Dual Agency and Why it Matters
What is Agency And What Is A Fiduciary? An Agency (Fiduciary) Relationship is created when a Seller signs a Listing Contract or Buyer signs a Buyer Agency Contract with a licensed Agent. It is the same relationship you likely have with your Attorney. The Client is owed the duties of Care, Confidentiality, Loyalty,
Obedience and Accounting. This is a very serious legal responsibility.
When Does Dual Agency Happen And What Is The Problem? It occurs when the Seller and the Buyer of the property each have Agency Agreements signed with the same Licensed Real Estate Agent. The problem is that it sets up the “opportunity for conflict of interest” such that the Agent’s interest and needs might take precedence over those of the Seller or Buyer. It also diminishes the Fiduciary relationship because the Agent is no longer exclusively devoted to the interest of one Client or the other. The potential exists for the interests of one client to be favored over the other, even if unintentionally or inadvertently.
The PA Consumer Notice very clearly specifies that a Seller Agent or Buyer Agent works exclusively for the Client. But you can’t have it both ways folks. The Notice also specifies that a Dual Agent works for both the Seller and the Buyer. A Dual Agent cannot do any harm to either party – meaning the Agent can give no guidance or engage in any conduct that “might not” be in the best interest of either party. Therefore, both Seller and Buyer must consciously accept this change to exclusivity in writing.
PA law permits the practice of Dual Agency. Truth be told, many Agents like it because they make considerably more money when they have “both sides” of the transaction and don’t have to split a commission with a separate Agent. On the other hand, Dual Agency is forbidden in 8 states essentially because it is deemed an unfair practice that potentially compromises the integrity of Agents and the transaction.
All parties to a transaction, whether Agents, Sellers or Buyers, want the same thing – the best possible price, terms and conditions. But “the best” is rather different depending upon whose shoes you are filling. In Dual Agency the task is no longer clear cut and the potential for problems is higher.
I am no Attorney so I cannot offer a legal opinion. But my personal opinion as a Broker is that Sellers and Buyers should have their own unique and separate representation. Buyers often think they can gain an advantage of “insider knowledge” if they contact the Listing Agent (Seller’s Agent) directly. That simply isn’t true. That Agent may initially know the property better than anyone else, but they cannot divulge anything not in their Client’s interest. Further, Seller Disclosure laws ensure that any material issues regarding the property must be completely and openly disclosed to all parties.
RECOMMENDATION. For Sellers, tell your Agent you don’t think Dual Agency is in your best interests. For Buyers, hire your own Agent from day one to represent your best interests exclusively.