If you’ve ever bought a property, you might be familiar with something called “multiple representation.” It’s when one real estate agent represents both the seller and the buyer for a particular transaction. It may also be called “dual agency.”
The reason this can happen is because, here in North America at least, real estate sales are typically done with two agents: a seller’s agent and a buyer’s agent. The real estate commissions are (directly) paid by the seller to the listing brokerage, but it’s usually split between both brokerages and agents involved in the transaction.
However, if you’re an agent-less buyer and you happen to come across a property that you like on your own (perhaps by browsing around online), the selling agent will likely ask you to also sign a representation agreement with them. And that means entering the world of “multiple representation.”
Here’s some of the wording that the Ontario Real Estate Association uses:
MULTIPLE REPRESENTATION: The Listing Brokerage has entered into a Buyer Representation Agreement with the Buyer and represents the interests of the Seller and the Buyer, with their consent, for this transaction. The Listing Brokerage must be impartial and equally protect the interests of the Seller and the Buyer in this transaction. The Listing Brokerage has a duty of full disclosure to both the Seller and the Buyer, including a requirement to disclose all factual information about the property known to the Listing Brokerage.
But I don’t understand how this can work.
You now have a sole agent that is supposed to act as a neutral facilitator between (1) a party that is paying them all of their salary for the transaction (and which increases as the selling price goes up) and (2) a party that just came off the street (and where there’s no preexisting relationship).
That’s why multiple representation scenarios always make me uncomfortable. Real estate already has too many information asymmetries for my liking and this feels like a conflict of interest in almost all of the cases. I guess that’s why they are not allowed in many states in the US.