What Is Dual Agency in Real Estate That Wins Both Sides?
When you sell or buy a house or condo, you want the process to go simply. If you’re selling, you’d probably like to make the sale quickly so you can use the money to purchase your new home or RV. If you’re buying a home, you likely want to find your new home as soon as possible, so you can settle into it and enjoy life in your new digs.
Alas, the home buying process can take a while. Peruse Zillow or REMAX, and you’ll find homes that have been for sale for a year or more. If you’re selling your home, that’s probably not the situation you desire. You might look for a quick way to sell your home the first week you list it.
Buyers, beware of rushing into a home purchase. Understandably though, you don’t want to live in a business hotel indefinitely or sleep in your office for the first six months of your job while you hunt for a spot to live.
While you look for shortcuts, consider using a dual agency in real estate. This works for both seller and buyer. So, what is dual agency in real estate?
What Is Dual Agency In Real Estate?
The term real estate dual agency refers to a real estate agency that handles both the buyer and the seller at closing.
While this process can help alleviate some of the closing cost that comes from the realtor’s fees, not every state allows dual agencies.
Both advantages and disadvantages exist to using a dual agency for a real estate deal. Let’s look at the good and bad for all parties involved.
The Advantages Of a Dual Agency
Everyone makes out pretty well by using a dual agency. The buyer, seller, and real estate agent all benefit. Let’s look at how.
The real estate agent makes more money as a dual agent. Typically, any real estate deal consists of a listing agent and a buyer agent. The two agents split the commission when the home or commercial structure sells.
Both the buyer and the seller save money, too. The buyer especially saves money since this can reduce their closing costs – at least the commission fees.
It simplifies the process of buying and selling because both seller and buyer only need to make one appointment to show the house. It also provides better communication between buyer and seller.
The use of a dual agency in real estate provides added transparency. But, as we’ll see in the disadvantages section, this can also create issues with transparency.
Using a dual agency can provide a quicker purchase process, too. It doesn’t reduce paperwork, but it simplifies the process of completion.
The Disadvantages Of a Dual Agency
Unless both the buyer and the seller know the real estate agent, both parties using the agency can create conflicts of interest. The seller wants to get the best price for their home, while the buyer wants to pay the tiniest price possible. Who will a dual agent actually help?
That situation creates the opportunity for mistrust and trusting your real estate agency tops the list of important items when buying a house.
Can you trust them to keep your personal issues private, such as a seller going through a divorce who desperately needs to sell the house or a buyer on a strict budget who can’t spend more?
This situation comes into play especially when the home inspection occurs, and the parties must negotiate repairs. Normally, each side has its own agent advocating for them, but not in the case of dual agencies. This all complicates negotiations.
States That Made Dual Agencies Illegal
Where is dual agency in real estate illegal?
Eight states in the US banned dual agencies. You must use separate real estate agents in the states of:
Alaska,
Colorado,
Florida,
Kansas,
Oklahoma,
Texas,
Vermont,
Wyoming.
Common Purchases Using Dual Agencies
Since 42 states make dual agency legal, these agencies do handle quite a few sales. Some scenarios in which they’re used occur more often than others:
You might find yourself needing to use a dual agency if you want to purchase property in a rural area. That’s because few people work as real estate agents in rural areas.
When you schedule a home tour or viewing online, the website assigns you a local real estate agent. This could be the same agent that represents the seller.
If you attend an open house, you will meet a listing agent with the agency helping to sell the property. You might want the house and want to start the buying process as soon as possible. That means you start the ball rolling right then with the agent present.
When you purchase a newly built home, you’ll often buy through the real estate agent working with the developer who constructed the sub-division. You won’t always know that though because that state might not require the real estate agent to disclose that they work with the developer.
Every State Has Its Own Dual Agency Laws
Of course, you can’t use this type of agency in the eight states that made it illegal. You should check each state’s laws though if you plan to move, but don’t yet know in which state you’ll purchase.
In many large metropolitan areas, such as Chicago, New York City, Boston, and Los Angeles, you might purchase a home outside of the state in which you’ll work.
Think that’s bunk? It’s fact.
For example, while purchasing a home in New York City remains exorbitant, you could easily buy in Jersey City, New Jersey. That’s less than five miles outside the city, but the commute takes about 45 minutes. A 1,000 square feet home in NYC costs a little more than $1 million, but the same size home in Jersey City costs just $479,000.
The Chicago area produces a similar conundrum. Buying a home in Chicago costs an exorbitant amount, while prices in Hammond, Indiana prove much more reasonable. The 23-mile trip typically takes about 35 minutes. A 1,000 square feet home in Chicago costs $250,000 to $500,000, while in Hammond, you could find a similar home for just under $100,000.
For this reason, you should check the laws surrounding dual agency in each state to which you could conceivably move. A commute across state lines could take you less than one hour but cut your home costs in half or more. That’s worth the bus or rail pass.
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