The Dual Agency Dilemma

In the states that allow it, dual agency (where the agent/broker represents both the buyer and seller in a single transaction) is something many agents may welcome when they list a property…  after all, it makes for a double paycheck. But is it truly advantageous to the buyer and seller to work with the same agent, and what are the potential legal ramifications in doing so?

All agents have a fiduciary duty to their clients. This means that we have a duty to act in the best interests of every client.  As a listing agent the duty is to market the client’s home in the best way possible, and to negotiate the best price possible for the client. The agent is normally privy to quite a bit of information, such as the lowest price a seller will accept for the sale of his property, or financial information that explains why the seller cannot pay for repairs.

A buyer’s agent also is privy to information about the buyer, such as the buyer’s bottom line as to how much they will or can afford to pay for the home, or what they may need to ask of the seller to make the sale come to fruition.

An agent who represents both sides of a home sale will undoubtedly possess information that could be conflicting when it comes to negotiating price or repair issues. How then does the agent properly represent both parties? In a lawsuit an attorney cannot represent both the plaintiff and the defendant—clearly it would be impossible to act in the best interests of both parties. So what makes a real estate transaction any different, and what are the legal ramifications of dual agency should something go wrong?

Although states like California require paperwork acknowledging dual agency (and the potential for such) for every sale, the potential for liability down the road still exists. If an agent is found to have breached his fiduciary duty to the client the contract can be rescinded, the parties restored to their positions before entering into the contract (including returning all deposits to the buyer), and the home can be returned to the seller. Any commissions paid to the agent/broker can be ordered returned, and if the party she represented suffered damages the brokerage or agent can be help monetarily responsible for those damages.

Dual agency disclosures are not completely fool-proof in preventing a lawsuit. This is an issue that has drawn much debate from brokers, attorneys and others in the industry. It is something we need to continue to explore and be aware of within the real estate industry.