RE49R05: Dual Agency

A Description of Dual Agency
  1. History of written relationship disclosure
    1. States response to Federal Trade Commission survey - license regulation requires disclosure of agency representation.
    2. 1990 MA Board of Registration of Real Estate Brokers and Salespersons mandates first written agency disclosure form.
    3. 1993 MA Board of Registration of Real Estate Brokers and Salespersons revised agency disclosure form to recognize buyer agency.
    4. Current MA regulation requires real estate licensee to disclose type of relationship and company business model when the following three conditions occur,
      1. at the first personal meeting
      2. to discuss a specific property
      3. with a potential buyer or seller.
        (See 2005 Massachusetts Mandatory Licensee-Consumer Relationship Disclosure).
    5. Open House exception (254 CMR 3.00(13)(a)(3)) - at an open house the Real Estate licensee must conspicuously post and/or provide with other written materials any relationship so that the attendees can understand the relationship they may have with the licensee conducting the open house.
  2. General Definitions
    1. "Agent" - one who is authorized to represent and act on behalf of a principal (buyer/seller) or real estate broker (broker of record).
    2. "Principal" - a main party to a transaction. Could be the seller/buyer or an entity. The licensee would be delegated certain responsibilities and must be aware of fiduciary duties that they may hold.
    3. "Client" also known as a Principal - a person who empowers another to act as his or her representative/agent. Client relationship = fiduciary relationship.
    4. Vicarious Liability-"liability created not because of a persons actions but because of the relationship between the libel person and other parties. For example, a real estate broker is vicariously libel for the act of his or hers salespeople while acting on behalf of the broker even if the broker did nothing to cause the liability" ( The Language of Real Estate)
    5. Informed Consent - "Consent to a certain act that is given after a full and fair disclosure of all facts needed to make a conscientious choice." ( The Language of Real Estate)
    6. Fiduciary - "A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client." ( The Language of Real Estate)
  3. Establishment of Agency
    1. Express written or oral contract where agent and principal agree to terms.
    2. Implied agency by actions and/or words
    3. Compensation does not create an agency relationship
  4. Duties that may be required of agent licensees referred to by acronym OLD CAR.
    1. Obedience - the duty to carry out all lawful instructions of the Client
    2. Loyalty - the duty to act in the best interest of the Client
    3. Disclosure - the duty to disclose all information relevant to the Client
    4. d. Confidentiality - the duty to keep the Client's confidential information, confidential - Duty survives termination of agency relationship. Duty does not apply to legally required disclosures such as known physical hazardous conditions of property.
    5. e. Accountability - the duty to protect, isolate and account for all money, documents, or other personal property provided to the agent
    6. f. Reasonable Care and Due Diligence - the duty to act competently and being capable of performing the duties undertaken "OLD CAR" is modified as it relates to Consensual Disclosed Dual Agent to only "C" and "A"
  5. Types of Licensee/Consumer Relationships
    1. Seller Agency - Real estate agent represents seller on client basis and treats buyer as customer. Seller agent's duties to seller include "OLD CAR".
    2. Subagency - Where a seller or buyer client expressly or implicitly authorizes his or her broker to use other agents from other firms to find the buyer a property. The seller or buyer must provide written informed consent that indicates the following: "Massachusetts law permits the broker to cooperate with other licensed brokers who will act as subagents of the seller or buyer only with the written consent of the seller or buyer and the disclosure to the seller or buyer for the potential for vicarious liability"
    3. Vicarious liability The potential for a seller or buyer to be held liable for an act or omission of the subagent". Subagent's duties to seller or buyer include "OLD CAR" except in the instance of Dual Agency the subagent assumes the same split loyalty and duties as the principal agent.
    4. Buyer Agency - Real estate agent represents buyer client in real estate transaction. Buyer agent's duties to buyer include "OLD CAR".
    5. Single Agency - "The practice of representing either the buyer or the seller but never both in the same transaction." ( The Language of Real Estate)
    6. Dual Agency - When an agent or a real estate firm, practicing traditional agency as a business model, represents both principals (Buyer and Seller) in the same transaction, a dual agency exists. In Massachusetts Disclosed Dual Agency is legal, provided there exists full disclosure and written informed consent to the dual agency by both the Buyer and the Seller in a specific transaction. A Dual Agent has a duty of confidentiality and accounting to both parties. Reasonable Care and Skill will apply in the real estate transaction.
    7. Facilitator- also known as a Non-Agent or Transaction Broker/Salesperson. The Facilitator works to complete the transaction. Although bound by license law and MGL Ch. 93A, they do not have a fiduciary relationship with the seller or the buyer. They do not represent either party in the transaction. The Facilitator must disclose all known material defects that exist. Failure to do so could result in a Chapter 93A violation. Their duties consist of accounting and any other Facilitator duties undertaken. Facilitator's has no required duties to seller and/or buyer A Facilitator is obligated to fulfill all the duties of "A" ("Accountability") pursuant to the Massachusetts Real Estate License Law.
