Who Pays the Commission in a Dual Agency?

Dual agency in real estate transactions raises questions about commission responsibility. This article explores how real estate commissions are handled when a single agent represents both the buyer and the seller.

Understanding Dual Agency and Real Estate Commissions

Dual agency arises when a real estate agent or brokerage represents both the buyer and the seller in the same property transaction. This arrangement requires the informed and written consent of both parties involved. Without this explicit agreement, an agent cannot legally act in a dual capacity.

In a standard real estate transaction, the seller typically pays the entire real estate commission. This commission, usually 5% to 6% of the sale price, is outlined in the listing agreement and divided between the listing and buyer’s agent brokerages.

Commission Payment Mechanics in Dual Agency

In a dual agency scenario, the seller remains responsible for paying the entire real estate commission. This payment is typically stipulated in the listing agreement the seller has with the brokerage. The commission rate usually falls within the common range of 5% to 6% of the final sale price.

Because the same agent or brokerage represents both the buyer and the seller, the commission is not split with an outside buyer’s agent. Instead, the entire agreed-upon commission is paid directly to the single brokerage handling both sides of the transaction. For example, if the agreed commission is 5.5%, the brokerage receives the full 5.5% from the sale. This payment is typically deducted from the seller’s proceeds at the closing of the sale.

The buyer does not typically pay a commission directly to the dual agent in this arrangement. The financial obligation for the agent’s compensation rests primarily with the seller, as established through the listing agreement. This structure simplifies the commission flow to a single entity.

Financial Implications for Parties

For the seller, paying the full commission to a single brokerage in a dual agency impacts their net proceeds from the sale. While the total commission percentage might be similar to a traditional transaction, the absence of a split with an external brokerage can sometimes open an opportunity for negotiation on the overall commission rate. A seller might negotiate a slightly reduced rate, perhaps from 6% down to 4.5% or 5%, since the brokerage retains the entire amount.

For the buyer, while they do not directly pay the commission to the dual agent, there can be indirect financial considerations. The dual agent’s role involves balancing the interests of both parties. This can influence aspects like pricing negotiations, as the agent may not advocate as aggressively for the lowest possible price for the buyer, or the highest price for the seller, to ensure the transaction proceeds smoothly. This balancing act might also affect negotiations regarding repairs or other concessions, where the agent aims for a middle ground acceptable to both sides. The buyer should consider how this balanced approach could shape the final terms of the purchase.