“Dual agency practiced by one agent is always a conflict of interest for the agent even if legal dislcosure is made.
In a designated agent situation, the principal broker is by law acting as a dual agent and is in a conflict of interest position even if legal disclosure is made.
Virginia law requires disclosure of dual agency but our Code of Ethics requires â€œinformed dislcosureâ€. Though this phrase is not defined it does appear to place a further obligation on an agent to make some type of explanation of the consequences to seller or buyer accepting dual agency. It doesn’t go far enough in my opinion.
Unfortunately, the laws in our state regarding dual agency (including designated agency) do not require an agent to specifically disclose to either seller or buyer the number of ways in which his â€œrepresentationâ€ of them will change once dual agency is invoked by him or his broker.
A. Upon having a substantive discussion about a specific property or properties with an actual or prospective buyer or seller who is not the client of the licensee and who is not represented by another licensee, a licensee shall disclose any broker relationship the licensee has with another party to the transaction. Further, except as provided in Â§ 54.1-2139, such disclosure shall be made in writing at the earliest practical time, but in no event later than the time when specific real estate assistance is first provided. Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement:
Specific examples should be given such as â€œI can no longer advise you on value or offering priceâ€. They won’t be hearing information such as â€œI can no longer inform you about the wild and loud parties that go on every weekend at the house next doorâ€.
When signing most listing agreements sellers agree in advance to go along with the a potential dual agency without this vital information. The agent is already free on the seller side to work as a dual agent as long as his buyer client agrees.
Because of such dual representation, Owner understands that Owner and purchaser have the responsibility of making their own decisions as to what terms are to be included in any purchase agreement. Owner should be aware of the implications of the Broker’s dual representation including the limitation on Broker’s ability to represent Owner or the purchaser fully and exclusively. (see a sample Exclusive Authorization to Sell here – PDF)
I wonder how many well informed sellers or buyers would agree to go along with it when offered if they knew that â€œtheir agentâ€ could no longer be their advocate but would merely be providing ministerial services?
I wonder how many times the request to agree to dual agency is presented to a seller as the agent is holding an offer in hand.
I wonder how many times the act of bringing in a second agent to â€œrepresentâ€ one side in a designated agency situation is accomplished at the last minute with little knowledge of the new client by the new agent and without actually being familiar with the property or showing it to him.
Our Code of Ethics requires Realtors to ALWAYS place the best interests of our clients ahead of our own. It could, in my opinion, do a better job of helping us accomplish this as could our state regulations.
And last but not least, most good lawyers would never let themselves get involved in a similar situation with two clients.
What does that tell you?”
*Links and quotes were added by me.