Dual Agency. What is it and why you need to understand it? Previously we spoke about the Agency Disclosure form and why it’s important to read. At that time we covered regular agency situations. That’s where the agent knows only one party to the negotiations.
Dual Agency
In Dual Agency the agent involved knows both parties well enough to sway the negotiations. For instance, you are the agent selling your best friend’s property to another good friend. You know the facts about both. You know how much the buyer is actually willing to spend. Why one is selling and the other is buying. Is the seller a motivated seller and why?
Undivided loyalty no longer exists. You have confidential information about both parties. To disclose this information to one and not the other is unethical so what do you do?
The Dual Agency Rules
- First, the moment a Dual Agency exists, the agent must tell the broker and all principal parties.
- Second: All negotiations are immediately suspended.
- Third: The broker will arrange a meeting with all principal parties. At this meeting, a new agency disclosure form is presented. The rules about dual agency are discussed.
Your Options
Dual Agency has options for the parties. These are to be considered carefully. There are important pros and cons to both.
Option 1
Under this option, both parties agree–in writing–to allow the agent to continue to represent both of them. Knowing full well that the parties are “giving up their rights to undivided loyalty”. With the surrender of undivided loyalty, other items are at risk. It is now fair for the agent to divulge any confidential information.
Don’t like this one, well there is Dual Agency with Designated Sales Agent.
Option 2
The parties agree in writing to allow the broker to pick representatives for both. A sales agent to represent the buyer. The other to represent the seller. The broker supervises the two agents.
The designated agents work only for the party they represent. But, consider the following. And I quote. “A designated sales agent cannot provide the full range of fiduciary duties to the buyer or seller. The designated sales agent must explain that like the dual agent–the broker–under whose supervision they function cannot provide undivided loyalty.”
Explanation
Undivided loyalty is one fiduciary responsibility. There are others that make up the full range of responsibilities. The above statement indicates that some of the fiduciary responsibilities cannot be provided. Not just undivided loyalty.
As you can see Dual Agency can be somewhat sticky. It should be entered into very–I cannot stress this enough–very carefully.
Impasse
Question, what happens if one or both parties don’t agree to Dual Agency? The answer is simple, all negotiations end. No real estate transaction is possible.
And going to another agency does not solve the problem. The person who knows both of you is still in play. Both parties start over from scratch.
Confusing you bet. As a Realtor, I took a full day’s course learning this stuff. Don’t get me started on how long it took for the agency disclosure to be written and revised time and again.
Disclaimer
Disclaimer: I am not a lawyer and nothing stated here is legal advice. This article applies to the five boroughs of New York. All information is deemed accurate but not guaranteed. Always check the real estate laws in your part of the country.
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