Considerations of Real Estate Broker Dual Agency
In Washington State, real estate brokers may represent buyers and sellers on opposite sides of the same transaction. These agents function as “dual agents.”
I will openly admit my own immediate anxiety at the prospect of dual agency. I believe that in most cases, buyers and sellers would benefit from having their own independent brokers, and that the inherent potential for a conflict of interest in dual agency overrides the possible advantages.
I am not alone in my concerns. Eight states have outlawed dual agency – Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont. Most, if not all, other states, including Washington State, have passed laws placing additional requirements upon dual agents to protect buyers and sellers.
In Washington State, dual agents must abide by the duties of all brokers, as outlined in RCW 18.86.030, must further obtain written informed consent for dual agency from both represented parties, and must meet several additional requirements in RCW 18.86.060, some of which include:
- Not taking an act adverse or detrimental to either party’s interest in a transaction;
- Timely disclosing conflicts of interest to both parties;
- Advising both parties to seek expert review of matters beyond the agent’s expertise;
- Not disclosing either party’s confidential information, except under subpoena or court order.
Dual agents may find it difficult to meet these requirements. For example, a seller may purposefully list a home using a price higher than typical for the marketplace but would remain willing to drastically reduce that price to get under contract. The dual agent must decide whether to disclose these facts to the buyer. If the broker exclusively represented the seller, that broker would have no obligation to disclose the information to the buyer, and indeed, doing so would be adverse to the seller’s interests. On the other hand, if a buyer’s own independent agent came across this information, that broker would certainly disclose it to the buyer, and failure to do so could similarly constitute an act adverse to the interests of the buyer.
A dual agent in this circumstance faces a serious conundrum: disclosing this information to the buyer would cause detriment to the seller, who wants the highest price, but not disclosing this information to the buyer would cause detriment to the buyer, who wants to negotiate the lowest price. In this case, someone will likely come out ahead at the expense of the other side. A dual agent could similarly feel limitations in negotiating inspection issues, addressing title issues, interpreting Form 17 disclosures, or in many other circumstances. A dual agent will face significant hurdles to avoiding conflicts of interest, and may sometimes inadvertently favor one party over another, which would violate that agent’s duties under Washington law. In other words, dual agency carries many risks – to the buyer, the seller, and the broker.
Nonetheless, buyers, sellers, and brokers sometimes desire dual agency because it affords certain benefits. First, buyers and sellers may find it easier to deal with a single agent because that will streamline communications. Second, buyers can find dual agents attractive because the agent representing a seller might provide more information about a particular home that might not otherwise be readily available to the buyer absent dual agency. Finally, and perhaps most obviously, brokers might like dual agency because that allows the broker to retain, rather than split, the sales commission.
Washington State has attempted to balance the concerns of buyers, sellers, and brokers by placing additional requirements to protect the parties to a transaction. A broker acting as a dual agent must tread very carefully, and buyers and sellers seeking dual agency should seriously consider the benefits and drawbacks of not securing independent representation.
Beresford Booth frequently addresses real estate matters for a variety of clients, including real estate brokers, as well as those seeking to purchase or sell real property.