DUAL AGENCY AGREEMENTS FOR THE PURCHASE AND SALE OF HOMES
In the sale of residential real property (houses) the parties consist of a buyer and a seller. Each will typically employ a broker to act as their agent to perform brokerage services. The relationship which results is governed both by contract law based upon an employment agreement and agency law. The broker also has other obligations required by statute, such as requiring that the broker make specific disclosures to their clients and other parties to the transaction.
As fiduciaries, real estate agents must act in the "highest good faith" toward their principals and may not obtain any advantage over the principal in any transaction arising out of the agency relationship. They must make full and complete disclosure of all material facts that might influence their principal's decision to enter into a transaction. Under agency law, a real estate agent's breach of fiduciary duty may forfeit the right to a commission for even properly performed services.
A "dual agency" or "dual representation" arises where the same salesperson, or same brokerage firm, through different salespersons represents both buyer and seller. This scenario raises one of the most serious problems in the real estate brokerage field . . . because a broker who is agent for both buyer and seller is put in the difficult (if not incongruous) position of being a fiduciary to parties who have directly competing interests. Nevertheless, under narrowly defined circumstances, the law permits such dual agencies:
A real estate agent's fiduciary duty to faithfully represent the interests of his or her principal includes the duty to make full disclosure of adverse interests. This is both a common law and statutory duty . Thus, a broker may properly act as "dual agent" for buyer and seller only with both parties' informed consent.
Brokers violate the real estate licensing law, and risk discipline, damages liability and a loss of compensation, if they act for more than one party in a transaction without the knowledge and consent of all parties thereto. Listing and selling agents for residential real property must provide the seller and buyer with a statutory written disclosure statement. The statement makes certain disclosures about the agent's fiduciary duties to the parties and about which party or parties to the transaction the agent is representing.
The statutory form includes a section describing the effect of a "dual agency" and explaining that the broker/salesperson can legally act as agent for both buyer and seller in a transaction only with the knowledge and consent of both buyer and seller. The agent must disclose all facts which would reasonably affect the judgment of each party in permitting the dual representation. The statement must be provided to the parties early in the transaction.