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Dual Agency

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4 Examples of Dual Agency

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Dual agency is when the same agent represents both the buyer and seller in a transaction. This is considered a questionable commercial practice as it may create a conflict of interest. The following are illustrative examples.

Same Agent

A situation where both sides in a negotiation or transaction are represented by the same person. This inherently creates a conflict of interest. For example, the same person can't push for the best price for the buyer and seller at the same time in a real estate transaction.

Same Firm

The same firm represents the two sides in a transaction. This creates temptation for both agents to advise their client to accept offers as the firm can then benefit from a double commission from both buyer and seller. Also, agents may be tempted to share information that isn't beneficial to one side. For example, the agent of the seller who advises the agent of the buyer that the seller is desperate to sell and will probably accept any reasonable offer.

Transaction Brokers

The term agent implies a professional who is representing the best interests of a client. Where the agent is representing both sides they are better described as a transaction broker whereby they simply facilitate the transaction without trying to get either side a better deal. Despite this limited role, the broker may collect fees from both sides such that they are better paid than agents who are better situated to offer objective advice.

Rent Seeking

Rent seeking is where a firm or individual seeks more money without offering more value. Where there are no restrictions or regulations regarding dual agency some firms may become aggressive in seeking double commissions as follows.

Unethical Tactics for Double Commissions


Where dual agency isn't prohibited the agent may be overly aggressive in their pursuit of a double commission. For example:

Reject independent buyers who don't want an agent.

Secrecy -- don't widely publicize the sale but aggressively push to your own clients.

Sabotage negotiations with other agents to make sure your clients can buy.

Provide the seller with dubious advice in order to close sales that result in double commissions.

Provide the buyer with dubious advice in order to close sales that result in double commissions.

Provide clients with inside information in a competitive bidding process to secure double commissions.

Notes

In some jurisdictions, the practices described above, including dual agency, are prohibited.
Overview: Dual Agency
Type
Definition
A transaction or negotiation where both sides are represented by the same agent.
Related Concepts

Conflict Of Interest

This is the complete list of articles we have written about conflict of interest.
Chinese Wall
Compliance
Cronyism
Dual Agency
Fee Splitting
Fiduciary Duty
Moral Hazard
Profit Motive
Revolving Door
Self Dealing
Transaction
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