Buyers and sellers of California real estate have the option of using one broker to represent both parties. As long as both parties are aware of this, and consent, it is legal, and called "Dual Agency". Here is an example of how it looks in a real life scenario:
A seller wants to sell his home so he hires a reputable broker at ACME Real Estate Co. The broker, or her agent, lists the home for sale and starts to advertise. MOST OF THE TIME, the home will be sold to a buyer, who has his own agent. The agent representing the seller, and the agent representing the buyer will split any commission owned by the seller.
But in this case, the broker at ACME meets an interested buyer at an open house she is holding. The interested buyer does not have an agent, and asks ACME if she'd write the offer for him. She agrees to meet him later and write an offer.
At their meeting, ACME gives the buyer a disclosure about Agency, and then gets written permission from the buyer to act as agent for him, and for the seller. The buyer agrees.
The ACME broker then approaches her seller, and says "I have an offer to present to you from a buyer whom I am representing". The broker will then get formal written permission from the seller that she can represent both parties. If either the seller or buyer doesn't agree, then the broker must refer one of the parties to another broker. It would most likely be the buyer being referred because the broker already has a written contract to represent the seller and to list the home.
Assuming everybody agrees, ACME has become a Dual Agent.
Dual Agency is controversial and is not legal in many states. It is legal in California.
What are the disadvantages of dual agency?
- Your broker no longer represents your interest only. The buyer and seller generally have different objectives. The buyer wants the best deal, and the seller wants to maximize profit
- Your broker might have a difficult time advising you on what to offer or what to accept since she may have confidential information about the other party that she can not share.
- Some people think an agent may favor the listing party since they hired her out of thousands of possible agents whereas the buyer picked the agent just because the buyer thought it was an advantage.
What are the advantages of Dual Agency?
- Not everything about the transaction is about money. There are other considerations where knowing both parties can be helpful in negotiating a win/win transaction.
- Some agents write into the listing contract that they'll charge less to the seller if she represents both parties.
- Some people believe that the possibility of dual agency makes a broker want to advertise the property more aggressively.
In California, the most important thing to remember with dual agency is that an agent can not tell the buyer how low the seller is willing to go (without written permission to do so), and the broker can not tell the seller how much the buyer might be willing to pay (without written permission).
But here's the thing... If two different agents were involved in the sale, each representing one of the parties, the listing agent still would not know how much a buyer would be willing to pay, and the buyer's agent still would not know how low a seller would be willing to go.
So that's what Dual Agency is all about. You will see it numerous times in the listing contract, and when reviewing any offers.
I love living in Rincon Valley! I've lived here since 1995 and can't imagine living in a better north bay community. Call me today if you're interested in buying a home in Rincon Valley, or if you'd like to list your Rincon Valley home for sale.
- Jim Cheney, Broker
- Saint Francis Property
- Jim@StFrancisProperty.com
- (707) 494-1055
- Rincon Valley - Santa Rosa
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Originally posted on RinconValleyBlog.com
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