Is Dual Agency Ethical
By Jim Palmer Jr.

A real estate broker was recently accused of unethical behavior by another jealous broker because he acted as the agent for buyer AND seller in a recent property transaction where the accusing broker thought they should have been included just because of a familial link to the buyer.

A scenario where a broker represents both parties is defined as “dual agency” by Washington State’s Law of Agency statute and is a permitted legal activity according to the Law of Agency statute. To answer the naïve accusation presented above, one must examine more than just the Law of Agency, since the Realtor® Code of Ethics requires a higher expectation of behavior for Realtors® than may be statutorily required.

According to the Realtor® Code of Ethics, “when entering into buyer agreements, Realtors® must advise potential clients of any potential for the buyer representative to act as a disclosed dual agent.” Furthermore, it says, “Realtors® shall make reasonable efforts to explain the nature and disclose the specific terms of the contractual relationship being established prior to it being agreed to by a contracting party.”

What that really means is, if the broker has explained dual agency prior to any contract being signed and then obtains written permission from both parties, it is legal AND ethical. In most cases the seller has already signed an Exclusive Right to Sell Listing Agreement with the broker, which gives explicit permission for the broker to act as a dual agent. The broker must also obtain written permission to act in that dual capacity with the buyer (via a Buyers Representation Agreement) before a purchase contract is consummated.

The possibility to commit un-ethical acts in a dual agency situation may seem more likely than in a normal transaction with cooperating brokers, but the act of dual agency is not in-and-of-itself unethical. For example, a dual agent must take great care to keep confidential information separated, or risk crossing that un-ethical line. Instead of unethical behavior being probable, it is more likely that a transaction with dual agency will go smoother and be less cumbersome because of the tighter communication loop which creates more of a mediation atmosphere than adversarial.

The broker who made the accusation in the above example is likely in violation of that same Code of Ethics that says, “Realtors® shall not recklessly make false statements about other real estate professionals, their businesses, or their business practices.

Back to Real Estate Trends Articles