Homebuyers and sellers are often confused about real estate agents' roles in a sale or purchase. If you are buying or selling a house and working with a real estate agent, you may wonder who the agent represents, who they are loyal to, and whether there are any rules around agent relationships.
Many states require that agents give buyers and sellers anagency disclosure formto sign, which clears up these questions. The form used in California, for example, is not a contract between two parties but rather a disclosure from one to the other. It clarifies the many types of agency functions that may come up when buying or selling a home and specifies the rules agents must adhere to. All parties must read it so they know what to expect from each other; the form also allows them to select the type of agency relationship they prefer.
Key Takeaways
- "Dual agency" refers to an agent that works with both the buyer and seller of a home.
- Two agents can work for the same broker on the same transaction, causing a dual agency situation.
- Single agency refers to an agent or real estate broker that works with only one party in a real estate transaction.
Single Agency
All agents who represent clients under a single agency must treat their clients with a certain standard of care. This sounds pleasant, and it is, but it is a legal standard that dictates certain rules that come with the job.
For instance, all real estate agents owe afiduciary responsibilityto their clients. This means many things, but among the most crucial are that they have to act in the best interest of their client's finances, and they cannot share confidential information with the other party or the other party's agent. In addition, agents acting in a single agency must use care anddue diligenceto perform duties, disclose allmaterial facts, and be honest.
The duty to disclose is a tricky thing in real estate. State laws govern what agents are required to tell their clients, so there might be some items that an agent does not disclose. "Material" facts set the standard. They are defined as those that are crucial in the choice of whether to buy or sell a home.
Note
In some states, an agent must disclose issues with a building code or a pending lawsuit but may not need to reveal that a house was the scene of a crime.
Buyer's Agents vs. Seller's Agents
Agentswho work for people shopping for homes act in a single agency capacity as buyer's agents. Agents who work for people listing their homes to sell act in a single agency capacity as listing agents.
Buyer's agents and the buyer will often sign abuyer's broker agreement, which lays out the duties and obligations of the agent. In some states, if buyers do not sign this form with the agent, that agent does not represent the buyer. Instead, they become a sub-agent of the seller.
Sub-agents owe the same duties to theseller as the listing agent. The seller's agent and the seller sign alisting agreement, which also lays out the duties and obligations of the agent. Listing agents and buyer's agents each owe their clients loyalty, confidentiality, and accountability.
Can my Single Agent Work for the Other Party?
Many agents work all angles: as a buyer's agent with buyers and as a seller's agent with sellers. Some agents work asexclusive buyer's agentsand never take a listing. Other agents work exclusively with sellers and never show a home.
If you are looking to buy or sell a house, you may prefer to deal with these types of agents over general agents because they can provide a more focused point of view. You may also have a clearer notion of what to expect in terms of duties of care.
Note
Duty of care is the agent's legal responsibility to inform their client and act in their best interests.
Dual Agency With Two Agents
Allreal estate agentsare licensed under areal estate broker. If you're buying, you may end up working with an agent who is licensed by the same broker as the listing agent. If you're selling, the buyer might work with an agent who works for the broker your agent works for.
When this happens, it creates a dual agency. The agents could work at two offices across town and not know each other, but they are still working under dual agency, since they have a license from the same broker. Simply put, one agent represents the buyer, and the other represents the seller.
Should I Be on the Lookout for Conflicts of Interest?
At first, an agent may have created asingle agency relationshipwith the buyer, but when the buyer chooses a home listed by that agent's broker, the agent's relationship with the buyer changes. This can be complex when loyalty is in play, because as your buyer's agent, their duty is to help you find a home, and they want to help you get the best price.
But when the house is listed with their broker, they make more money on a higher sell. This can create a conflict of interest on the agent's part; you can see why it is crucial to find an agent you trust.
If you have a single agent helping you buy a house, and you find a home listed with that agent's broker, your agent may end up working both sides. Not all single agents note the distinction.
Note
You should always ask about dual agency when hiring an agent, to find out their policy and whether you're required to stay with them if the situation develops.
How Can I Prevent My Agent From Working With the Other Party?
Laws vary from state to state, but for the most part, both parties must agree to dual agency in writing. In California, for example, standardexclusive buyer's broker agreements contain terms that allow dual agency, so most buyers don't realize that their agent and broker are working in dual agency.
If you want to be certain that your agent is yours and yours alone, ask for exclusivity. The only agents who will never work in a dual agency are exclusive buyer's agents and listing agents whose practice consists only of listings.
Dual Agency With the Same Agent
A listing agent for a house who also represents the buyer is a dual agent. Dual agents cannot act in a fiduciary relationship with either party and must treat both sellers and buyers equally. They cannot share confidential information or provide confidential advice.
