For Sale SignSee previous posts on "Does Your Realtor Work for You?" and "Becoming a Client with a Realtor Agency Agreement" for background information prior to reading this post.

When a client hires a real estate agent by signing a listing or agency agreement, that client is actually hiring the real estate agent's entire firm not just the real estate agent themselves. A common transactional situation is that the buyer and seller each have their own real estate agents who work for different firms and operate in the best interest of their respective client. Things can get more complicated, and a conflict of interest can exist, when the same real estate firm is used by both the buyer and seller.

For example, if the buyer and seller both hire John Agent working for XYZ Realty, the buyer and the seller have hired the same firm (XYZ Realty). Since a single firm can not simultaneously provide the fiduciary duties of OLDCAR (see previous posts as noted above) to both the buyer and the seller, a conflict of interest exists. Real estate agents call this situation dual agency and it reduced both client's protections and benefits to fairness, honesty and disclosure of material facts.

Let's look at a couple of common scenarios where dual agency can arise:

1. Bobby Buyer signs a Buyer's Agency Agreement with John Agent of XYZ Realty. John Agent shows Bobby Buyer several properties over the course of a couple of weeks. One of the properties John Agent shows is listed by Sally Agent also of XYZ Realty. If Bobby Buyer decides he is interested in the property, a dual agency will exist. As a result, neither the seller nor Bobby Buyer will benefit from OLDCAR. Instead, both will only get fairness, honesty, and disclosure of material facts.

2. A seller hires Sally Agent from XYZ Realty and Sally places a sign in the front yard advertising the property for sale. Bobby Buyer sees the sign and, using the phone number on the sign, calls Sally Agent to see the property. At this point, it is the sellers that are Sally's clients and to which Sally must provide OLD CAR. Bobby Buyer is not a client so Sally is only obligated to provide Bobby Buyer with fairness, honesty, and disclosure of material facts. Once Bobby Buyer signs an agency agreement with Sally Agent a dual agency situation would exist. As a result, neither the seller nor Bobby Buyer would be entitled to OLDCAR - settling instead for fairness, honesty, and disclose of material facts.

In the above scenarios, the buyer and seller can get back their OLDCAR benefits by having the real estate firm specifically assign one named real estate agent to represent the seller and another named real estate agent to represent the buyer. When specific named agents are assigned in this way it is called designated dual agency. In the first scenario, this seems rather straight-forward since the buyer and seller are already working with different agents within the firm. In the second scenario, the firm would have to replace Sally Agent with another real estate agent for either the buyer or the seller. The important thing about all this is that unless dual agency is mitigated by designated dual agency, the real estate agent's obligation to the client is diminished from OLDCAR to fairness, honestly and disclosure of material facts.

Several events must occur for dual agency and designated dual agency (a form a dual agency) to exist. The firm must offer dual agency, the client must agree to dual agency and a conflict of interest must arise. Real estate agents that operate under dual agency without proper approval from all parties in the transaction are engaging in undisclosed dual agency which is a serious violation.

All of this can be confusing and is typically something buyers and seller are not fully aware of when they work with a real estate agent. Hear the explanation directly from the North Carolina Real Estate Agent Commission at the following links:

Working with Real Estate Agents (Buyer)

Working with Real Estate Agents (Seller)