This form is not an agreement; it is a disclosure. It disclosures the various natures of possible agency relationships, and it is important that you read it to be better prepared to select the type of agency relationship you want.
Buying agents who represent buyers are working in a single agency capacity as a buyer's agent. Seller's agents who represent sellers are working in a single agency capacity as a listing agent.
Agents who represent clients under single agency owe a fiduciary responsibility to the client. They cannot share confidential information with the other party or the other party's agent. Single agency agents must use care and due diligence to perform duties, disclose all material facts and be honest.
Buyer's agents and the buyer generally sign a buyer's broker agreement, which lays out the duties and obligations of the agent. In some states, if buyers do not sign a buyer's broker agreement with the agent, that agent does not represent the buyer but instead becomes a sub-agent of the seller. Sub-agents owe the same duties to the seller as the listing agent.
Seller's agents and the seller sign a listing agreement, which also lays out the duties and obligations of the agent. Listing agents and buyer's agents each owes the client loyalty, confidentiality and accountability.
Many agents work as buyer's agent with buyers and as a seller's agent with sellers. However, some agents work solely as exclusive buyer's agents and never, ever take a listing.
Dual Agency With Two Agents
Because all real estate agents are licensed under a real estate broker, it is possible to work with one agent who is licensed by the same broker as the listing agent. This situation creates a dual agency. The agents could work at separate offices and be strangers to each other, but since they are licensed by the broker, they are still operating under dual agency if one agent represents the buyer and the other represents the seller.
Starting out, an agent may have created an single agency relationship with the buyer, but when the buyer chooses a home listed by that agent's broker, the agent's relationship with the buyer changes. Not all single agents note the distinction. In the real world, most of these dual agents talk the talk of dual agency but continue to walk the walk of single-agency representation.
Dual agency must be agreed to in writing between the parties. Laws vary from state to state. In California, for example, exclusive buyer's broker agreements contain verbiage that allows dual agency, so most buyers don't realize their buyer's broker could be subject to dual agency. Only exclusive buyer's agents are never dual agents.
Dual Agency With Same Agent
A listing agent who also represents the buyer is a dual agent. Dual agents cannot operate in a fiduciary relationship with either party and must treat both sellers and buyers equally. They cannot share confidential information but they cannot give confidential advice.
A dual agent in California was sued by the seller because she told the buyer to ask for a carpet allowance from the seller. It is very difficult to obtain the highest and best price for the seller when the agent also represents the buyer. The dual agent cannot advise on home price nor terms nor negotiate on anyone's behalf.
Some buyers prefer to work solely with listing agents because they know the agent is receiving both ends of the commission, that is the listing commission and the buyer's agent commission. They feel the listing agent is motivated when a buyer makes a purchase offer to get that offer accepted. They might also ask the dual agent to further negotiate the real estate commission to increase the seller's profit on a low-ball offer.
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What is Dual Agency?A dual agent represents both buyer and seller in the same transaction. Although widely practiced, dual agency has come under increased scrutiny in the last few years for the following reasons:
- Buyers Misperception Of Agent's Role
Dual agency is commonly misunderstood. Some buyers may unknowingly confide in an agent with the perception that the agent is working with them as a buyers' agent. In fact, the agent does not legally represent their best interest but is actually working as a seller subagent as required by cooperation agreements with the listing firm or agent.
- Undisclosed, Unintentional Dual Agency
In dual agency, buyers are sometimes not aware that the agent working with them actually represents the seller as a subagent. This can lead to confusion. If the agent does not conduct him/ herself properly, their actions could mislead the buyer into thinking that the agent represents them. The agent must be very careful to not give the impression that he/she is working for the buyer. Improper conduct by the agent could result in the creation of undisclosed, unintentional dual agency.
In states that permit dual agency, a real estate agent (or firm) may not represent more than one party in the same transaction without the full knowledge and written consent of all parties.
Dual agency is most likely to occur when a buyer, represented by a buyer’s agent, wants to purchase a property listed by that same agents' firm. A dual agent must carefully explain to each party that the agent and the agent’s firm are also acting for the other party for whom they have the property listed.
- Examples of Dual Agency
Agent A has a contract to sell Homeowner Bs' home and he also shows potential buyers the home. (He represents both buyer and seller).
In this situation, both seller and buyer must agree in writing to this arrangement. The agent must carefully represent each party. (It is difficult for the agent to try and help the seller obtain the highest possible price for their home AND try to help the buyer obtain the lowest amount possible.
Agent A desires to show a potential buyer one of his own firms' listings.
Under the firms' relationship with the seller, this too can be considered dual agency. The agent must disclose that the firm represents both seller and the buyer.
- Practical Problems with Dual Agency
Buyers and sellers have conflicting interests - In a general sense, the real estate agent is obligated to serve the best interests of his or her principal. An agent representing both buyer and seller must be extremely careful to represent both equally and fairly. Under the common law of agency, if an agent chooses to represent both parties, this dual agency must be fully disclosed in writing and consensual by both parties.
Both parties lose "advocacy" for their best interests - By representing both client's (with conflicting interests), the agent cannot advocate or seek an advantage for either client. A dual agent must always remain neutral even if he/she has previously represented one of the parties exclusively and cannot show favoritism. Providing equal service to both clients may be practically difficult. Some states do not permit dual agency.
How does an agent handle personal information about a client? The dual agent may become aware of personal information that does not necessarily relate to the property but, if disclosed, could harm one party and benefit the another.
Example: Agent A lists commercial property for seller B with an offering price of $500,000. Seller B tells the agent that he is in need of cash and will take as low as $425,000 for a quick sale. In a morning staff meeting the next day at Agent A's firm, Agent A informs other agents of the buyers bottom line price and need to sell quick. Agent C (another agent with the firm) acquires a buyer who is interested in the property. (Agent A and C at this point become dual agents).
The above example creates a unique situation since under traditional agency law, Agent C must disclose the sellers bottom line. At the same time, the firm and selling agent are obligated legally to act in the best interest of seller B without disclosing personal information about the seller that might harm the sellers' bargaining position. One possible solution to the above dilemma is for the agent to include, in the dual agency contract, a provision that the dual agent cannot be liable to either party for refusing to disclose information the law does not require be disclosed and which could compromise (potentially harm) one party's bargaining position and benefit the other party.
- Key Issues In Dual Agency
Courts vary in their interpretation of what is acceptable and not all states endorse dual agency. Primary issues in determining equitable treatment in dual agency include:
Did the agent provide timely disclosure of dual agency and were the potential consequences of dual agency sufficiently explained to both parties? Generally, both clients must provide "informed consent" meaning that not only do they consent but that they sufficiently understand the agency relationship.
Did the agent treat each party equally fair and comply with his/her duties required under the laws of agency? Most importantly, a dual agent cannot favor one party over the other. All the disclosures in the world will not relieve the Agents' liability if he/she advocates for one client at the expense of the other. It is not yet clear by the courts whether the loss of advocacy (in dual agency) results in a reduction of the agent's "duty" to the client. Proper explanation and advance authorization by all parties in the initial agency contract is the critical factor.
1. Discuss with the agent how he or she plans to be fair to both parties.
2. Talk with some of the agent's past clients where dual agency was performed. Ask whether the clients felt the agent treated them fairly throughout the entire process, if the agent fully explained his or her role early on in the process, and whether the clients would recommend this agent to a good friend.
3. Get comparable prices of homes in that neighborhood from another real estate firm to ensure the property is not overpriced. (Companies usually provide this information for free.)
Interviewing Realtors? Ask other Realtors if they can sign this Bill of Rights
When buying a home, avoid dual-agency