The dual agent cannot advise onhome price or terms, or negotiate on anyone's behalf. Therefore, they cannot try to obtain the highest pricefor the seller or the lowest price for the buyer.
Note
Dual agents have a fiduciary responsibility to both the buyer and seller, so they must be careful how they conduct the transaction.
Some buyers prefer to work only with listing agents because they know that the agent gets two commissions—one as a listing agent and one as a buyer's agent. They feel that the listing agent is motivated when a buyermakes a purchase offerto get that offer accepted. They might also ask the dual agent tonegotiate the real estate commissionto increase theseller's profiton alowball offer.
How Neutral Transaction Agents Can Help
To avoid dual agency, some agents work as transaction agents.Transaction agentsdo not represent either party and do not protect their interests; they facilitate the transaction between them and ensure the process runs smoothly.
A transaction agent helps fulfill the terms of the purchase contract and provides the paperwork needed for each side. Having an agent of this type can help all parties avoid any conflicts or issues around loyalty that may arise when working in a dual-agent setup.
FAQs
What is the difference between single and dual agency? ›
"Dual agency" refers to an agent that works with both the buyer and seller of a home. Two agents can work for the same broker on the same transaction, causing a dual agency situation. Single agency refers to an agent or real estate broker that works with only one party in a real estate transaction.
What does single agency mean in real estate? ›Single agency is when an agent represents a client (either the buyer or the seller) and is solely responsible for representing them with their best interests in mind. The buyer's agent and the buyer will sign a buyer's broker agreement, and the listing agent and seller will sign a listing agreement.
What's the difference between special agency and dual agency? ›A dual agent is an individual who acts as both the buyer's and seller's agent in a transaction. It is easy to confuse dual agents with designated agents. But unlike a dual agent, designated agents are two separate individuals representing the buyer or the seller.
What is an example of a single agency? ›The real estate term "single agency" means that a broker or agent will represent the interests of either the seller or the buyer. They may act as either the listing agent or the buyer's agent, but not both. The agent will sit on only one side of the transaction.
What does single agent mean? ›A single agent is a broker who represents either the buyer or the seller, but not both in the same transaction. While a transaction broker provides a limited form of representation to a buyer, seller, or both during a transaction, but does not represent either in a fiduciary capacity.
What is an example of legal single license dual agency? ›A dual agency is a situation where one agent represents both buyer and seller in a real estate transaction. This agent, of course, works for only one broker. An equivalent in law would be a divorce lawyer representing both members of a couple during the proceedings.
What is a single agent in real estate quizlet? ›What is a single agent? A broker who represents as a fiduciary, either the buyer or seller, but not both in the same transaction.
Which of the following is considered dual agency? ›Dual agency is when a single real estate agent represents both the buyer and the seller in a real estate transaction. It can also occur when an agent represents both the landlord and the tenant, or when the same real estate company represents both parties in a purchase and sale or rental transaction.
What is the most common type of agency in real estate? ›To this day, single agency is still the most common form of agency in real estate. But, when you do find yourself in a dual agency, it is important that the realtor maintains the integrity of their career by serving the best interest of both parties.
Should I avoid dual agency? ›Well dual agency is certainly a good thing for the agent but is typically a negative scenario for both the buyer and seller, as neither party is getting fair representation. This is an especially negative arrangement for inexperienced buyers and sellers who really need professional guidance.
What is dual agency and pros and cons? ›
This means that the broker or agent owes fiduciary duties to both parties, such as loyalty, confidentiality, and full disclosure. However, dual agency also creates a conflict of interest, as the broker or agent may not be able to advocate for the best interests of both parties, or may favor one over the other.
What is a dual agency situation? ›In a dual agency situation, the same real estate agent represents both the buyer and the seller of a home. This can be risky for buyers, since agents are paid based on how much the home sells for.
Which of the following provides the best example of single agency? ›Which one of the following provides the best example of single agency? An agent from one firm acts as the agent for the buyer.
What are the 3 types of agencies? ›In this day and age, there is a multitude of types of agencies that provide marketing/communication services for businesses, but for clarity's sake, we can broadly separate them into 3 different types of agencies: Creative, marketing, and advertising.
Who is the principal in a single agency? ›In a single agency relationship, the employer becomes the principal, who authorizes the broker as agent to perform certain services on his or her behalf.
Who benefits most from dual agency? ›The seller typically pays both agents' commissions, so the seller is the one who can directly save money in this situation. But when the seller's costs are lower, they may be willing to accept a lower price from the buyer. The seller, buyer and agent could all benefit from the arrangement.
What are the two main types of agency relationships? ›Note that there are two types of agency: (1) actual, either express or implied, and (2) apparent. The relationship of an agent and a principal may also arise by estoppel, necessity or operation of law.