Double Commissions and Dual Agency in Real Estate Transactions

Dual agency in real estate occurs when one agent serves both sides of the same real estate transaction, often earning a commission from both parties. The practice of one agent “brokering” a deal between two sides is a normal, common behavior in real estate markets around the world. There are pros and cons to dual agency property sales: The commissions in dual agency transactions provide incentives that can enable deals that would not happen otherwise; on the other hand, dual agency can also create conflicts of interest.

In this article we will help define dual agency. We will provide some references to the topic from multiple real estate markets around the world, including the United States, the UK, and examples of dual agency in Japan. We’ll show you when dual agency causes trouble for buyers or sellers of real estate. And we’ll also talk about why dual agency is seen as a good thing by many buyers and sellers, and show when dual agency can be beneficial.

Explaining Dual Agency, Pocket Listings, and Off-Market Real Estate Transactions

Dual agency is when one agent provides advice or assistance to both sides of the same real estate transaction, typically earning a commission from both sides. Another term for “dual agency” is “double-ending” the transaction. In dual agency deals, the agent commonly doubles the commission they might otherwise earn if they were representing only one side of that deal.

Terms like “off-market” and “pocket listings” are common when discussing dual agency.

Dual agency can occur in real estate markets where properties are advertised for sale or listed on a multiple listing service (MLS), but the practice of one agent serving both sides of a purchase is more common in off-market real estate transactions.

When a property is not announced to the general public, but is sold in a private transaction, those transactions are considered to be “off-market” real estate transactions.

Off-market listings can lead to more dual agency transactions, as the agent may actively advertise the property only to his or her clients. While not illegal, the practice can be problematic if the prospect of a double commission is the reason an agent suggested an off-MLS listing.
— From the book Real Estate Transaction in Japan

When a real estate broker knows of a property that is potentially for sale, and that property is not included on local MLS systems or advertised on real estate portal sites, that listing is said to be “in the pocket” of that agent; otherwise known as a pocket listing, a quiet listing, a private exclusive listing, or an off-MLS listing.

Double Commission for the Agent in Dual Agency

Real estate agents can accept requests from both sellers and buyers. Although there is a legal cap on the remuneration that licensed real estate agents can receive from their clients… they are allowed to receive double the remuneration.
— From Real Estate Transactions in Japan

Dual agency in real estate transactions is common, in large part, because real estate agents can earn more commission than if they only represent one side. This double commission in real estate is a powerful incentive.

In cases like financial advisory, we are not on solid ground until we know, in some detail, the compensation arrangement our advisor is under. What does the knowledgeable advisor stand to gain from our purchase?
— Shane Parrish, from his book The Great Mental Models

If you understand that real estate agents and brokers have powerful incentives to close deals, and especially so when the commission could double, you can begin to see why agents want to create dual agency deals, and can begin to explore when and why dual agency might be good or bad for the sellers and buyers in those deals.

Examples of Dual Agency Real Estate Transactions

An agent that brings together a buyer and a seller is potentially providing a service to both parties, and creating a transaction that might never happen otherwise. In as far as real estate agents enable transactions, dual agency can be a very good thing.

For an example: Imagine a buyer that is looking for a certain kind of property. That buyer knows some local agents in the area, and communicates with them regularly about what kind of property they want. An agent meets the owner of a property in the community, and that agent asks the owner if they might consider selling the property. The agent learns what the owner might accept for the property, and contacts the buyer to explain the opportunity. The agent brokers the deal, and the sale closes – often quite quickly, with minimal external fees, and almost no work for the seller. The agent collects a commission from both the buyer and the seller.

These kinds of off-market deals are often based on personal relationships between owners, buyers, and agents in a given community. Properties never become publicly available because finding a buyer (perhaps several) within the local network is easy, and advertising the property is not necessary (or desired). The agents that put these deals together are particularly motivated to do so by the extra commission from dual agency.

On the other hand, when a real estate agent represents two sides which have very different needs, conflicts of interests are created; there is sometimes tension between the competing needs of the buyer versus the needs of the seller. Sometimes when an agent provides dual agency to clients with divergent goals, one or both sides of the transaction may suffer. When the agent is in pursuit of a big commission, the agent may be incentivized to ignore or neglect those conflicts.

Alternatives to Dual Agency

The common alternative to dual agency is when the buyer and the seller each have their own agent. This is a very common arrangement in real estate. Particularly in residential real estate in the United States; two separate agents – a buyer’s agent for the buyer, and a seller’s agent for the seller – is the most common arrangement.

Because the buyer and the seller in a real estate transaction have different goals and objectives, it is often a good idea to have separate agents. The buyer’s agent can show the buyer a range of property, and can often confidently say what is wrong with a given property; because they will earn a commission on any transaction, they can be honest about the qualities of a property that is for sale. A seller’s agent that does not also represent the buyer can argue for the best price or better terms for the seller.

There is less conflict of interest when each side has their own agent.

While it is often arguably better for each client to have their own agent, that is not always so. In many cases, the constructive nature of dual agency transactions, particularly in off-market transactions, creates real benefits for both buyers and sellers.

