Most of the time home buyers and sellers have different agents, but not always. About 10% to 20% of the time, they both use the same agent. This arrangement – when a buyer and a seller both have the same agent – is known as “dual agency.” There are some advantages to dual agency, but there are also some definite downsides. Whether you’re a buyer or seller, you need to know about both in order to make the best agent decision. To help you out, then, we offer these pros and cons of dual agency for Newark buyers and sellers.
Overview of Dual Agency
Single agency, which is what most people are familiar with, occurs when one agent represents only one party in a real estate transaction. Typically, an agent from one company represents the buyer, and another agent from another company represents the seller. The main benefit here is that the agent can act in her client’s best interests without any conflict of interest.
Dual agency, on the other hand, “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.”
When it comes to the exact mechanism of how dual agency works, here’s what we find. “When someone hires a real estate agent, they have the opportunity to decide whether they want to work with a dual agent, and they fully understand the trade-offs of doing so. The agent asks any client who says they’re fine with dual agency to sign an official disclosure from the state department of real estate.”
Because of the cons associated with dual agency, it is prohibited in some states and heavily restricted in others. You can find out more about dual agency by contacting a Newark agent at (848) 299-4847.
Dual Agency Pros
There are some notable pros of dual agency for Newark buyers and sellers. Chief among these are . . .
FASTER COMMUNICATION AND TRANSACTION SPEED
“When one agent represents both sides of a real estate transaction, there can be less of a delay in price negotiations or getting the answer to a question. The agent still may not get a timely response from their buyer or seller. However, because there aren’t two agents, there’s one fewer party that could hold things up.”
In addition, with only one agent involved and handling all the details, the whole transaction is speeded up. “One agent passing paperwork between the buyer and seller speeds up the entire process and leads to the possibility of a quick closing. This of course depends on if both parties can come to an agreement on pricing and contingencies.”
With dual agency, the seller, who typically pays the agents’ commissions, stands to save some money. A dual agent will typically earn a nearly double commission for assuming both agent roles. And that means the agent may be willing to accept a lower commission because it will already be higher.
This may also result in savings for the buyer as well. If the dual agent reduces her commission, the seller may accept a lower price owing to the reduced commission.
MORE PROPERTY KNOWLEDGE
When one agent is handling both sides of the transaction, you can often get more information about a property because the agent knows more about it. “From a buyer’s or tenant’s perspective, using the seller’s or landlord’s agent could mean gaining access to more information about the home.”
Dual Agency Cons
And now we come to cons of dual agency . . . .
POTENTIAL CONFLICT OF INTEREST
This is probably the biggest drawback of dual agency and the reason for its prohibition in some states. With one agent assuming both roles, that agent may be tempted to pursue personal gain over her clients’ best interests. “Human nature and financial incentives can make it hard for an agent to be neutral when representing both the buyer and seller.”
INCREASED CLIENT RESPONSIBILITY
A related con of dual agency is that the agent’s clients may have to look out for their own best interests. Even if a dual agent is completely ethical, it will be next to impossible for her to “represent the best interests of two parties with different [and usually competing] goals.”
“That means a dual agent acting ethically can’t do more than facilitate the transaction. For example, the buyer will have to come up with the price they want to offer and decide whether to counteroffer without their agent’s input.”
DIFFICULTY WITH NEGOTIATIONS
When an agent represents both parties in a real estate transaction, that agent will have difficulty advocating successfully for either one of them.
“If,” for example, “a dual agent suggests the buyer makes a purchase offer below list price, the agent is going against the seller’s best interest. Similarly, if that dual agent tells the seller not to accept an offer below the list price, they go against the buyer’s best interest.”
When to Consider Dual Agency
So when should Newark buyers and sellers consider going the dual agency route?
Some industry insiders say they should never consider it. “They question whether a dual agent can truly be neutral when facilitating a transaction where they represent both the buyer and the seller. That’s mainly because the buyer will want to sell their home for the highest price possible while the seller will want to pay the lowest price.” Others maintain that the risk isn’t that great and that dual agency can benefit both buyers and sellers “by speeding up communications and helping the transaction close faster.”
Really, it all boils down to your particular situation and needs – and the quality and trustworthiness of the agent and agency. If, then, you’re a Newark buyer or seller, contact us today at (848) 299-4847 to make the right decision.