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Dual Agency is Not What You Think

by | May 10, 2024

Do you think that dual agency has a clear and consistent definition? If so, then you might not entirely understand how it works. I say this as someone who used to think I knew what dual agency was; I also say this as someone who is not a lawyer, and who is in no way offering legal advice!

One of the most confusing things about dual agency is that many states have outlawed it, but these “no dual agency” states often approach it in the same manner as states where dual agency is legal. How is this possible? One reason is that dual agency lacks a consistent definition across the country. Most information online on this topic is either state-specific, or is a national list of which states allow dual agency and which do not. However, the concept of dual agency in general, across all states, is almost never defined.

I already know what you’re thinking (am I psychic?); you’re saying “I know what dual agency is, it’s when one real estate agent represents both the buyer and the seller of a property (or perhaps two buyers) in the same transaction.” This is absolutely true, but I challenge you to find a clear, consistent, interstate definition of what the word “represents” means in this context.

For example, Florida does not allow dual agency, while Washington does allow dual agency. Though Florida explicitly does not allow dual agency, it does allow transaction brokerage. However, the way that dual agency actually works in Washington makes it almost exactly like Florida transaction brokerage–it’s even described the same way in both states. Here’s how transaction brokerage (which, remember, is not dual agency) is described in Florida: “A transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction” Florida Statute 475.278. In Washington, “A limited dual agent provides limited representation to both the buyer and the seller in a transaction” RCW 18.86.120. Already, you can see that Florida transaction brokerage is looking a lot like Washington dual agency; both of them “provide limited representation” to both a buyer and a seller in the same transaction.

Perhaps you’re thinking, “sure, these sound similar, but maybe there are some significant differences in the duties owed to clients between Florida and Washington.” I totally hear you, and yes, there is some slightly different language used between these two states… but determining how exactly they differ might take a Supreme Court ruling. Let’s compare the duties a Florida transaction broker owes to their customers with what a dual agent in Washington owes to their clients:

“A Florida Transaction Broker owes the duties of honest and fair dealing, accounting, skill/care/diligence, disclosure, presentation of all offers, and limited confidentiality” Florida Statute 475.278.

“A Washington Dual Limited Agent owes the duties of honesty and good faith, accounting, skill/care, disclosure, presentation of all offers, confidentiality” RCW 18.86.120.

On top of these duties, Washington dual limited agents must “take no action that is… detrimental to either principal,” must disclose conflicts of interest, and must make a good faith effort to find a property for the client. These are basically offshoots of the duties of skill/care, disclosure, and honesty, which are duties also owed by Florida transaction brokers.

Now, I want to be clear that I am speaking in generalities here–there may be subtle differences between the dual agency laws in each of these states with which I am unfamiliar. However, if you simply take Florida at its word when it says “a real estate licensee may not operate as a… dual agent” Florida Statute 475.278, you will miss the fact that Florida does allow something that is almost exactly like limited dual agency in Washington.

I’m not the only one who thinks that dual agency being illegal often looks exactly the same as when it is legal. An article in the Hastings Law Journal asserts that the “statutory schemes” in different states regarding dual agency still usually permit a form of dual agency, saying “It bears repeating that each of these statutory schemes share one important feature—none outright prohibit a single Broker from representing (in some capacity or another) both parties in the same transaction.”

Though Washington and Florida make a clear definition of dual agency difficult to determine, neither of these states force an agent to be loyal to more than one party in a transaction. This makes sense, because you can’t easily be loyal to two opposing parties at the same time. However, in some states, a dual agent owes the duty of loyalty to both sides of the same transaction. California Civil Code § 2079.16 says that a dual agent owes “to both the Seller and the Buyer… a fiduciary duty of… loyalty in dealings with either the seller or the buyer.”

Being loyal to two opposing parties in the same transaction seems confusing, right? The California Supreme Court is also confused, noting in the case Horiike v. Coldwell Banker that California’s dual agency disclosure statute was “not intended to address the fundamental problem in dual agency relationships.” The court also noted that the legislature enacting California’s dual agency law “knew of these concerns when it enacted the disclosure statute” but “opted not to address them directly.” Basically, the court said that dual agency law in California has inconsistencies that were not adequately addressed by the legislative body that enacted them.

To review, Florida has outlawed dual agency, but transaction brokers in Florida function almost exactly like dual agents in Washington. However, California’s dual agency is almost the polar opposite of these two states, which themselves are supposedly opposites, but in fact are essentially the same.

If this seems confusing, I want to clarify that this article is not meant to clarify this issue in any way; I simply want to point out how difficult it is to find a clear and consistent definition of dual agency. If you feel after reading this article that you know even less about what dual agency is than you did before, then I have achieved my goal. If you have one takeaway from my rambling, it’s that you should be extremely careful and knowledgeable about the laws in your state if you’re practicing real estate. Remember that law is essentially philosophy; it might be easier to answer the question “if a tree falls in the woods, does anyone hear it?” than to find a consistent legal definition of what dual agency is, and whether or not it’s legal.

https://hastingslawjournal.org/wp-content/uploads/72.2-Bayer.pdf

https://www.hauseit.com/transaction-broker-florida-real-estate/What%20are%20the%20duties%20of%20a%20transaction%20broker%20in%20Florida?

https://www.hauseit.com/can-a-real-estate-agent-represent-two-buyers-on-the-same-property/

https://listwithclever.com/dual-agency/

https://www.legis.iowa.gov/docs/code/543B.56.pdf

https://dprfiles.delaware.gov/realestate/CIS-Residential-1-4-Families.pdf

https://www.car.org/-/media/CAR/Documents/Transaction-Center/PDF/Standard-Forms/December-2018/December-2018—Legal-Forms/AD_12-18_LegalChange_Draft5.pdf?la=en&hash=8F0FC03A2AEC7B6F2A009AF4154D164738D9ADEA

https://www.thompsoncoburn.com/insights/blogs/the-ground-floor/post/2016-11-30/i-m-yours-and-yours-california-supreme-court-puts-restrictions-on-dual-agents

https://oregon.public.law/statutes/ors_696.800


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