What is Real Estate Agency?

A real estate agency, often called a brokerage, arranges the buying, selling, and management of properties for its owners. According to the National Association of Realtors, the law of agency in a real estate transaction defines the legal relationship between a real estate professional and a client. An agency is created with fiduciary duties for the client’s best interest by signing an agreement or disclosure form. Although some state laws require a written disclosure, some allow oral agreement.

Fiduciary duties are all the duties real estate agents or real estate brokers are bound and compelled to do when working with their clients. The broker has a fiduciary relationship in which the client places trust, confidence to act for their benefit on the matters within the scope of the relationship. A licensed real estate broker can operate brokerage, hire real estate agents to facilitate real estate transactions for a fee or commission on their behalf.

Licensed real estate agents represent the broker and cannot work independently without the supervision of the broker. The broker is liable for all the actions of their real estate agents. Therefore, in a real estate transaction, the broker is the agent of the principal or client, while the salesperson is the agent of the broker and a subagent of the principal.

Agency Relationships

The agent is a general term applied to both broker and salesperson, and they represent the interest of the principal (or client) in a real estate activity. Working as agents, they have to understand their duties and responsibilities in properly representing their clients by agreeing to an agency relationship.

Single Agency

An agent represents a client (buyer or seller) and is solely responsible for representing them and their interest. In a seller agency, the agent represents the seller, while in a buyer agency, the agent represents the buyer in a real estate transaction. The listing broker is responsible for conducting open houses, finding prospective buyers, availing listing services, and taking care of the selling process. On the other hand, the buyer’s agents represent buyers in searching for homes and comparable properties to choose from and guiding them in the buying process.

Dual Agency

In a dual agency transaction, both the buyer and listing agent are from the same brokerage firm. They are expected to act on behalf of the client they represent and not the brokerage. On the bright side, they can communicate effectively to bargain and compromise, which could have a positive outcome by using the association to obtain a beneficial understanding on both sides of the sale. But keep in mind that real estate agents work together in the hopes of a successful deal, whether they are from the same real estate company or not.

Another example of dual agency is when a real estate agent acts as the buyer and seller agent in a simultaneous transaction. Although this kind of scenario does not happen pretty often, it can occur from time to time. For instance, a licensed real estate agent has a listing and decides to have an open house. He meets a potential buyer who is interested in buying a home but is not represented by any real estate professional.

Hence, the buyer requests the same agent to represent them in the transaction. As a result, dual agency occurs as the real estate agent also referred to as a dual agent or transaction broker, becomes the representative of both parties, buyer and seller, in the said transaction.

What are the Advantages of Dual Agency?

The possibility of smooth and fast transaction since the agent who acts as the middleman of both parties can obtain files and records to verify quickly. In general, the buyer would discuss matters with their agent, and the agent would present the proposal to the seller’s agent to talk about with the homeowners. So when there is only one person in the middle, what the buyer says can be communicated efficiently directly to the seller resulting in a faster process flow.

Consequently, the agent who deals directly with the homeowners has additional information regarding the property being sold. Therefore he can inform the prospective buyers all about it. Thus, he can answer the buyers’ concerns and inquiries and speed up the entire transaction process.

In most cases, a real estate brokerage commission is split into two between the buyer’s and the seller’s licensed agents. However, since only one agent works on the same transaction, he will get the entire commission. The good thing is that the particular dual agent would probably be willing to collect less payment since he will be receiving the deal for both ends.

What are the Disadvantages of Dual Agency?

One of the disadvantages of a dual agency is the conflict of interest. Since real estate agents represent their clients and their best interests, balancing them can be extremely difficult. The listing agent is supposed to make a deal with the highest possible price for the seller, whereas the buyer’s agent seeks to purchase the property with the lowest possible price. There will be some confidential information that cannot be shared.

The buyer’s agents supposedly guide potential buyers to the most reasonable purchase price, but they would probably justify the property’s price since they are also the listing agents. It is unavoidable that a real estate salesperson can favor one side without even realizing it. It can be challenging and stressful for the dual agents since they will be handling information and legal documents, which sometimes can overlook important details

Conclusion

The real estate agent can be tempted not to disclose important information to the buyer or seller because of the fear of losing the deal and the double commission. Apart from that, a real estate agent who chooses to be a dual agent should be extremely careful in representing both sides of the real estate transaction since it may lead to legal repercussions. There are many technical aspects involved in dual agencies.

Different states have different laws surrounding dual agency, like some places consider dual agency as illegal, like in Texas, Colorado, Florida, etc. In contrast, others require that real estate agents disclose that they represent both sides of the transaction to their clients.

If you are looking for a licensed real estate professional who can assist you with your needs, reach out to Barry Jenkins - Better Homes & Gardens Real Estate | Real Estate Agents in Virginia Beach, VA. He has been working in the real estate industry for many years, his wisdom and experience give him the edge, and he would ensure that he represents his clients well and their best interests in real estate transactions.