When is Dual Agency Good for Buyers and Sellers?

When one agent can create special access for buyers and better selling conditions for sellers, that agent benefits both parties and creates value for the local real estate market.

Dual agency itself is not necessarily good for buyers or sellers in a property transaction. Because dual agency provides larger commissions, the incentive of more money can motivate some real estate agents to work hard to set up deals that might not otherwise happen. Very often, particularly in off-market real estate sales, the transaction is personally created by agent; that agent works within their network of personal contacts to bring the buyer and seller together.

[A] startling amount of real estate deals happen ‘off-market.’ Real estate changes hands without ever being officially ‘listed’ with anyone.
— Anton Wormann, from Free Houses in Japan

Real estate agents and brokers can help buyers gain access to off-market property, or can create early access to property, helping to avoid the competition in more traditional open-market transactions (where the property was listed on the MLS). In these dual agency deals, that agent isn’t trying to help the buyer find “the best property” in the area, but is offering that buyer special access to unlisted properties that are potentially of value to that buyer.

The good deals are sold off-market.
— Alicia Qin Wang, Axolotl Capital

Real estate brokers and agents can help sellers via dual agency, as they take a property that is not ready to be marketed via the MLS or other online property listing websites, and personally find a buyer for that property. These sales may not create the highest possible purchase price for the seller, but are faster, easier, and more private. Off-market dual agency transactions can be completed in just a few days, particularly when the agent brings together two trusted parties.

Fast, off-market deals are common in “cash for homes” real estate sales. In these sales, many of the fees that are paid to prepare a property for sale, including fees for advertising the property, can be eliminated, saving the seller money.

While buyers and sellers rarely ask for “dual agency” property sales, they often seek out off-market transactions, which are typically done via a dual agency commission structure for the agents that can put those deals together. We provide more examples in our article about off-market property in Japan.

The agents that can put together these deals do get larger commissions, and that is often a good thing – they provide an excellent service to both sides of the deal.

When is Dual Agency Problematic for Buyers or Sellers?

As we stated earlier in this post, the fundamental problem that can affect dual agency property sales are conflicts of interest that occur when the agent encourages a buyer and seller to trade a specific property, even when there are better properties, lower prices for the buyer, or buyers that might pay the seller a higher price.

There are other potential problems with dual agency, separate problems for buyers and sellers of real property.

Sellers can face many disadvantages when their property is an off-market “pocket listing” in a dual agency transaction.

Pocket listings generally have been perceived as benefiting the listing firm more than the client.
— NAR: Clear Cooperation LEGAL ANALYSIS

When a real estate company tries to sell a property in an off-market transaction in an effort to earn a commission from both sides, sellers often experience: Fewer buyers (because the property’s availability is not widely known), longer sales cycles (less advertising for the property means it can take longer to find a buyer), higher holding costs (if the sale takes longer, the seller may have to pay property taxes and other costs while the property remains unsold), and lower sale prices (less advertising often means fewer buyers, less competition, and lower sales prices for sellers).

In some cases, when an under-marketed property is not sold quickly, the agent or real estate company may offer to buy the property themselves (at a below market rate), and resell it (often with no improvements) on the open market.

Buyers can potentially be disadvantaged by dual agency as well:

It is about redirecting buyers away from their chosen agents and forcing them to work with the exclusive listing agent, who controls all information and access to the property.
— Art Carter, CEO of CRMLS, from Real Estate News

Some buyers in dual agency property deals experience the conflict of interest as the agent won’t point out problems with the property, won’t encourage the buyer to negotiate on price, and won’t take the buyer to see other properties.

In other cases, when a seller’s agent is intent on dual agency, because they don’t want to share the commission, they may refuse to work with buyers that bring a buyer’s agent into the sale. Buyers can be excluded from the deal, as the seller’s agent fails to return phone calls, or ignores offers to buy the property that would require the agent to share the commission.

If a property is advertised and another broker brings a buyer, then the commission would need to be shared. But if the broker finds their own buyer and represents both the buyer and the seller, they keep the whole thing. So there’s a pretty strong incentive to sit on the listing for a while.
— Brian Murray, from the book Crushing It

In Japan, there are explicit rules that attempt to address the problem of seller’s agents denying access to buyers that bring a buyer’s agent into the transactions.

[You can be fined for] declining an inquiry for details about or a visit to a listed property, without a proper cause.
— From MLIT’s rules for agents using the REINS multiple listing service in Japan

Dual Agency in Japan

Dual agency is used by agents around the world, but seems to be especially common in Japan. While there are benefits and advantages to off-market property and some dual agency transactions, the Japanese real estate market experiences many problems from the aggressive use of dual agency in Japanese real estate sales.

It is believed that the dual agency system, unique to Japan, where real estate agents can receive commissions from both the seller and the buyer, also has a negative impact.
— Kinji Sukeno, from the book 2025 Winning Strategies for Japan Real Estate

Dual agency is not unique to Japan, but does seem to be an especially common strategy for Japanese real estate agents.

