Dual Agency in Real Estate Transactions Presents a Problem

Question: We listed our North Scottsdale home for sale with a long-time family friend because we trusted her.  A buyer has now signed a purchase contract for our home. This buyer, however, is represented by another real estate broker in the same brokerage firm as our listing agent.  Our listing agent says that she is sorry but she is now a dual agent who represents both us and the buyer.  Although we have signed the purchase contract and a form consenting to dual agency, we are not happy.  How can the same brokerage firm represent both us and the buyer, when we want to get the highest price for our home, and the buyer wants to pay us the lowest price for the home?  Isn’t that similar to the same lawyer representing both the prosecution and the defense in a criminal trial?

Answer: Your concerns are valid and are shared not only by other sellers and buyers, but by real estate brokers.  One Supreme Court judge has even said that dual agency in a real estate transaction “is a euphemism for conflict of interest.”  If there is litigation, dual agency is almost impossible to defend.

There are, however, logistical and economic reasons for dual agency.  One, in some small towns there are only a handful of real estate agents, and it is almost impossible not to be a dual agent who represents both the seller and buyer in at least some real estate sales.  Two, in many brokerage firms up to 40% of sales are “in house,” which means that the seller and buyer are both represented by real estate agents in the same brokerage firm.  These brokerage firms do not want to lose significant revenue by referring the seller or the buyer to other brokerage firms.

Note: Dual agency requires the written consent of both parties, which is typically given by the signing of a consent form attached to the real estate contract.  Once a dual agency is established, all of the licensees are obligated to deal with both parties in a fair and evenhanded manner.