ChitownLiving | Chicago Real Estate + Life

Dual agency is one of those terms that is thrown around quite often and can tie all involved up in knots unless fully understood. In many cases, the pitfalls of dual agency are never truly understood by clients and inexperienced agents alike, until fully immersed in a dual agency situation. The sterile definition of dual agency is as follows…

Dual agency occurs when an agent represents two principals (both buyer and seller) in the same transaction.

But what does this really mean? At the outset of any client relationship, an agent takes a listing, or begins working with buyers, and forms a fiduciary relationship. In this relationship, the agent has the duties of reasonable skill and care, obedience, accounting, loyalty, and full disclosure. So how is this fiduciary relationship honored if the agent represents both parties in the transaction? The answer is that it can’t be, and in fact, the relationship must be limited. This limited dual agency relationship can only be entered into if fully disclosed, agreed to, and I will include understood by both parties (buyer and seller) in writing. The agent can:

• Treat all clients honestly.
• Provide information about the property to the buyer or tenant.
• Disclose all latent defects in the property that are known to the agent.
• Explain real estate terms.
• Help the buyer or tenant to arrange for property inspections.
• Explain closing cost procedures.
• Help the buyer compare financing alternatives.
• Provide information about comparable properties that have sold so both clients may make educated decisions on what price to accept or offer.

The agent can not disclose:

• Confidential information that agent may know about the clients, without the client’s permission.
• The price the seller or landlord will take other than the listing price without permission of the seller or landlord.
• The price the buyer or landlord is willing to pay without permission of the buyer or tenant.
• A recommended or suggested price the buyer or tenant should offer.
• A recommended or suggested price the seller or landlord should counter with or sccept.

* info above taken from the Coldwell Banker Residential Brokerage Consent to Dual Agency form. So let’s look at a couple scenarios. Buyer Scenario: A buyer’s agent has been working with clients for six months to find a unique West Loop loft. The agent takes a new listing that he/she feels is perfect and as it turns out it is perfect and the buyer clients want to write an offer. Both buyer and seller agree to a fully disclosed dual agency relationship. The buyers ask for comps to come up with a starting offer price and then ask the agent for their opinion on analyzing the comps to come up with a negotiation strategy. After all, they have spent the last six months driving aound Chicago looking for the perfect place. What can the agent do? Under this limited fiduciary relationship, the agent can pull comps for the clients but that is it. No assistance can be given (unless agreed to by the seller) with regard to interpreting the comps or coming up with a negotian strategy. Seller Scenario: A listing agent brings newly acquired buyer clients over to one of their new Lincoln Park townhome listings. The buyer clients love it and want to write an offer. Both buyer and seller agree to a fully disclosed dual agency relationship. The listing agent knows that the sellers have purchased a new single family home in Evanston and are closing in a month. The sellers are motivated. Can this information be disclosed to the buyer? The answer is no unless disclosure is agreed to by the seller. After an agent spends weeks, months, and sometimes years with both buyer and/or seller and building a strong client relationship, it is sometimes tough for clients to accept this new limited fiduciary relationship the agent is bound to. As an agent it is imperative that dual agency is disclosed, consented to in writing, and most importantly understood. Hire an agent who knows the full meaning of not only dual agency, but agency in general.