The do’s and don’ts of dual agency

By Jon Gorey

Just as you can’t be in two places at once, some would argue that you can’t truly represent two sides of a real estate transaction at the same time. But dual agency — where a single agent represents both sides of a real estate deal — happens all the time.

“I would say probably 20% of my deals are dual agency,” says Connie Antoniou, an agent with Jameson Sotheby’s International Realty in Barrington, Illinois. “Which is kind of unusual — I’m doing more of it now than ever.”

Jenny Ames, an agent with Engel & Völkers in Chicago, estimates that she’s a dual agent in about 10% of her sales. “Sometimes it’s just that I’m working with a buyer, and I might interview for a listing, and it might be a great fit for somebody,” she says. “I know what they’re looking for, so I can get them in early.” Other times, she adds, buyers approach her directly, hoping to gain an advantage by working exclusively with the listing agent.

And yet, in other places, dual agency doesn’t happen at all. Eight states have outright banned the practice, from major markets like Texas, Florida and Maryland, to sparsely populated ones like Wyoming, Alaska and Vermont. Even where it remains legal, some agents prefer not to dabble in dual agency, saying it creates an inherent conflict of interest — or, at the very least, the appearance of one.

Here’s the crux of that conflict: In a dual agency relationship, the agent has a fiduciary duty to both the seller and the buyer — a lawful obligation to act in each client’s best interest. While both parties generally share the common goal of a smooth, fair transaction, they clearly have opposing interests when it comes to the price or other terms of the sale. So a dual agent is, at the very least, limited in their capacity to fully advocate and negotiate for one side or the other.

Many consumers seem perfectly fine with those limitations, though — and some agents say it makes for a more efficient, less stressful transaction for everyone involved. “If I’m able to be a dual agent, it actually goes more smoothly,” Ames says. She doesn’t have to worry about an inexperienced or difficult broker bumbling the sale from the other side. “When I’m on both sides, I can control it better and make sure that nothing’s getting lost in translation.”

Some clients do express doubts over whether she’ll be able to advocate for them effectively, Ames adds, when she explains that she’s also representing the other side (an important step). “But the answer really is yes,” she says. “Our goal is to bring buyers and sellers together, and to have it be a win-win.”

Getting to that point without getting into trouble demands that agents make some important adjustments to their usual work practices, however. Here’s what you need to know about dual agency and other options for single-agent transactions.

Dual agency done right

The National Association of Realtors takes a neutral stance on dual agency. But where it is allowed by state law, the NAR’s Code of Ethics and Standards of Practice offers guidance for conducting a lawful and ethical dual agent transaction. “There are a few provisions, and mainly they focus on disclosure and consent,” says Missouri-based agent and attorney Bruce Aydt, a member and past chair of the NAR’s Professional Standards Committee.

In fact, articles 1-12 and 1-13 state that agents should discuss with clients even the potential for a dual agency situation to arise, well before it ever does. “Before you enter into an agreement with a client, either a listing agreement or a buyer agency agreement, you have to disclose to them any potential for you to act as a dual agent — the circumstances under which that might occur,” Aydt says.

Article 1-5, meanwhile, states that Realtors may represent both the buyer and seller in a transaction “only after full disclosure to and with informed consent of both parties” — a standard that most states hold agents to, as well. “Virtually any place that allows for dual agency is always going to have this idea of full disclosure and informed consent to both parties before you can go into dual agency,” Aydt says.

“The most important thing is to always disclose, disclose, disclose,” Antoniou adds. “Disclose everything you can, to both sides, so they know exactly what you can and cannot do for them legally.”

That doesn’t mean simply handing clients a boilerplate disclosure form to sign. “The idea of informed consent is that the parties know what they are entering into,” Aydt says. So, agents have to make sure their clients fully understand the limitations of dual agency and what they’re agreeing to — something that might demand a discussion or verbal explanation to accompany any state-mandated forms.

“I specifically walk them through the dual agency form,” Antoniou says. “I literally read right to them what I can and cannot do for them.”

