Buying or selling a property is a significant decision, and choosing the right real estate agent is crucial. You want someone who will prioritize your interests above all else. However, real estate agents can sometimes face conflicts of interest that might affect their advice or actions. Understanding what these conflicts are and how to avoid them can help you make a more informed choice.
What is a Conflict of Interest in Real Estate?
A Conflicts of Interest with Real Estate Agents occurs when your real estate agent has personal, financial, or professional interests that could interfere with their ability to represent you fairly. For instance, if an agent is also trying to purchase the property you’re selling, or if they have a close relationship with the buyer or seller, it could create a situation where their interests conflict with yours. These conflicts can lead to biased advice or decisions that don’t align with your goals.
Why Conflicts of Interest Matter
Conflicts of interest can undermine trust in the real estate process. If an agent prioritizes their own interests, you might end up with a less favorable deal, higher costs, or unexpected complications. By identifying and addressing potential conflicts early, you can ensure your agent acts in your best interest, which is their legal and ethical obligation.
Common Types of Conflicts of Interest
Conflicts of interest can arise in various scenarios. Below are the most common types, along with examples to illustrate how they might affect you:
| Type | Description | Example |
|---|---|---|
| Dual Agency | The same agent represents both the buyer and seller in a transaction. | An agent pushes for a quick sale to earn commissions from both parties. |
| Undisclosed Relationships | The agent has personal or business ties with another party but doesn’t disclose them. | An agent favors a buyer who is their relative without informing you. |
| Financial Incentives | The agent steers you toward deals that offer them higher commissions or benefits. | An agent recommends a lender who pays them a referral fee. |
| Ownership Interests | The agent or their associates have a financial stake in the property. | An agent sells a property they partially own without full disclosure. |
Dual Agency
Dual agency occurs when one agent represents both the buyer and seller. While legal in some jurisdictions with proper disclosure, it can create divided loyalties. For example, the agent might struggle to negotiate the best price for you if they’re also representing the other party. Always ask if your agent is acting in a dual role and ensure they provide written consent forms if applicable.
Undisclosed Relationships
If your agent has a personal or business relationship with the other party—such as a family member, friend, or business partner—and doesn’t disclose it, their decisions might favor that party. For instance, an agent might downplay issues with a property if the seller is their colleague. Transparency is key to avoiding this conflict.
Financial Incentives
Agents might be tempted to recommend properties, lenders, or services that offer them financial perks, like higher commissions or referral fees. This could lead you to choose options that aren’t the best fit for your needs. Asking about their compensation structure can help uncover these incentives.
Ownership Interests
If an agent or someone close to them has a financial stake in the property, their advice might be biased. For example, if an agent’s spouse owns part of the property you’re buying, they might encourage you to pay a higher price. Full disclosure of any ownership interests is required to maintain fairness.
How to Spot Potential Conflicts
Being proactive is essential to identifying conflicts of interest. Here are practical steps to take:
- Ask Direct Questions: Inquire about any relationships your agent has with the other parties involved in the transaction. For example, ask, “Do you know the buyer or seller personally or professionally?”
- Check for Dual Representation: Confirm whether your agent is representing both sides of the deal. If they are, ensure they’ve disclosed this and obtained your consent.
- Request Disclosures: Ask for written disclosures of any potential conflicts, such as financial incentives or ownership interests.
- Look for Red Flags: Be cautious if your agent pressures you to make quick decisions, avoids answering questions, or seems overly focused on their own benefits.
Reading reviews from past clients can also provide insights into an agent’s behavior. For example, a review noting that an agent consistently recommended the same service provider might suggest a financial incentive (HAR.com).
Legal and Ethical Obligations
Real estate agents are bound by legal and professional standards to disclose any conflicts of interest. They have a fiduciary duty to act in your best interest, which includes:
- Loyalty: Putting your interests above their own.
- Disclosure: Informing you of any conflicts or relationships that could affect the transaction.
- Honesty: Providing accurate and unbiased advice.
These obligations are enforced by state real estate laws and professional codes of conduct, such as those set by the National Association of Realtors (NAR). If you suspect a conflict, you can request more information, file a complaint with your state’s real estate commission, or switch to a different agent (Cres Insurance).
No significant changes to conflict of interest laws in real estate were identified for 2025, based on available information. However, existing laws continue to emphasize transparency and client protection.
Practical Tips for Clients
To minimize the risk of conflicts of interest, follow these actionable steps:
- Research Your Agent:
- Check their reputation through online reviews and ratings.
- Ask for references from past clients to verify their trustworthiness.
- Confirm their licensing status with your state’s real estate commission.
- Clarify Compensation:
- Understand how your agent is paid, including commissions and any referral fees.
- Ask if they receive incentives for recommending specific properties or services.
- Get Independent Advice:
- Hire your own professionals, such as home inspectors or appraisers, rather than relying on agent recommendations. For example, choosing your own inspector ensures an unbiased evaluation of the property’s condition (Proven Resource).
- Consult a real estate attorney for complex transactions to review contracts and disclosures.
- Document Everything:
- Keep written records of all agreements, disclosures, and communications with your agent.
- Request written confirmation of any verbal promises or disclosures.
- Set Clear Expectations:
- Discuss your goals and priorities with your agent upfront.
- Establish boundaries, such as requiring full disclosure of any potential conflicts.
Real-Life Example
Consider a scenario where you’re selling your home, and your agent receives a low offer. You later discover that the buyer’s agent is married to a county inspector who advised the buyer that your septic system might fail, leading to the low offer. This relationship wasn’t disclosed, creating a conflict of interest. By asking about the agent’s connections and requesting disclosures, you could have identified this issue early and sought independent verification of the septic system’s condition (Hauseit).
Additional Considerations
When choosing an agent, prioritize those who demonstrate transparency. For example, an agent who openly discusses their commission structure and potential conflicts is more likely to act in your best interest (HAR.com). Additionally, be cautious of agents who:
- Rush you into decisions without providing clear explanations.
- Avoid answering questions about their relationships or compensation.
- Recommend the same service providers repeatedly without justifying their choices.
Conclusion
By understanding potential conflicts of interest and taking proactive steps, you can ensure that your real estate transaction is fair and that your interests are protected. Researching your agent, asking questions, and documenting agreements are key to maintaining transparency. A trustworthy real estate agent will prioritize your needs and disclose any conflicts upfront, helping you navigate the process with confidence.