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Dual Agent: A Misunderstood Concept

Written by on Monday, 25 November 2013 2:27 pm

Is the real estate agent you are working with representing your interests? Is she your agent? Is he a designated agent? Is she a dual agent? Do you know, and more importantly, does your agent completely understand his/her role?

For many years, the agent represented only the seller. If you were selling, you would list your home with a real estate broker - called the "listing agent". If another broker/agent found a potential buyer who entered into a sales contract, that agent was the "selling agent".

Today, however, there are many forms of agency:

single agency: the agent represents either the seller or the buyer, but not both in the same transaction;

designated agency: (also referred to as "designated representation"). Here, the seller has a listing agreement with a broker and the buyer has an agreement to be represented by another agent/broker - but who is affiliated with the same real estate company.

Brokers and agents in the Washington metropolitan area are required to provide disclosure of their role to prospective clients. If there is a designated representation, all parties are put on notice that the agent must not disclose information obtained in confidence to other parties in the transaction.

Dual representation: (also called dual agency). Here, the agent represents both the seller and the buyer. According to the District’s disclosure form, "the ability of the licensee (the broker) and the brokerage firm to represent either party fully and exclusively is limited. The confidentiality of all clients must be maintained."

This is the area of real estate brokerage that is extremely confusing. According to a survey compiled this year by the National Association of Realtors, many agents who responded do not understand dual agency, cannot explain it to their clients and in fact do not provide the State required disclosures.

In Maryland, although the disclosure forms use the term "dual agency", in fact it really is the same as the District’s "designated agency". The form that potential clients must sign states "if all parties consent in writing, the real estate broker ... (the "dual agent") will assign one real estate agent affiliated with the broker to represent the seller... and another agent affiliated with the broker to represent the buyer..." Agents in Maryland are not permitted to represent both buyer and seller.

Virginia has a new law which will take effect July 1, 2012. It is a comprehensive approach to enhance the agency relationship disclosure requirements between agents and those they represent. Accordingly, single dual agency is permitted, so long as the agent has provided the potential client the written consequences of such practice and obtains the written consent of the client.

What does the agent have to disclose?

  • the agent will be unable to advise either party as to the terms, offers or counteroffers;
  • that the agent cannot advise the potential buyer of the suitability or condition of the property;
  • that the agent will be acting without knowledge of the client’s needs, or experience in real estate, and
  • that either party may engage another agent if either requires additional representation.

The question then becomes: why should I - as a potential buyer or seller - agree to a single dual agency arrangement? What’s the benefit to me?

Recently, the New York Office of General Counsel issued a memorandum entitled "Be Wary of Dual Agency". The memo cautioned consumers that "by consenting to a dual agency, you are giving up your right to have your agent be loyal to you, since your agent is now also representing your adversary. Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent, because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests."

And, while most agents are honest, there is always the possibility that what you tell the agent will get back to the other side.

Many brokers - and legislators who allow dual agency - believe that it is not a problem so long as buyers and sellers are fully informed and sign a written disclosure form. But in my opinion, that is not the real world. Buyers get excited about a new house and do not pay attention to the various documents they sign - including the real estate sales contract. Similarly, often the issue of dual agency arises only after the seller has signed the standard listing agreement ; the seller’s broker suddenly finds a potential buyer who is not represented by counsel or by another agent.

My advice to buyers and seller. While I have serious reservations about the designated agency arrangement, I can live with it since there are at least two agents involved - one representing the buyer and one the seller - albeit from the same brokerage company.

However, I cannot under any circumstances recommend anyone to engage in a single agent dual agency agreement. You will not be properly represented - which has been the hallmark of american real estate agents for years.

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  About the author, Benny L. Kass

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.