Agency

Quick Takeaways:

Dual agency is illegal in some states
Both parties must agree to dual agency
Dual agency may provide a smoother transaction

Source: Can One Realtor Represent Both Buyer and Seller? What to Know About Dual Agency (Bankrate, Jul. 23, 2024)

Agency, which creates a legally binding relationship between the real estate agent and their client during the buying and selling process, is one of the most important aspects of the real estate profession. Because of agency, real estate agents to act in their client’s best interest. Agents can have single or double agency, but their status must always be disclosed.

Like many parts of the real estate buying and selling process, keeping documentation of agency disclosure is of the utmost importance. In real estate transactions, agency is often formed without the signature of the client, so it is up to the real estate professional to keep track of your disclosure. Keeping both paper and digital copies of important documents is always a safe idea!

Dual agency occurs when an agent is representing both the buyer and the seller. Disclosure is of the utmost importance in cases of dual agency, as it is still the fiduciary duty of the agent to represent the interest of both clients. Dual agency is illegal in some states.

Each state has different disclosure laws, controlling everything from agency disclosure, dual agency legality, and what sellers must disclose about their home when selling. It is imperative that, as a real estate agent, you study the laws of your state and make sure your clients are fully aware of any pertinent details.

To help better understand the legal issues surrounding agency and disclosure, we have compiled a verity of recent legal cases for you to study.

See References for more information.

Featured

NAR Policy

The Code of Ethics: Article 16

January 1, 2018

REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship...

Case Interpretations Related to Article 16

January 1, 2024

Respect the exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with their clients.

References

NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.

About Agency Disclosure

Agency Representation in Real Estate…Fiduciary Duties (The Data Advocate, Jan. 19, 2024)

Most states have adopted agency disclosure laws requiring the licensee to disclose early in the transaction whom the licensee represents and to verify this disclosure in writing. States have also created new terms and definitions of working with consumers, such as “limited agent,” “designated agent,” “transaction coordinator,” and “facilitator.”

Real Estate Agent: Definition, How Agents Work, and Compensation (Investopedia, Mar. 30, 2024)

Agents must disclose whom they represent so that buyers and sellers are aware of any conflicts of interest.

Family and Real Estate: Should Agents Disclose That They’re Related to a Client? (realtor®.com, May 19, 2022)

“Article 4 of the NAR Code of Ethics states the following: “REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.”

Dual vs. Single Agency Relationships in Real Estate (The Balance, Mar. 18, 2022)

“Many states require that agents give buyers and sellers an agency disclosure form to sign, which clears up these questions. The form used in California, for example, is not a contract between two parties but rather a disclosure from one to the other. It clarifies the many types of agency functions that may come up when buying or selling a home and specifies the rules agents must adhere to. All parties must read it so they know what to expect from each other; the form also allows them to select the type of agency relationship they prefer”

Dual Agency

The law is a living and breathing organism that is always changing, so be sure to check with your state or territory’s statutory code for the most up-to-date information on agency laws in your state. Or, if you are a REALTOR®, contact your state association of REALTORS®’ legal hotline. To find your state association, please visit this page and select your state from the list.

The Dual Agency Dilemma: Navigating the Intricacies of Representing Both Sides (Luxury Presence, Aug. 5, 2024)

The regulation of dual agency varies by jurisdiction. Some states, such as Colorado and Florida, have stringent rules or outright bans on the practice, while others allow it under specific conditions. In states where it is permitted, agents are typically required to obtain informed consent from both parties, ensuring that both the buyer and the seller understand the potential conflicts of interest and agree to proceed.

Can One Realtor Represent Both Buyer and Seller? What to Know About Dual Agency (Bankrate, Jul. 23, 2024)

Having only one agent involved in a transaction can simplify the process. But it also presents the risk that the agent may favor one party over the other — specifically the seller, as their commission fee hinges on the final sale price of the house. In fact, in several states, acting as a dual agent is actually illegal. Still, if it’s permitted in your state, it can be worth considering. Here’s what you should know about dual agency, whether you’re a buyer or seller.

