Real estate transactions can be complicated and confusing, especially for first-time buyers or sellers. One term that often comes up in real estate is "dual agency." In this blog, we will discuss what dual agency means in real estate and how it works.
What is Dual Agency?
Dual agency occurs when a real estate agent represents both the buyer and the seller in the same transaction. This means that the agent is acting as a representative for both parties and owes them both a fiduciary duty. A fiduciary duty means that the agent must act in the best interest of their clients, including protecting their confidential information, negotiating on their behalf, and disclosing any relevant information about the property.
Dual agency is legal in many countries. In countries where dual agency is allowed, the agent must disclose this to both the buyer and the seller and obtain their written consent before proceeding with the transaction.
How Does Dual Agency Work?
When an agent represents both the buyer and the seller, they must navigate a delicate balancing act to ensure that they are fulfilling their fiduciary duty to both parties. Here are some ways that dual agency works in practice:
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Disclosure: The agent must disclose to both parties that they are acting as a dual agent and obtain their written consent to proceed with the transaction.
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Neutrality: The agent must remain neutral and not show favoritism towards either the buyer or the seller. This means that they cannot provide advice or opinions that could benefit one party over the other.
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Confidentiality: The agent must maintain confidentiality for both parties and cannot disclose any confidential information without the written consent of the party.
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Negotiation: The agent must negotiate fairly on behalf of both parties and disclose all relevant information about the property to both parties.
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Commission: The agent will typically receive a commission from the sale, which is usually split between the buyer's agent and the seller's agent. In the case of dual agency, the agent will receive the entire commission, which can create a conflict of interest.
Pros and Cons of Dual Agency
Dual agency can have advantages and disadvantages for both buyers and sellers. Here are some pros and cons to consider:
Pros:
- Dual agency can streamline the transaction process by having one agent handle both sides of the transaction.
- The agent may have a better understanding of the motivations and needs of both parties, which can facilitate negotiations.
- Dual agency can save both parties money by reducing the commission paid to the agents.
Cons:
- Dual agency can create a conflict of interest for the agent, as they owe a fiduciary duty to both parties.
- One party may feel disadvantaged or mistrustful if they feel that the agent is not acting in their best interest.
- Dual agency can create ethical concerns if the agent is not able to remain neutral and fair to both parties.
NB: In Uganda, it is common for real estate agents to act as dual agents by default. This occurs when an agent engages with a buyer and discovers that the landlord does not have their own agent, resulting in the agent assuming the role of the landlord's agent as well.
Conclusion
Dual agency is a complex issue in real estate that requires careful consideration by both buyers and sellers. If you are considering dual agency, it's important to understand the advantages and disadvantages and to work with an agent who has experience with dual agency transactions. Ultimately, the decision to use a dual agent will depend on the specific circumstances of the transaction and the preferences of the parties involved.
Kind Regards
Julius Czar
Author: Julius Czar
Company: Zillion Technologies Ltd
Mobile: +256705162000 / +256788162000
Email: Julius@RealEstateDatabase.net
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