The definition of dual agency in a real estate context is when one real estate agent represents both the seller and the buyer in the same transaction. In some states, dual agency is illegal.
Why is dual agency difficult
Dual agency is difficult because the seller always wants to sell his/her home for the highest possible price, but the buyer always wants to buy a home for the lowest possible price. And, in between those two conflicting desires is the real estate agent, who is typically just trying to close the deal so he/she can get his/her commission check.
An example of dual agency
Let’s go through a quick example of dual agency and how it would happen. Suppose Seller X is using Agent A to sell his house. So, Agent A has an open house to attract prospective buyers.
Now, let’s say Buyer Y comes to the open house and decides that he wants to place an offer on the home, but the problem is that Buyer Y does not yet have an agent representing him. So, at the open house, Buyer Y asks Agent A if he would like to be his agent as well. Assuming Agent A agrees and Seller X also agrees to this situation, then this is now an example of dual agency because Agent A represents both Seller X and Buyer Y.
Dual agency and commission
One of the pros of dual agency is that the seller could probably get the agent to reduce the commission. This is because the agent is going to get both the buyers and sellers portion of the commission (which could be as high as 5-6%), so he would be more likely to agree to a lower commission in the interest of maintaining his dual agency status. Of course, the agent would still get a higher commission in dual agency than if he were only representing the seller and not both buyer and seller.