Real Estate Agents and Dual Agency

As noted in earlier posts, there are both advantages and disadvantages to using an agent when selling (or buying) your home. If you decide to use an agent, you should understand the nature of an agency relationship, and in particular the implications of dual agency.

The term "agent" refers to a person who acts on behalf of another. The person for whom the agent acts is called a "principal." Thus, when you hire a real estate "agent," you hire that person to act on your behalf in buying or selling your home; you are the "principal." The law requires the agent to be loyal to the principal and to act in the principal's best interest.

In some instances, an agent may be acting on behalf of two different principals -- a "dual agent." When acting as a dual agent, the agent must be aware of his or her responsibility to each principal. If the principals have conflicting interests (such as negotiations between a seller, who wants the highest price, and the buyer, who wants the lowest), then it may not be appropriate for the agent to continue as a dual agent.

In Washington, statutes address the rules of agency as they relate to real estate professionals. These laws (RCW Chapter 18.86, "Real Estate Brokerage Relationships") spell out the scope of an agent's responsiblity to you as the principal. If you use an agent to sell your home, you will probably be asked to sign an Exclusive Sale and Listing Agreement. You should appreciate the nature of an agency relationship before you sign that agreement. In fact, by law an agent must provide you with a pamphlet entitled "The Law of Real Estate Agency" (which is simply a reprint of the applicable laws in RCW 18.86) before you sign a Listing Agreement or otherwise accept the agent's services (see RCW 18.86.030(1)(f)).

The standard form Exclusive Sale and Listing Agreement contains language that addresses the agency relationship. Specifically, the Listing Agreement as written allows the agent to represent both a buyer and a seller of the same property. This is permissible under Washington law (see RCW 18.86.060). However, you should seriously consider whether you want to permit your agent to represent the other party in the transaction. If you decide that your agent should work exclusively for you, then you should change the Listing Agreement before you sign it. Of course, you should also discuss this issue with your agent. Although the agent may indicate that he or she will not represent the other party, regardless of what the Listing Agreement says, note that your contractual rights are generally determined by the contract, not by comments made when the contract was signed. An attorney can assist you in understanding your rights under the Listing Agreement and can suggest changes to further protect your interests. Of course, you must consult with the attorney before you sign the contract.