Many of the problems with dual agency in Japan are not related to un-advertised “pocket listings,” but begin when a seller’s agent avoids listing a property on REINS (which would attract clients with buyer’s agents), but instead lists the property on a commercial Japanese real estate listing website; the agent will attempt to attract buyers that do not have an agent to an online property listing, and then represent both the seller and the buyer, and create a double commission via dual agency.

While many buyers appreciate the convenience of being able to look at property in Japan online, they often underestimate potential problems that occur when they do not have their own buyer’s agent. When a buyer contacts an agent based on a property that was listed online, that agent is then highly incentivized to get that buyer to buy that specific property; even if better properties are available (which they commonly are).

If a buyer even mentions that they are working with a buyer’s agent, some Japanese real estate brokers stop communicating, or refuse to cooperate with another agent on the transaction.

There is a term in Japanese for “hiding” a real estate listing from other agents; in Japan that is called kakoikomi (囲い込み), which means roughly to “hoard the property,” which is very similar to the concept of a “pocking listing.” When a Japanese real estate broker engages in this kakoikomi practice, it can cost the seller time and money; a property that could sell quickly instead lingers for weeks or months, because it is intentionally under-marketed, or active buyers with their own agents are turned away.

While professional investors are actively seeking property that will never appear on online property websites in Japan, many of the dual agency transactions in Japan are literally advertised and not especially valuable; thus there is no benefit to the dual agency. For most residential property in Japan, particularly “used homes” and condominiums/mansions, there is rarely a good reason to accept a dual agency condition – buyers should have their own, independent agent.

Dual Agency in the United States and the UK

While dual agency is not inherently immoral nor illegal, in some real estate markets around the world, the local real estate communities are moving to discourage off-market real estate sales and/or dual agency.

The practice of pocket listings, or pre-MLS or off-MLS listings, has grown in recent years, according to NAR. Pocket listings can generate more money for a brokerage — or even an individual agent – if the buyers and sellers are both represented by the same company or by the same agent, known as dual agency.
— Michele Lerner, The Washington Post (2019)

In the United States in 2019, the National Association of Realtors® (NAR) created the Clear Cooperation Policy, with specific pressure to force real estate agents to put their listing online on the local MLS systems in the US. When real estate associations force their members to list real estate online, dual agency becomes much less likely.

In 2018, the Royal Institution of Charted Surveyors (RICS) banned the practice of dual agency for their members in the UK. Agents in that association can be fined for attempting to double-end a real estate transaction. However, most residential sales in the UK begin as the buyers find the listing online, and then works with the seller’s estate agent to close the deal. Those deals are not expressly “dual agency,” but the buyers rarely have their own representation.

Advice for Sellers in Dual Agency Transactions

Real estate investor David Lindahl both encourages participation in off-market deals (especially for buyers), and cautions against limited marketing of a property as you sell.

When we are selling… we want competition. Good brokers will do this by preparing a call to offer. They will create a property package and send it to their entire list. Some offices work together and send it to everyone’s list in that office. As a seller, I like for the broker to go through this process. It’s usually when I get my highest price.
— David Lindahl, from the book Multi-Family Millions

Dual agency can sometimes lead to lower purchase prices for the seller. When a seller specifically requires the seller’s agent to create a “call to offer,” and to distribute that call to offer to their network, some competition and multiple offers may help bring the seller a better price.

Consumer Consent in Dual Agency and Off-Market Transactions

While dual agency can provide incentives to agents that create valuable private sales of real estate, potential problems with the practice of dual agency are easy to recognize. When a local real estate market wants to increase the understanding for buyers and sellers, they can require local real estate agents to specifically explain the concept of dual agency to their clients.

A brokerage which has a company policy that permits disclosed dual agency for in-house transactions shall provide a disclosed dual agency consent agreement to the client or prospective client prior to engaging in any activities of a dual agent.
— Iowa Rules & Laws for Real Estate

In some markets, the local government or the real estate associations have rules where an agent must disclose risks and hazards associated with dual agency or off-market property, and then require the client to sign a disclosure. In those instances, the benefits of off-market real estate are still available, while the client can be more aware of their choices and the inherent problems that come with dual agency.

Hiring a Local Japanese Real Estate Agent

It is almost always a good idea to hire your own real estate agent when you buy or sell property. If you’re interested in off-market properties, the first step is to talk to local real estate agents. When off-market, dual agency transactions are possible, your agent will likely find a property that is not listed online, or sell you a property they already represent.

For introductions to local real estate agents in Hokkaido, contact us, we are happy to help. Our services are always free to you.

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For More Information:

— See our piece about various Taxes in Japan
— Our detailed Guide to Paying Property Taxes in Japan
— We provide a list of Sapporo Tax Offices
— In Hokkaido, there are areas with special rates for property taxes
— Our review of the role of Property Management Companies in Sapporo
— Buying Property in Hokkaido as a Foreigner
— Our list of Tax Accountants for Expats Living in Japan
— Our complete guide for Buying a House in Sapporo
— Our report on How to Rent an Apartment in Sapporo and Move-In Costs for Sapporo Apartments
— Find Lawyers in Hokkaido
— Tax representatives in Japan

See also:
— A guide to the concept of Domestic Contacts in Japanese Real Estate
— Off-market Properties in Osaka