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Wilmington, North Carolina

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Matt Buckmiller
Matt Buckmiller
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Double Dipping and the Erosion of the Duty of Loyalty: The common practice of dual agency by Real Estate Brokers

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In the hopes of obtaining more listings, greater commissions, and overall greater profits, real estate brokerage firms in North Carolina commonly engage in the practice of dual agency whereby they act as both the seller’s agent and the buyer’s agent in the sale of a particular piece of real estate.

In one form of dual agency, one broker from a real estate firm will act as both buyer’s and seller’s agent. In another form of dual agency, the firm “designates” an individual agent to fully represent the interests of only the seller and another individual agent to fully represent the interests of the buyer. The later approach is called “designated agency.”

It is my belief that the practice of dual agency, where one broker in a firm wears both hats violates, in almost every fact pattern, the duties of loyalty and care owed by a broker to his client. The dual agent will almost always “double dip” by receiving greater commissions then would otherwise be obtained, and therefore there is a greater tendency for a broker to push a sale then to act in the best interests of either of their clients. Under general agency principals, an agent has a duty to represent its’ principal’s best interests to the exclusion of all others, including the agents own desires in receiving a commission. Dual agency provides an incentive and a method in which to violate the duties of loyalty and care that every agent owes toward their principal.

Moreover, under dual agency a broker is required to get the informed consent of the seller and the buyer by having the parties execute a dual agency addendum after disclosing to them the consequences of having a broker operate as agent for both parties. Informed consent rarely occurs as the “dual agent” often does not fully understand the consequences of dual agency, much less do they or can they adequately convey those consequences to the buyer and seller.

Under the first type of dual agency, it is almost impossible for the broker to continue to fulfill all their duties to both principals. In essence, when a broker acts as dual agent, he essentially acts as a middleman for the parties eliminating any duties owed to the seller or the buyer. A broker acting as a “middleman” is not a lawful practice under North Carolina law but unfortunately, due to the desire to achieve top listings and greater profits, the exception of “dual agency” has now become the rule.

The better and more ethical practice for real estate brokers is “designated agency.”

If you have bought or sold real estate where one broker from a real estate firm acted as a dual agent for both you and the other party, and you feel that the broker did not obtain for you the best deal possible please contact an attorney so that you can discuss your legal rights.