Sacramento Law Group

Dual Agency In California Real Estate Transactions

Real estate agents and brokers have fiduciary obligations to their clients, but fulfilling those obligations when representing both the buyer and seller can be difficult.  When the same agent or brokerage represents the buyer and seller in the same transaction, the broker and agents under the same broker act as dual agents.  In that instance, the dual agency relationship must be disclosed and consented to by the parties.  Moreover, the dual agent must constrain the information they relay

Fiduciary Obligations

Real estate agents and brokers (hereinafter collectively referred to as “agents”) owe their clients, whether those clients are the buyer or seller, fiduciary obligations and must act with the highest degree of loyalty and good faith. In practice, this agency relationship requires agents to be honest and truthful with their sellers or buyers and give full disclosure of all material facts that could influence their client’s decision to move forward with the sale. In practice, these obligations require agents to operate only in their client’s interest. However, buyers and sellers in real estate transactions have divergent and competing interests. Both parties want the benefit of the bargain, and oftentimes that benefit comes at a cost to the other party.

In light of the competing interests between buyer and seller, California surprisingly permits dual agency in real estate transactions, meaning that a real estate agent or broker can represent both the buyer and seller in the same transaction.  However, dual agents must disclose the dual agency to both the buyer and seller and obtain their consent to the dual agency relationship.

What Dual Agency in Real Estate Looks Like

Dual agency can arise when (1) a single real estate agent or (2) separate agents under the same broker represent the buyer and seller in a real estate transaction.  Accordingly, even when separate agents in the same brokerage represent different parties in a real estate transaction, dual agency exists.  For instance, if the seller’s agent and buyer’s agent are under the same broker, each agent is considered a dual agent.

The Undisclosed Dual Agent

Dual agency may arise not only by express agreement but also by implication. As stated by the court in Wright v. Lowe (1956) “An implied agency may arise from the words and conduct of the parties and the circumstances of the particular case.” Consequently, when a real estate agent for the seller assumes duties or responsibilities for the buyer to facilitate a sale, dual agency may arise. In Wright v. Lowe, an agent for the seller transmitted the seller’s offer to a buyer. The buyer in turn formulated a counteroffer in which a low down payment would be achieved by deductions from the purchase price for assessments and loans. However, the counteroffer was not transmitted directly from the buyer to the seller, but rather through the seller’s agent, who upon transmitting the buyer’s counteroffer to the seller became a dual agent. An agent in this implied dual agency must give full disclosure to the buyer and seller and obtain consent to dual agency from both principals. If the agent fails to obtain this consent and make full disclosure they have become an undisclosed dual agent. Upon becoming an undisclosed dual agent, either principal may avoid their obligations under the real estate purchase agreement by rescinding the contract. The right to rescind the contract where an undisclosed dual agent exists is not predicated upon a showing of fraud or injury. The mere existence of the undisclosed dual agent gives rise to the right of rescission and leaves the undisclosed agent liable for damages suffered by the parties.

Dual Agency Disclosure & Consent

Nearly all California real estate agents disclose and obtain consent to dual agency by using CAR form AD (Disclosure Regarding Real Estate Agency Relationships) and Paragraph 2B of the RPA (Real Estate Purchase Agreement) which lists the seller and buyer’s brokerage firm, agent, and a checkbox if the agent is acting as a dual agent.

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