The Dual Agency Dilemma

In many states, Brokers may represent both the buyer and seller in a real estate transaction or business opportunity. This is called a dual agency relationship and it presents a few unique issues that should be understood.  A dual agent often means an agent acting, either directly or through a salesperson or broker associate, as an agent for both the seller and the buyer in a business opportunity or real property transaction. Dual agents commonly have fiduciary duties to their clients that require disclosure of all material information known to the agent – otherwise, the agent may be held liable for breach of fiduciary duty and constructive fraud for an innocent or negligent nondisclosure. Dual agents are often also obligated to disclose their relationship with both parties as soon as possible. 

Yet, these fiduciary duties are constrained in certain jurisdictions. In California, for example, a dual agent cannot disclose any confidential information obtained from one party to the other party without the consent of the original party. This includes facts relating to a client’s financial position, motivations, or bargaining positions.

If the disclosure and non-disclosure obligations of a dual agent appear to conflict, it is because they conflict. A conflict of interest can be defined as a situation in which an entity or individual becomes unreliable as their personal interests or obligations to the other party clash with their professional duties or responsibilities. 

Here are a few examples: 1) the dual agent broker directs his buyer-client away from legal counsel that will negotiate the terms of the purchase and sale agreement to streamline closing on behalf of a Seller that needs to close by a date certain; 2) the dual agent broker opens escrow on behalf of his clients weeks before divulging to the buyer-client that the seller client’s residential tenant has been hospitalized and is months’ behind on rent, or 3) the buyer-client submits a naïve offer that is overly favorable to the seller-client and the broker abstains from correcting the error.

Rather than discounting or avoiding the entire dual agency system, parties to transactions should each hire independent counsel to represent their interests. By retaining a fiduciary to represent your interests, you increase your chances of reducing information asymmetry in a transaction and uncovering facts and information that may have a tremendous impact on your well-being and financial success. 

The opinions stated in this post are my own and do not reflect the opinion of the firm. This post does not constitute legal advice and should only be understood as a generalized summary of the law that is not specific to any particular state. If you are considering a dual agency relationship with a broker in a dental transition, or have further questions about the dental transition process, please feel free to contact me at Justin@DentalAttorneys.com or your dental attorney contact at the firm: Pat@Dentalattorneys.com or Jason@Dentalattorneys.com.