Dangers of Dual Agency: Walking the Tight Rope

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dual_agencyWhen a Broker represents both the buyer and seller in the same transaction, there is the potential for Dual Agency to exist. More specifically, dual agency is created based on the involvement of the affiliated licensees of the broker.

When the buyer and seller are represented by the same broker, but different licensees respectively, the relationship is known as a Designated Agency Relationship. In the event there’s only one sales associate involved in the transaction and the brokerage only represents one party, there’s no risk of dual or designated agency.

There’s a common misperception that exists in the industry: If I sell my own listing, it’s always dual agency. This is simply not always the case. You can sell your own listings and not be in a dual agency situation. When selling your own listing, a dual agency scenario is based on there being a BBA with the buyer (with you as the agent) in addition to the Sellers Listing agreement signed (with you as the agent).

As you can see the basic premises of the situation can be challenging to understand. Thus far we’re only addressing paperwork. When dual agency exists, there are various dangers that arise with some of the actions taken by the agent.

Let’s examine a couple.

  1. The agent is responsible for protecting the best interest of two parties in the same transaction where the parties may have opposing interests. Example: The buyer wants the property purchased at the lowest price possible and the seller wants the property sold for the highest price possible. This tug of war may create a nightmare for the agent during negotiations.
  2. The buyer asks “Will the seller take less than the listed price?” or the seller asks “Will the buyer pay more than the current offer?” The agent owes their highest loyalty to the party that is being represented. When the agent mistakenly answers the question posed about the contract price, they risk damaging the other party whom they also represent. When the damaged party realizes the agent had a role in their inability to get the price they wanted, there will always be problems.
  3. If the seller requests confidentiality regarding any matter of the transaction, and the buyer specifically raises a question regarding this very matter, the correct answer that the agent should give is “The answer to this question is protected under a confidentiality agreement.” Don’t be surprised if the buyer (whom you represent) finds this to be a less than acceptable response.
  4. Undisclosed Dual Agency is a huge problem. Many agents fail to properly educate the clients on the agency laws and their company’s policy. Often the agent interacts with the party and later attempts to make the interaction more formal by introducing the agency discussion. Unfortunately, the agent has already begun to “Represent or Not Represent” the party. It’s hard to undo many of the actions taken or precedencies set. Agency determination must be established as early in the working relationship as possible.

When handled properly by the agent, Dual Agency will be tough at a minimum and when there are mistakes made by the agent, it could result in a total disaster for the transaction, buyer, seller, agent, and broker. There are countless disputes that escalate to legal matters whereby more clearly defined working relationships could have assisted with more peaceful resolutions.

Dual Agency is the fastest way to have clients bring the agent’s actions into question and unfortunately the answers to the questions usually further contribute to a more frustrated and injured party. Disclosed Dual Agency is legal in Georgia and when explained properly many customers/clients aren’t willing to proceed with full knowledge that they’re working with an agent that also has the opposing party’s best interests as their highest commitment.

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2 Responses to “Dangers of Dual Agency: Walking the Tight Rope”

  1. Tom Burke Says:

    When acting as the sole agent in a transaction I always try and get the buyer to agree to a designated agency with another agent in the office representing their interests or agree to sign a customer disclosure and explain to them the difference if they do not want to involve another agent.

  2. Frank Holden Says:

    Mathew 6-24
    “No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other.

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