A dual agency real estate relationship exists when a real
estate agent or a broker represents both sides of a real estate transaction. By definition an agent is required to act as a
fiduciary towards their clients, however, under a dual agency scenario it is
virtually impossible to be a fiduciary for both a buyer and a seller in the
same transaction. “Fiduciary” is defined
by Black’s Law as a word derived from Roman law meaning, as a noun, a person or
entity, holding the character and position as a trustee, with respect to the trust
and confidence involved with candor and scrupulous good-faith towards their
principal’s affairs and property. A
fiduciary has duties to their principal involving good-faith, fair dealing,
trust, special confidence, and candor towards their principal’s interests. Fiduciary duties are imposed by law on real
estate agents and brokers.
The only way a seller can legally agree to a dual agency
relationship is when; 1) they have been provided a Dual Agency Disclosure
document; 2) have been fully informed as to all of the pitfalls and potential
problems associated with dual agency representation including being told the
relationship will be now be limited and no longer a relationship that they
should expect to exist; 3) have been advised to seek legal counsel; and 4) and
after all of this cautionary language has been disclosed and reviewed still
agree to the dual agency representation.
Several States Prohibit
Dual Agency Real Estate Transactions for Good Reason
For good reason several states including Colorado, Florida
and Kansas strictly prohibit dual agency transactions because it is incredibly
difficult to withhold confidential information about a seller or a buyer when
an agent is privy to such information.
Moreover, it is never in a seller’s best interest to allow their agent
to represent a buyer on their property.
The seller should insist that the agent refer the buyer to another agent
such that each party has equal and fiduciary relationships which will help
avoid conflicts that are inevitable in a dual agency transaction.
Potential Conflicts,
Issues, and Unknown Problems are Prevalent
The potential conflicts, disagreements, issues and parade of
horribles that can arise in a dual agency relationship are almost
infinite. The best practice for all
parties concerned is to have each party represented separately and equitably.
Buyers Asking For Help at
Open Houses Are Common
Finally, it is a common practice these days for a buyer to
walk into an Open House and tell the listing agent that they are unrepresented
and would like to have the listing agent represent them because they feel like
they would have an advantage or upper hand on other buyers. It is precisely this thinking that should
alert a competent and seasoned listing agent to refer this type of buyer to
another agent for representation because there are unreasonable expectations at
the outset of this relationship on behalf of the buyer. A seller who agrees to a dual agency
relationship should also have second thoughts and consider their own interests
first before they agree to this dual representation. Several of the reasons stated above should
give enough pause for sellers, however, those reasons are merely the tip of the
proverbial iceberg.
Best Practice:
As a listing agent with 23 years of experience and over 600 closed
transactions I always refer any potential buyer to another agent so I avoid this
conflict and maintain my primary fiduciary relationship with the principal who
hired me in the first place.
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