FauxCaster / Getty Images Dual representation, also called dual agency, occurs when the same real estate agent represents both the seller and the buyer of a property.
It was also recently banned in British Columbia in Canada.
Consumer Advocates in American Real Estate, a nonprofit that works against conflicts of interests in residential real estate, calls dual agency “the biggest scam in real estate.” But the reasons make sense only if you understand how real estate transactions are conducted, which many first-time home buyers don’t.
If you are a buyer, the agent is spending to drive you around for four hours to look at homes, search a multiple listing service to find houses to show you and so on.
When a house is listed, the seller signs a contract agreeing to pay generally a 5 to 6 percent commission split between the listing and buyer’s agents.
When a real estate agent becomes a dual agent, the agent represents both parties in the transaction.
Those are competing interests.
With dual agency, a real estate agent can’t really give proper guidance to either the buyer or the seller.
If a buyer likes a home and asks a dual agent how much to offer, the agent can’t give advice exclusively in the buyer’s best interests.
What’s missing are the checks and balances of having two agents protecting solely their client’s interests.