ProSchools offers a
prelicense real estate course, covering the various types of agency that can be established between a real estate agent and his clients. A new real estate agent needs to fully understand dual agency as this is can become an area of conflict and potential legal trouble.
Dual agency occurs when a real estate agent represents both the buyer and the seller in the same real estate transaction. A real estate agent has a duty of confidentiality, loyalty and full disclosure to his clients. If both the seller and buyer consent to dual agency, it is necessary to limit these duties and the agent shall be a limited agent for both the buyer and seller. Make sure to really study dual agency in your
ProSchools course. Another great resource for information on dual agency is
RealEstateLawyers.com.
In Oregon and in other states, to avoid agency conflict, an agent must give a prospective client a Disclosed Limited Agency pamphlet. Check with your state’s licensing laws and with your principal broker. This pamphlet demonstrates the different types of agency: Representing a buyer, representing a seller and representing both a buyer and a seller at the same time. Both the buyer and seller must consent in writing before an agent can represent both sides of the transaction creating dual agency.
Listings are taken on behalf of the principal broker, so dual agency still exists when two agents in the same branch represent both parties on the same transaction. The only way to avoid dual agency is to hire an agent outside the branch. Many brokerages allow dual agency as the branch will earn commissions on both sides of the transaction.
A dual agent must not disclose the following:
- What a buyer is willing to pay for the property over the asking price.
- That the seller is willing to take less than the asking price on the offer.
- What the motivating factors are for either party.
- The terms and conditions of any other offers made on the property.
- Confidential information from one party to the other party unless it is required by statute, rule, or regulation or failure to disclose would result in misrepresentation.
Many new agents like to represent both the buyer and seller in a transaction to make more money, mediate the terms of the sale and build their client base with both clients. Before engaging in a dual agency transaction, you should talk to your managing principal broker to see if dual agency is allowed in your office.
Experienced listing agents will hire a buyer’s agent and refer their buyer leads to their buyer’s agent and split the commission on the buyer side of the transaction with the listing agent taking a higher percentage of the commission. The listing agent will also receive the full commissions from the listing side.
Legal problems can arise in dual agency. The question arises, how can a single agent truly represent both sides of a real estate transaction if a conflict arises? The agent can mediate and try to keep both sides happy and close the deal, but what happens after the closing if the buyer decides he was misrepresented and feels he was manipulated into closing and the agent gets paid on both sides of the transaction? The home may have issues that were not disclosed by the seller or minor details overlooked by the agent that could turn into major legal issues later. It is always best if the buyer and seller each have their own representation.
Here are some steps an agent can take to avoid dual agency:
- Give the buyer a Disclosed Limited Agency pamphlet and review it with him.
- Explain to the buyer that you represent the seller only.
- Advise the buyer to find his own representation.
- •You can make a referral to an outside agent (and collect a referral fee).
- •Talk to your managing broker and find out your branch policy on dual agency.
Whatever you decide, make sure that every step of the way you are acting ethically and in the best interest of your clients.