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12/7/11: Is Your Real Estate Agent Representing You?

By Benny L. Kass

Is the real estate agent you are working with representing your interests? Is she your agent? Is he a designated agent? Is she a dual agent? Do you know, and more importantly, does your agent completely understand his role?

For many years, the agent represented only the seller. If you were selling, you would list your home with a real estate broker – called the “listing agent.” If another broker or agent found a potential buyer who entered into a sales contract, that agent was the “selling agent.”

Today, however, there are many forms of agency:

  • Single agency: the agent represents either the seller or the buyer, but not both in the same transaction;
  • Designated agency (also referred to as designated representation): Here, the seller has a listing agreement with a broker and the buyer has an agreement to be represented by another agent – but who is affiliated with the same real estate company.

Brokers and agents in the Washington area are required to provide disclosure of their role to prospective clients. If there is a designated representation, all parties are put on notice that the agent must not disclose information obtained in confidence to other parties in the transaction.

  • Single dual agency (also called dual representation): Here, the agent represents both the seller and the buyer. According to the District’s disclosure form, “the ability of the licensee (the broker) and the brokerage firm to represent either party fully and exclusively is limited. The confidentiality of all clients must be maintained.”

This is the area of real estate brokerage that is extremely confusing. According to a survey compiled this year by the National Association of Realtors, many agents who responded do not understand dual agency, cannot explain it to their clients and in fact do not provide the state required disclosures.

In Maryland, although the disclosure forms use the term “dual agency,” in fact it really is the same as the District’s “designated agency.” Agents in Maryland are not permitted to represent both buyer and seller.

Virginia has a new law that takes effect July 1, 2012. It is a comprehensive approach to enhance the agency relationship disclosure requirements between agents and those they represent. Accordingly, single dual agency is permitted, so long as the agent has provided the client the consequences of such practice in writing and obtains the client’s written consent.

What does the agent have to disclose?

  • The agent will be unable to advise either party as to the terms, offers or counteroffers.
  • The agent cannot advise the potential buyer of the suitability or condition of the property.
  • The agent will be acting without knowledge of the client’s needs, or experience in real estate.
  • Either party may engage another agent if either requires additional representation.

So the question then becomes: Why would anyone agree to a single dual agency arrangement?

Recently, the New York Office of General Counsel issued a memorandum warning consumers that, in dual agency, you give up your “right to have your agent be loyal to you.”

The memo continues: “Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent, because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests.”

And, although most agents are honest, there is always the possibility that what you tell the agent will get back to the other side.

Many brokers – and legislators who allow dual agency – believe that it is not a problem so long as buyers and sellers are fully informed and sign a written disclosure form. But in my opinion, that is not the real world. Buyers get excited about a new house and do not pay attention to the various documents they sign – including the real estate sales contract. Similarly, often the issue of dual agency arises only after the seller has signed the standard listing agreement; the seller’s broker suddenly finds a potential buyer who is not represented by counsel or by another agent.

Here’s my advice to buyers and sellers. Although I have serious reservations about the designated agency arrangement, I can live with it since there are at least two agents involved – one representing the buyer and one the seller – albeit from the same brokerage company.

However, I cannot under any circumstances recommend anyone to engage in a single agent dual agency agreement. You will not be properly represented – and that has been the hallmark of American real estate agents for years.

Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.