    8. Designated Agent - A real estate licensee who has been specifically appointed or designated by the broker with whom they are affiliated to individually represent a specific client (either a buyer or seller) when selling or buying real estate, provided the buyer or seller expressly agrees to such designation. The designated agent has full duties of agency ("OLD CAR") to the client while all other licensees of the firm the Designate Agent is associated with do not represent the buyer or seller and could very well represent the other party to the transaction. This type of relationship is only practiced by those real estate firms that select Designated Agency as their business model. When designation occurs the Principal Broker in the firm or some other licensee so appointed as the designator is a dual agent.
  6. Consensual Disclosed Dual Agency
    1. When does Dual Agency occur?
      1. An agent represents both Buyer and Seller
      2. Traditional Agency (business model)
        1. In-house transaction
      3. 3. Designated Agency (business model)
        1. Principal Broker or other appointed designator shall become a Dual Agent and is neutral as to any conflicting interests of the seller and purchaser, but will continue to owe the seller and purchaser the duties of confidentiality of material information and to account for funds.
    2. Disclosure, Consent and Notice
      1. Massachusetts Mandatory Licensee-Consumer Relationship form
      2. Massachusetts Consent To Dual Agency
        1. i. In advance of identifying a potential Dual Agency transaction
        2. ii. After a potential Dual Agency transaction is identified
      3. Notice of Dual Agency
      4. Consumer has no obligation to sign
      5. Forms must be retained by Agent for three (3) years.
    3. Informed Written Consent from both Buyer and Seller.
      1. How do you obtain "Informed Written Consent?"
        1. Stand alone Consent Form.
        2. Consent included in Listing Agreement or Buyer Representation Agreement
        3. Must be in writing - Signed by the Agent and Buyer/Seller.
        4. Language must satisfy the Law with Consumer approved language. Consent is conclusively presumed given when approved language is used.
        5. Original forms must be provided to the Seller and Prospective purchaser.
        6. Kept by Broker for Three Years.
        7. gNeither Seller nor Prospective Purchaser is required to sign.
    4. When is Consent to be obtained?
      1. In Listing Agreement or Buyer Agency Agreement - Before transaction is identified.
      2. If this is done - a Subsequent Notice upon the actual occurrence of Dual Agency is required.
      3. Can use a Stand Alone document (use example form).
      4. Consent MUST be obtained BEFORE the occurrence of Dual Agency however no later than the execution of an Offer to Purchase
      5. If there is no Offer to Purchase then BEFORE a Purchase and Sale Agreement is executed.
    5. What can the Dual Agent DO for Sellers and Buyers? (Objective is Equal Treatment and Neutrality for both Seller and Buyer)
      1. Treat Seller and Buyer with Accuracy and Honesty.
      2. Provide helpful Information and Description about the property to Buyer.
      3. Disclose all known Material Facts about the property to the Buyer.
      4. Explain Real Estate Terminology and Procedures.
      5. Provide licensed Property Inspectors List.
      6. Assist Buyer with Financing Options.
      7. Provide Public Record Information. (Possibly CMA'S-Not Slanted)
      8. Assist in preparation of Offer to Purchase.
      9. Explain Consensual Disclosed Dual Agency as it relates and compares to other Agency Relationships.
    6. What must a Dual Agent NOT DO for Sellers and Buyers?
      1. Disclose Confidential Information without permission.
      2. Disclose that a Buyer will pay a price or agree to terms other than those in the Offer, OR that Seller will accept a price or terms other than those contained in the Listing or Seller's Offer.
      3. Disclose the motivation of the Seller to sell or the Buyer to buy.
        NOTE: Dual Agents should separate information coming into their office on that transaction so that it is not available to other agents.
    7. How to disclose Agency at an Open House?
      1. 1. No individual written notice required to prospective Purchaser or Seller attending
      2. 2. Agent disclosure by sign, poster, distributed listing literature or property description form conspicuously discloses any pre-existing agency relationship.
      3. 3. On such material distributed - the disclosure shall be MORE CONSPICUOUS than on any other written material.
    8. Other requirements of a Dual agent
      1. ALL agents must, by law, present properties honestly and accurately.
      2. Must disclose all known material facts related to the real estate
      3. Must fully comply with License law and MGL c 93A
      4. Must fully comply with Massachusetts and Federal lead based paint laws.
    9. VII. Seller Agency, Buyer Agency, Dual Agency or Facilitator Compensation
      1. a. Compensation Methods
        1. Commission based on sales price
        2. Flat Fee
        3. Fee for Service/Menu Options
        4. Money Credited to the seller at closing
      2. Compensation alone does not create agency representation


    1. Massachusetts Mandatory Licensee-Consumer Relationship Disclosure
    2. Massachusetts Consent to Dual Agency Form
    3. Sample Notice of Dual Agency form

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