The Real Estate Agent’s Temptation “Dual Agency”

When I entered the commercial real estate business in 1972, I quickly discovered that you could earn twice as much money by representing both sides of a transaction. When I received a listing in my early years, I remember that I hesitated placing it on the Multiple for a day so I could call all of my prospects and canvass the neighborhood. Not only was it the thrill of earning twice as much money from your hard earned efforts, but it demonstrated to the owner that you were on top of your game if you were successful in bringing a buyer/lessee to the property.

Fortunately for me, I worked in a smaller firm at the time and was well supervised by very senior associates. My colleagues would always review my files and would ask me to document everything including a summary of conversations. My files became meticulous and I was able to stay out of trouble.

The AIR, the Multiple listing service, was famous for its arbitration panels which were chaired by senior members of the AIR with substantial transactional experience. I was able to see firsthand the kind of disputes, as President of the AIR, that placed agents in serious trouble. Most of the disputes were regarding agent disputes involving commissions and dual agency disputes. The dual agency disputes centered around agents not disclosing actual knowledge of information that should be disclosed to all parties.

There have been hundreds of articles written regarding dual agency and rightfully so. It is the “slippery slope” of representing both parties with equal representation and loyalty. I just completed an expert witness case and the issues in the case were quite apparent from the beginning. Those issues were “full disclosure of material facts”, “loyalty”, “integrity”, “duty of good faith” and honesty. It is the “fiduciary duty” of the agent to act in the best interests of both parties and not to violate that duty to the best interests of the agent.

It is always necessary for the agent to disclose all material facts of the property as soon as they are known. Further it is imposed by law that the agent investigate all known facts or facts that should have been known by the agent. Some of the most common disclosures are that blood relatives acting as buyer or seller in the transaction, soil conditions, title reports that should be updated throughout the transaction, known documents that are not recorded in a title report, financial conditions that may change during the course of the escrow that affect the parties desire to purchase the property and boundary disputes.

The agents desire to represent both parties in a transaction clearly place the agent in a position of a conflict of interest with potential adverse affects to all parties.

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