Section 2 - Dual Agency

022 NC Real Estate Commission Page 55

Section 2

Dual Agency: Who Do You

Represent?

“The Undisclosed Pitfall”

Sam and Melissa are affiliated brokers with ABC Homes. Sam meets with

Lucas, a prospective seller, and Lucas enters into a listing agreement with

ABC Homes. He does not agree to dual agency. Lacy, a buyer-client, enters

into a written buyer agency agreement with Melissa, but dual agency is

not discussed.

Lacy views the property owned by Lucas and is interested in making an

immediate offer on the property.

• Can Sam and Melissa legally practice dual agency in this transaction? YES/NO

Why or why not?

LEARNING OBJECTIVES

After completing this section, you should be able to:

• explain the basic requirements of Commission Rule 58A .0104;

• define dual agency;

• describe how to legally practice dual agency;

• explain designated dual agency;

• list an advantage of designated dual agency; and

• identify some policies a BIC should consider before allowing the practice of

designated dual agency in the firm/company.

2022-2023 General Update Course

TERMINOLOGY

Agency Concepts

• Agency: The relationship that exists when one person or entity is authorized to

act for and on behalf of another.

• Agent: The person or entity acting for and on behalf of the principal within the

bounds of the authority granted and who owes fiduciary (legal) duties to the

principal.

• Principal / Client: The party who authorizes another (the agent) to act on the

principal’s behalf within specified parameters and to whom the agent owes

certain legal duties.

• Dual Agency: The practice of one firm/sole proprietorship representing both the

buyer and the seller in the same real estate sales transaction.

• Designated Dual Agency: The practice of one brokerage company representing

both the buyer and the seller but designating individual brokers to exclusively

represent either the buyer’s or seller’s interest.

NOTE: Commission rules commonly use the term firm. However, these rules apply to

firms AND sole proprietorships. According to the BIC Best Practices Guide, a firm may

be a corporation, partnership, limited liability company, or any other type of business

entity. Also, prior to a firm conducting brokerage activity, a firm license is required. A

sole proprietorship is a business that is owned and managed by one individual who is

solely responsible for its debts and obligations. A sole proprietorship may have more

than one broker associated with their company as well.

AGENT’S FIDUCIARY DUTIES

It is important for brokers to remember that an agency relationship is created when the

principal authorizes the agent to act on their behalf. Therefore, we need to review the

fiduciary duties that an agent owes a principal before we begin the discussion on dual

and designated dual agency.

A fiduciary is a person who acts for another in a relationship of trust and who is

obligated to act in the other’s best interests, including placing the other’s interests

before their own. Brokers must act as fiduciaries for their principals while conducting

brokerage activities.

What are the fiduciary duties owed to a principal?

A fiduciary must:

• be obedient to the principal (e.g., follow all lawful directives);

• be loyal to the principal;

• disclose all facts to the principal that may influence the principal’s

decision;

• preserve all personal, confidential information about the principal that is

not a material fact;

• account for the funds of the principal; and

• exercise skill, care, and diligence in the performance of their duties; and

in addition, all brokers must operate in good faith to promote the principal’s interests.

In plain words, when a principal employs a real estate broker as an agent, that principal

is entitled to receive absolute loyalty and obedience from the agent. This means that

the broker cannot advance their own personal, business, or family interests above their

principal’s interests. The principal’s interests must be the top priority of the agent.

Also, the agent may not participate in conduct that will compromise or divide the

loyalty they owe to the principal. Basically, the agent cannot participate in activities

that will be adverse to the interests of the principal. Also, the agent must comply with

all lawful instructions of the principal and ensure they are fulfilling the terms of the

agency agreement.

Agency Agreements and Disclosures

Prior to establishing an agency relationship with a principal, a broker must adhere to

the requirements set forth in Commission Rule 58A .0104(c). This rule states:

In every real estate sales transaction, a broker shall, at first

substantial contact with a prospective buyer or seller, provide

the prospective buyer or seller with a copy of the publication

“Working with Real Estate Agents,”… review the publication

with the buyer or seller, and determine whether the agent will

act as the agent of the buyer or seller in the transaction.

It is imperative that the broker provide and review the WWREA Disclosure form to the

prospective buyer or seller at first substantial contact in all sales transactions (i.e.

residential and commercial). The WWREA Disclosure form informs the prospective buyer

or seller not to share confidential information before an agency relationship is created.

It further educates the consumer on the type of agency options that a firm/company

may provide during representation.

After the WWREA Disclosure is provided and reviewed, the consumer has the ability to

make an informed decision regarding the type of agency relationship, if any, they would

like to enter into with the firm/company.

