Part
5 of 7
From Section VI. UNDISCLOSED DUAL AGENCY: A BREACH OF AN AGENTS
DUTY OF LOYALTY: An agents duly of loyalty compels
him to refuse to accept any employment that would require him
to act contrary to, or in competition with, the interests of
his principal. Buyers and sellers of real estate are deemed
by law to compete with one another and to have adverse
interests. Accordingly, a real estate broker who acts as an
agent for both a buyer and a seller in the same real estate
transaction is a dual agent. A real estate broker who acts for
both the buyer and the seller and does not clearly disclose
his status to both parties and receive their informed consent
to the arrangement is an undisclosed dual agent. Undisclosed
dual agency is universally considered to be a breach of an agents
duty of loyalty to his principal.
Although disclosed dual agency relationships are technically
lawful, there are compelling reasons real estate brokers should
avoid creating them (and buyers and sellers should avoid consenting
to them). Courts are very strict concerning the degree of disclosure
necessary to make a real estate brokers dual agency lawful.
For example, a lawful dual agent must explain carefully to both
the buyer and the seller that he is also acting as a fiduciary
for the other party. The real estate broker must also ensure
that both the buyer and the seller understand that by consenting
to the dual agency arrangement, they each are forfeiting their
right to receive their agents undivided loyalty.
Without this comprehensive disclosure and each principals
informed, and preferably written, consent, the dual agency will
still be deemed undisclosed and therefore unlawful. Dual agency
is a totally inappropriate agency relationship for real estate
brokers to create as a matter of general business practice.
The disclosures and consents necessary to make a dual agency
lawful are so comprehensive and specific that a typical real
estate broker cannot undertake them as a matter of routine.
(Continue To Part 6 of 7)