnecessarily cutting off a significant portion of their market. Cresa and other tenant exclusive firms acknowledge this but value the trust and fluid communication created with their clients more through the virtue of remaining tenant only. Real estate is often the second highest expenditure for a company only behind payroll expenses. Why settle for a dual agent who does not have your best interests in mind?