Who Is My Client?

A Realtors Guide to Compliance with the Law of Agency

Part 5 of 7


From Section VI. UNDISCLOSED DUAL AGENCY: A BREACH OF AN AGENT’S DUTY OF LOYALTY: “An agent’s 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 agent’s 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 broker’s 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 agent’s undivided loyalty.”


“Without this comprehensive disclosure and each principal’s 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)