And what can’t she do? Some typical agent duties — such as offering advice on price — may be off-limits, since you risk violating confidentiality rules. “You can’t disclose to either side the confidential information of the other side,” Aydt says. “A dual agent can’t tell a buyer what the seller’s lowest price is, nor can they tell a seller what the buyer’s highest price is. They can’t discuss the motivations of the parties; they can’t discuss the negotiating position of the party or negotiating strategy of the other party.”

Agents can still counsel their clients based on publicly available information. “If it’s a public record, or anything that the buyer or seller tells us that we can share with the other side — I prefer that to be always in writing, of course — then we can share that,” Antoniou says. “But besides that, we cannot suggest, obviously, an offer price to make, nothing like that. And that’s where it gets tricky — sometimes these people are really leaning on you, they want you to tell them what to do. And the second you fall into that trap, you’ve crossed the line, and now you could get into trouble.”

Alternatives to dual agency

In some states where dual agency is illegal, a single agent can still handle both sides of a real estate sale, but only as a transaction agent or intermediary — a facilitator who doesn’t represent either party. Some states also permit a close relative of dual agency, called designated agency or assigned agency. That’s where, instead of trying to faithfully represent both sides of a sale, the agent refers one party to work with another agent within the same brokerage.

This is common in Texas, where dual agency isn’t permitted but acting as an intermediary is, says Richard Miranda, chair of the Houston Association of Realtors. “To act as an intermediary, the broker must obtain the written agreement of each party in the transaction,” Miranda says. But to further limit the potential for a conflict of interest, “what most brokers will do in Texas is they will assign an agent who will serve the interests of the buyer, and then another agent will act in the best interests of the seller. That way, even though the broker is an intermediary, there are two different parties in the same brokerage working on behalf of the interests of either party.”

The potential for favoritism or the sharing of confidential information still exists; the lead broker could pressure a less experienced agent into pressing forward with the sale, for example, even if their buyer wants to back out. But because each agent must be lawfully loyal to just one client, it does add an extra layer of protection.

“One party cannot divulge particular confidential information to the other party, even though those two agents may be working for the same broker,” Miranda says. “They’re obligated to watch out for the interests of the party that they’re representing, and they owe them a duty of confidence, confidentiality and fiduciary.”

Even where dual agency is allowed, some prefer the designated agency model. Hudson Santana, an agent with Keller Williams in the Boston and Miami metro areas, is no fan of dual agency, because he says it’s difficult for an agent to remain impartial. “I never work as a dual agent,” Santana says. “I introduce that buyer to an actual agent, somebody that’s going to represent them… and I just continue to be a fiduciary to the seller.”

As a team leader who believes his colleagues are among the best in the business, Santana typically refers buyers to someone from his own team. “Now, does that create a conflict? I don’t believe so, because that person is liable by law to represent that consumer,” he says. “We’re no longer team members — you work for that consumer, and I work for this consumer, and they don’t have access to the information that’s important to my client, and I don’t have access to the information that’s important to their client. I take that very seriously.”

But in another common scenario, buyers will contact Santana (as the listing agent) directly, hoping to score a discounted commission or an inside track on a property. Sometimes, even after a full explanation of what they’re giving up by declining representation, they’ll still insist on forgoing a buyer’s agent. Rather than act as a hands-off facilitator or transaction agent — loyal to no one but the sale itself (which is, shockingly, the presumed default for agents in Florida) — Santana prefers to continue representing the seller. “We’ll have them sign a disclosure showing that I am the seller’s agent, which means you are not being represented by anybody, and I’m still representing the seller,” he says.

“You could still help them do the paperwork — you need me to type up the offer? Tell me the terms that you want, I’m happy to type it up for you, happy to explain to you the steps,” he says. “But I’m making it very clear that I don’t represent you, my fiduciary duty is just to the seller. And as long as you’re OK with that, I’m happy to help you accomplish the transaction — but I’m not representing you.”

When buyers or sellers willingly decline agent representation, agents must still be truthful and fair with them, Miranda says — but they don’t owe them more than that. “My job is to be honest and fair,” Miranda says. “I have a duty to the customer — who is not a client — to be fair and honest and truthful with that customer. But I do not owe that customer fiduciary duty.”

