Real Estate Dual Agency Conflict and Litigation Attorney

It’s often the case that mishandled real estate deals end up being the stuff of lawsuits. Real estate contracts can be pretty confusing. Needless to say, real estate professionals, work on commission, and one might be tempted to do things, even though not lawful, to maximize their pay.

Conflicts of interest situations are common in the real estate sector. The main reason this might happen; a real estate agent representing both parties as a dual agent. It’s always a wise idea to know where your state stands on dual agency and work with a real estate attorney to figure out what to do.

What is dual agency?

A dual agency situation happens when the same agent/broker acts for both sides in a transaction. It can also occur when both the seller and buyer agents/brokers work for the same firm, i.e., a designated agency.

Real estate professionals owe their clients a fiduciary duty. It means that their client’s interest comes first. That’s the reason complications arise when the agent represents both the buyer and the seller in the transaction – whose interest will the real estate broker prioritize first? After all, they need to do well for both parties. The dual agency may result in a conflict of interest that needs to be disclosed immediately to each principal.

A dual agency situation may be present in any brokered real estate deal such as:

• A leasing or rental transaction
•  A sale
• Mortgage assignment or origination

In a sales transaction, dual agency and therefore a conflict of interest arises when the buyer:

• Is an established client of the agent/brokerage firm and has even been informed on qualifying properties in multiple listings and has expressed interest in a property listed by the agent/broker

A dual agency is not an unusual brokerage practice. Indeed, it happens naturally in the process of representing property owners and potential buyers. However, both principals in the transaction need to be informed of the dual agency immediately it arises.

In certain jurisdictions, dual agency agreements are lawful as long as disclosures are made and both parties make full and informed consent before the dual agency is established. Without approval from both parties, liabilities apply.

Is dual agency legal in California?

In California, dual agency is legal. An agent can represent both the buyer and seller directly or through an associate licensee in a real estate transaction.

However, the agent needs to approach the situation with care. Dual agency is also heavily litigated in California. In the state, brokers are required to confirm their relationship with their clients in writing. The broker or agent must also present their clients with a form disclosing their agency relationships. It will list the agents and brokers involved in the transaction, the buyer’s agent, the seller’s agent, the dual agent, and their roles.

The form will also explain that the real estate agents/brokers owe the buyer and seller a fiduciary duty to act in their best interest. The body charged with investigating cases of misconduct in dual agency situations is the Real Estate Commissioners’ office. Consequences of failing to act with the consent of all parties involved include:

• Suspension or even having their license revoked permanently
• They won’t be allowed to collect commission from either party
• The transaction will likely be canceled

Benefits of a dual agent

In some situations, a dual agent will be good for a buyer. Here’s a look:

• It’s easy to streamline transactions: sharing an agent makes eliminates intermediaries, making it easy to pass forms between buyer and seller for signing, and communicate offers and counteroffers quickly.

• The buyer/seller can get information quickly instead of waiting for their agent to contact the other’s agent.

• Dual agents might charge less because they are representing both sides in the transaction.

• Dual agents know the sellers well and can help buyers craft desirable offers to compete.

Drawbacks of working with a dual agent

Working with a dual agent has its risks. Neutrality is essential in situations of dual agency. If an agent or brokerage firm is performing as a dual agency, they need to be impartial.

However, that can be hard since commissions are based on sales prices, and therefore most agents tend to favor the seller with their services to maximize their pay. Always ensure that everyone in the team does their best to stay neutral. Otherwise, there will be a conflict of interest.

Some of the negatives of using a dual agent include:

• It doesn’t guarantee the buyer or seller certain confidential information. Just because you are using the same agent doesn’t compel them to tell you what amount the seller is willing to accept on the property or the buyer’s maximum offer. It’s up to the seller or buyer to tell the agent to make this information known.

• A dual agent may hide information in an attempt to close the deal in his/her favor.

• An agent can have challenges advancing both parties’ interests – the buyer wants to pay the lowest price, the seller wants to get the highest price, it’ll be challenging to satisfy them both.

•  Reduced legal option: if the deal goes wrong, you only have one brokerage firm to sue and one broker insurance firm to deal with

• A dual agent may not provide buyers with a dedicated search of outstanding properties.

• If the agent has worked with the seller before, their interest and loyalty may not lie with you.

• The agent may not advise the buyer whether a price is reasonable; in fact, if they’ve worked with the seller before, they’ll likely defend the price.

Final Point

In buying and selling real estate, conflicts of interest arise all the time. It’s always good to retain the services of an attorney experienced and qualified in business and property transactions to watch out for your interest.

In case you want to sue after a breach of fiduciary duty, a real estate litigation attorney will help you collect and prepare evidence, file a court case, and present evidence for a court’s ruling. Get in touch with our team of legal experts now for help with your dual agency case.

Real Estate Law

The skilled and knowledgeable real estate attorneys at Hess-Verdon and Associates, PLC, have extensive experience in real estate planning and dispute resolution. In order to best serve our clients, we meet and strategize with each of our clients to understand the unique nature of their goals and ultimate objectives.

The firm’s experienced real estate attorneys have expereince representing a range of property owners, both residential and commercial and have been successful in achieving their goals.

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• Real Estate Purchase Agreements, Leases, Etc.
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• Disputes Over Income Properties
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