Dual Agency: What Home Sellers and Buyers Should Know (Rocket Homes, Feb. 5, 2024)

A real estate agent can represent both parties fairly, but the potential conflict of interest makes it difficult. That’s why some states have made dual agency illegal.

Dual Agency in Real Estate (Forbes, Jun. 9, 2023)

According to a report published in 2019 by the Consumer Federation of America, more than half of homebuyers and sellers in America are unaware that there are different types of agencies for real estate agents. Dual agency is regulated by law and is illegal in some states, but often comes down to what the homebuyer or seller is comfortable with, after the real estate agent has disclosed their agency type.

The Do’s and Don’ts of Dual Agency (Chicago Association of REALTORS®, Jun. 30, 2021)

“Illinois has three different types of agency relationships with consumers: No Agency, Designated Agency and Dual Agency. It is important to know that no matter which agency relationship you have with a client or consumer, all of them have a requirement of written disclosure or notice. Further, while we will discuss this from a for sale transaction scenario, everything being mentioned also pertains to rental transactions. The License Act and agency disclosure requirements make no distinction between the two.”

Disclosure Materials From Your State

The laws and regulations for agency disclosure may vary from state to state. As a member of the National Association of REALTORS®, you can contact your State Association of REALTORS® for specific details on your state's disclosure requirements.

Back to Basics: Agency (Pennsylvania Association of REALTORS®, Oct. 7, 2024)

A Refresher on Agency (Chicago Association of REALTORS®, Jul. 31, 2024)

Agency – The First Question that a Lawyer is Going to Ask (Arizona REALTORS®, Sep. 5, 2023)

“Is This Dual Agency?” (Virginia REALTORS®, Dec. 29, 2023)

Dual Agency, Designated Dual Agency, and the Role of the BIC (NC REALTORS®)

Agency Legal Cases

The below cases all address agency issues in some way, often dealing with the breach of fiduciary duty and/or buyer representation.

Broker Granted Second Chance to Show Full Consent to Dual Agency (National Association of REALTORS®, Dec. 15, 2023)

Hall v. John L. Scott Real Estate (Casetext, Jan. 17, 2023)

Hall argues in his brief that the alleged chapter 18.86 RCW violations constitute unfair or deceptive acts or practices under the CPA. The SRA provides that if STCA is represented by Hall's brokers, Hall consents to his brokers acting as dual agents. The alleged violations are based on statutory duties owed to Hall, not any duty arising from the SRA's terms. Finally, Hall's misrepresentation claim, whether characterized as intentional or negligent, was by JLS's own admission based on conduct occurring before the agency relationship was established in the SRA and amounted to a claim that Hall would not have entered into the SRA but for JLS's asserted misrepresentations.

In its order vacating the summary judgment and remanding the case back to the district court, the D.C. Circuit explained that despite failing to adhere to Section 42-1703(i)’s formatting specifications, Broker will have the opportunity to prove entitlement to the commission by showing whether it fulfilled the Brokerage Act’s requirements of obtaining truly informed consent following full disclosure of the dual nature of the relationship.

Court Rules for Broker Over Enforceability of Oral Exclusive Representation Agreement (National Association of REALTORS®, Aug. 21, 2023)

Case Interpretations Related to Article 16 (National Association of REALTORS®, Jan. 1, 2023)

The Best of the Legal Hotline: Agency Revisited (Wisconsin REALTORS® Association, May 13, 2019)

Broker Can’t Limit Statutory Duties (National Association of REALTORS®, Apr. 24, 2019)

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

Real Estate Salespeople, Beware! (eBook)

The Real Estate Entrepreneur (eBook)

Books, Videos, Research Reports & More

As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.

Digest of Real Estate License Laws and Current Issues (Lake City, UT: Arello (published annually) HD 1383 N21d

Have an idea for a real estate topic? Send us your suggestions.

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