Dual agency explained;
A consumer must decide if they want to allow dual agency before a buyer begins shopping or a seller can list a home because it will have a significant impact on the homes a buyer will be able to view.
This is one of the most important things to understand so that you can make an informed decision before you buy or sell real estate in Arizona.
So what is it and how do you make an informed decision?
When you hire a real estate agent you are actually hiring the brokerage that your agent represents. The brokerage is allowing him/her to represent you on their behalf.
For dual agency to exist, a brokerage must represent both the buyer and the seller in the same transaction.
Dual Agency can happen when a buyer uses a listing agent to purchase the home that they have listed OR when the buyer and the seller are using different agents but both of the agents represent the same brokerage.
Dual agency can be a beneficial arrangement for all parties involved. In the first instance (when the listing agent represents both the seller and the buyer), they can benefit from having a single point of contact for all aspects of the transaction, and the real estate agent can benefit from having two clients who are both interested in buying and selling the home. In some cases, if a listing agent brings the buyer they can reduce the commissions since they are not going to have to split the commission with another agent. This can significantly reduce costs for both the buyer and the seller.
However, this creates a situation where the agent is limited in representing you. The agent is at all times obligated to deal honestly with all parties and exercise reasonable skill and care in the performance of those duties however, the agent can no longer represent one party to the detriment of the other. This means in part that the agent can not tell the buyer if the home is overpriced or if they know that the seller will take less. They can not tell the seller that they know the buyer qualifies for more than the offer price.
If you are a first-time homebuyer I personally do not recommend this type of dual agency. You will have many questions and concerns as you embark on this journey that your agent may not be able to guide you through.
In the second instance; (when the buyer and the seller are using different agents but both of the agents represent the same brokerage) dual agency be extremely beneficial for both the buyer and the seller.
If you choose not to allow this type of dual agency your agents will not be able to show a home to a potential buyer that has the same broker. This is huge if you are with a large real estate brokerage. For example at my brokerage, there are more than a thousand agents. If even half of the agents have a listing and half have only one buyer then that is 500 homes a buyer won't be able to see. As you can see this significantly impacts both buyers and sellers.
For many the concern about allowing this type of dual agency is the possibility of the two agents running into each other at the office and potentially discussing what they can do to get the highest price out of the home. Buyers and sellers may see this as a conflict of interest because in many companies the brokerage will benefit from the higher price.
This would be an egregious misrepresentation if it were to happen because as a licensed agent, we are bound by a code of ethics that will prevent this. A real estate agent has a fiduciary duty to their clients, which means that they must act in their client's best interests. This means that the real estate agent must disclose all material information to their clients, and they must not put their own interests ahead of their client's interests.
Don't be afraid to ask your agent how the commission is earned and distributed.
Many brokerages charge a commission and then give the agent a percentage of that. Meaning you may be paying the brokerage 3% of the purchase price but the brokerage is splitting it with the agent and, after expenses, fees etc, perhaps the agent only gets 1.5% of that 3% thus making it more beneficial to get the highest price for the home.
At the brokerage I represent I pay a flat fee. It doesn't matter if I sell a $5,000.00 lot or a $5,000,000.00 home, I pay the same amount. I can choose to pay the broker more or less depending on what I hire them to do for me like advertising or paperwork, things like that but, there is never a conflict of interest because the brokerage doesn't get paid any more or less based on the purchase/sell price.
You do not have to give a blanket yes to allow dual agency. You can allow one type of dual agency and not the other. Whatever you decide to do your agent will put it in writing in your employment contract when you hire them and in an agency disclosure form and it should be disclosed to everyone involved in the transaction.
If you or anyone you know needs assistance please contact me directly at 520-304-4691