A conflict of interest may prevent real estate agents from representing their clients’ best interests. Dual agency and other less apparent conflicts can place buyers and sellers at a disadvantage. To protect themselves, it is essential that all parties fully understand whose interests the real estate agent truly represents.
Dangers of Dual Agency
One of the most common conflicts of interest occurs when a single real estate agent represents both parties in a transaction. This is called dual agency.
Unlike real estate attorneys who are subject to the rules of the Illinois State Bar Association, prohibiting dual agency except in extraordinary circumstances, Illinois law allows real estate agents to represent both parties in a transaction. The only requirement is that they disclose the dual agency in their contracted agreement with the parties.
Buyers and sellers will often agree to this arrangement under the pretense that it is more efficient than dealing with two separate agencies. However, potential conflicts can affect the best interests of both clients.
This is because dual agents typically remain neutral when there is a conflict between buyer and seller. They cannot seek a better deal for one over the other. The result can be a sale where the property is:
- Has unknown defects.
Some agents may be motivated to suggest dual agency representation in order to retain all of the commission. In some cases, the agency they work with may even offer them a bonus for keeping the sale under one agent-broker.
Other Conflicts of Interest
Dual agency is the most common conflict of interest in a real estate transaction, but other conflicts may cause a real estate agent to not act in their client’s best interests. For example, an agent may have a financial interest in the property or have a personal, family or business relationship with the property owner and may seek an advantage at the expense of their client.
The best protection buyers and sellers have to avoid conflicts of interest is to fully understand the contract with the real estate agent. They should ask whether they are giving consent to dual agency-representation and whether the agent has a financial interest in the property or relationship with any of the other parties. The answers to these questions will help them understand if the agent will be motivated to represent their best interests.