Dueling offers and dual agency

Ames also encounters homebuyers who go straight to her as a seller’s agent, in hopes of saving on commissions in a dual agency deal. But even if that’s something an agent would entertain in normal circumstances — and many don’t, or legally can’t — it’s certainly not happening in a multiple-offer scenario. “Any kind of commission negotiation, in my opinion, is off the table 100% in a multiple-offer situation,” Ames says. “Otherwise, you run into a scenario that’s really messy.”

Imagine, Ames explains, representing a buyer who loses out on a home during a multiple-offer situation. “And then you saw it closed later for a lower price, with the listing agent as the buyer’s broker — you’d feel like something unethical happened,” she says. “That’s the seller’s choice, and maybe the seller liked the terms better or something else, but it opens you up for scrutiny.”

“It’s difficult enough to be representing the buyer and the seller, but then when you have another agent bringing in their own offer, now you really mix it up,” Antoniou says. At that point, she calls in her managing broker as an impartial party so that she doesn’t see any of the other offers.

“I have him represent the seller, and then I obviously represent my buyer, and then the other Realtor represents their buyer, and we just send the contracts to my managing broker,” she says. “He’s able to kind of step in and present the offers to the seller and advise the seller on what to do.”

Antoniou sits on the Professional Standards Board for the state of Illinois, hearing and judging cases where sellers feel wronged by an agent, for example. Some complaints do arise from mishandled dual agency relationships, she says, and punishments can vary depending on the severity of the infraction and whether it was a repeat offense. “Sometimes they’ll just get a letter put in their file down at the state… saying that they were disciplined on such and such a date, and that stays in the file for a couple of years,” she says. “If they do it again, there’s going to be a fine… there are procedures, all the way up to losing your license.”

The simplest way to maintain a good reputation and stay on the right side of the law, Ames says, is to trust your gut and consider how you’d want your own family members to be treated in a real estate transaction. “Your gut is going to tell you whether you’re doing the right thing,” she says. “And if you have even the tiniest little question about a decision or comment or recommendation, you should be careful and not go in that direction — follow your gut.”

Are condos the new bargain property?

Single-family home sales have been driving the U.S. housing market of late, as homebuyers continue to leave populated cities behind and instead opt for space and privacy in the suburbs and rural areas.

But where does that leave the condo market?

According to a new report from Redfin, the desire for privacy is keeping a lid on condo prices, making that segment somewhat of a sleeper in terms of value.

The typical single-family home that sold in the U.S. this year was purchased for an average of 17.3% more ($58,000) than the typical condo. That’s up from 15.4% last year and represents the largest premium since at least 2013, when Redfin began recording this data.

 Sales data backs the trend — the median sale price of single-family homes surged 15.5% year over year in October, outpacing the condo market’s 9.9% growth.

Condos are also taking longer to sell—the typical condo spent 36 days on the market last month, compared with 27 days for the typical single-family home.

And less than a quarter (22.8%) of condos sold for more than their listing price, compared with 36.6% of single-family homes.

But condos have been catching up. According to Redfin, condo sales rose 22.7% in October from a year earlier, following a 50% plunge in the spring. That’s on par with the 23.3% growth in sales of single-family homes last month.

“Condos sales are rebounding because buyers are finding great deals,” said Redfin Chief Economist Daryl Fairweather in the report. “Families are fleeing cities in search of more space in the suburbs, which has presented an opportunity for millennials who are looking to become homeowners but don’t need extra bedrooms or a backyard.”

But extra space and a backyard come with a cost. The premium for an unattached home was the highest in Fort Lauderdale, where single-family homes sold for an average of 38.3% more than condos in October.

In Atlanta, single-family homes sold for an average of 21.6% more than condos in October, a premium of $60,441.

In the Seattle metro, where single-family homes are selling for a 17.9% premium, condos are taking several months to sell rather than the usual couple of weeks, according to local Redfin real estate agent Forrest Moody.

“Before the pandemic, it was challenging to find a condo in Seattle for less than $500,000, but now there are plenty selling for under $400,000,” Moody said in the report. “The people who are buying condos now are the people who couldn’t afford to buy one a couple of years ago because prices were so high,” he said. “I recently sold a condo that was within walking distance of Amazon’s headquarters for $510,000. Condos in that building normally go for $550,000 and up.”