Avoid dual agency representation in real estate deals

It’s considered the dark side of real estate — dual agency representation.

The term means one agent represents both sides in a single real estate transaction: the buyer and the seller. Legal in only a few states, dual representation is a choice disclosed to both parties.

Nevada is one of the few states that allows dual representation. Several states don’t allow it because, at its core, it is a conflict of interest.

Understanding the issue begins with being aware of the advantages and disadvantages before hiring an agent. This awareness is essential in the luxury marketplace as it could impact a client’s bottom line.

One potential benefit of dual agency representation is it streamlines the process as one agent handles all the communication. Further, an agent’s commission could be negotiated to a lower percentage of the sale. Typically, a seller pays 5 percent to 6 percent of the sale price split between the listing and selling broker.

However, the disadvantages seem to outweigh the benefits. When choosing a single agent to represent both parties, each surrenders certain client rights.

Traditionally an agent’s fiduciary responsibility includes confidentiality, offering counsel, fair negotiation, assessing value and recommending preferred providers. Dual agency bypasses the fiduciary duty, downgrading the agent into more of a mediator.

“The agent has to pull themselves out of it a little bit. They end up just facilitating the transaction. In my opinion, there is no advantage to either the buyer or seller at that point.

A dual agent must remain neutral and assist both sides equally, balancing the interests of the buyer, seller and their own in the transaction.

I always pose this question to my seller, especially in the luxury space: If you were in a legal battle with someone, would you want your attorney representing both you and the person you’re going up against?

It’s the same in a real estate transaction. If I’m representing both parties, how can I truly fight for you and get you the best deal when I’m representing both sides?

Further, agents cannot disclose any information from either party. For example, if a seller is desperate to sell, they cannot disclose that information to the buyer or vice versa.

In a situation where I’m representing the seller and find out there’s a motivation by the buyer, I will use that in my negotiation. But if I’m representing both, I cannot share that motivation with my seller.

The bottom line is dual agency representation may sound appealing, but it is best to avoid such an arrangement. It negates the rights of both the buyer and seller. Most agents are not skilled or experienced enough to manage a dual agency transaction.

At the end of the day, both sides need to ask the question: Did they get me the best deal or did the other side get the better deal?

Darin Marques is the president and founder of the Darin Marques Group, Huntington &Ellis.