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Legal IssuesDual agency fraught with difficulty
If your practice permits dual agency but not designated agency, you may want to re-examine the reasons and determine whether your policy is in the best interest of your clients and your risk reduction practice.
While dual agency is inherent to your business, it can — and probably should — be minimized. Dual agency is fraught with difficulty. Licensees are expected to walk the center line without faltering. Designated agency allows the designated buyer’s agent and designated seller’s agent to retain their single-client advocacy. This is a natural practice that avoids claims of conflict of interest and perceived breaches of confidentiality.
Ask any buyer or seller whether he wants you to serve as his advocate, counselor and confidant in the in-house transaction where the other party is represented by another salesperson and you will invariably get a “yes.” The buyer or seller who hired you wants you to remain on his side even if the other party is represented by an agent in the same office.
Why is designated agency preferred over dual agency? Buyers and sellers select an agent with the expectation that the agent will be that advocate, counselor and confidant. Even when the other side of the transaction is represented by an in-house agent, the buyer and seller expect their respective agent to remain partial and not take on the passive cloak of dual agency. When a buyer asks her agent for advice on an amount to offer, she expects answers based on facts known and analyzed by the licensee (e.g., time on market suggests that we submit a low price, etc.). The same question asked of a dual agent might elicit a response to the effect that the salesperson is unable to give an opinion other than that the seller seeks the list price and any offer made will be communicated to the seller, who will determine its acceptability.
Perhaps the biggest problem with dual agency is that few adhere to the standards of a dual agent. In other words, when there are separate licensees representing the buyer and seller in an office that does not practice designated agency, the licensees may nevertheless act as “undisclosed” designated agents for their respective clients rather than take up the very difficult position of being a dual agent. Simply stated, it is very hard for an agent to resist being an advocate for the buyer or seller who selected him.
In the case of an in-house transaction where the buyer and seller are represented by different agents, designated agency prevents them from becoming dual agents (the broker, with supervisory responsibility for both the buyer and seller agent, is a dual agent). In the same scenario where the buyer and seller agents are not designated agents, then each is to be considered a dual agent to the transaction.
Dual agency is inherent to real estate practice because it is impossible to forecast the conflicts that may arise. While a law firm can check for potential conflicts when accepting a client by determining who is on the other side of the case, it cannot be done in real estate. When a seller lists with you, can you really predict whether the buyer will be represented by a cooperating office rather than by an agent in your own brokerage?
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Jim Goldsmith, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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Great – clear explanation , Jim. I hope 100% of licensees, especially BR’s read it and take appropriate action.
Jim, You make it so clear and simple to understand. Puts the consumer first just like Article 1 of the Code requires.