If the prospective buyer or seller decides against entering into an agency relationship

with the broker, the broker does not owe any fiduciary duties to the individual under

agency law. For example, if the broker receives any personal, information from the

consumer, the information is not considered confidential and can be shared with others.

Are agency agreements required to be in writing?

Yes. An agency agreement must:

• be in writing;

o listing agreements must be in writing before brokerage services are

provided

o buyer agency agreements must be in writing no later than the time one of

the parties makes an offer to purchase, sell, rent, lease, or exchange real

estate to another

• identify and be signed by all parties and include the broker’s license number;

• have a definite termination date on which it automatically expires; and

• contain the fair housing non-discrimination language as stated in Rule 58A

.0104(b).

Also, all agency agreements must be expressed from the beginning before any

brokerage services can be conducted. An express agreement means that the agreement,

even if oral, includes all of the contractual terms between the parties.

When must an agency agreement with sellers or lessors be in

writing?

Rule 58A .0104(a) indicates that brokers may not provide any sales, leasing, or

management services for any property owner without having a written agency

agreement from the onset of the brokerage relationship.

What if a broker is only providing limited brokerage services? Is an agency

agreement required for the limited brokerage services? Yes. It does not matter if

the broker is providing full or limited services, the agency agreement must still be

executed in writing before the agreed upon services are provided. If the broker does

not have a written agency agreement, they may be forfeiting any right to receive

compensation.

Also, Rule 58A .0104(a) states that every agency agreement must specify a definite

termination date on which the agency agreement will automatically expire. However,

an agency agreement (e.g. property management) between a landlord and broker to

procure tenants or receive rents for the landlord’s property may allow for an automatic

renewal so long as the landlord may terminate without notice at the end of the contract

period and any subsequent renewals.

When must an agency agreement with buyers and tenants be in

writing?

A buyer agency agreement with a buyer/tenant must be reduced to writing and signed

no later than the time one of the parties makes an offer to purchase, sell, rent, lease,

or exchange real estate to another. However, if the policies of a firm/company permit

a broker to enter into an oral buyer agency agreement, then the broker may do this

initially.

However, oral buyer agency agreements must be express and permit the buyer/tenant

to work with other agents for an undetermined time period. In other words, the oral

agreement may not be exclusive and obligate the buyer/tenant to work only with the

firm/company for any period of time. The moment the buyer agency relationship is

restricted to a specific time period or to only one brokerage company, the agency

agreement must immediately be reduced to writing and signed by all parties.

DUAL AGENCY

“But Everyone Agreed”

Alice, a broker with 123 Realty, enters into an oral buyer agency agreement with

Bernice, a buyer-client. Bernice is interested in purchasing two parcels of land

listed by 123 Realty. Alice tells Bernice that the seller has provided the firm with

written authorization to practice dual agency. She also tells Bernice while

reviewing the WWREA Disclosure, that the firm can represent her as a dual agent

as well if she agrees to this type of agency representation.

Before agreeing to representation, Bernice asks Alice to explain the concept of

dual agency. Alice uses the WWREA Disclosure and Questions and Answers: on

Working with Real Estate Agents brochure to assist her with answering questions

about dual agency. Bernice verbally agrees to dual agency representation. After

the verbal agreement, Alice submits an offer to the sellers on behalf of Bernice.

Did Alice violate License Law and Commission rules? YES/NO?

If so, how?

What is dual agency?

Dual agency exists when a firm/company or sole practitioner represents both the

interests of the prospective buyer and prospective seller in the same real estate

transaction.

Does dual agency always involve only one individual broker

representing both buyer and seller in a transaction?

No. There continues to be confusion about how many affiliated brokers of a real estate

brokerage company can be actively involved in a dual agency transaction.

Perhaps the clearest illustration of dual agency is a sole practitioner who is responsible

for securing a seller-client and then a buyer-client interested in that seller-client’s

listed property. Most people can quickly appreciate the challenge that a single broker

(individual dual agent) would encounter while balancing fair and equal (neutral)

representation of both sides without sharing protected confidential client information.

But, recall that dual agency can also be practiced by a single entity. Therefore, a real

estate firm can have the listing of a seller-client and also have a buyer agency

agreement with a buyer who is interested in that particular listing. If both the buyer

and the seller clients authorize dual agency, the firm and ALL of its affiliated brokers

are in dual agency with both the seller-client and the buyer-client for this property.

The situation could mirror the sole practitioner example above, in that, a single

affiliated broker signed up both the seller and buyer clients with each authorizing the

broker to serve as the dual agent. It is more likely that one affiliated broker secured

the listing of the seller-client and a different affiliated broker created agency with the

buyer-client who is interested in the firm’s listing.

The fiduciary duties owed in dual agency are not affected whether one or multiple

affiliated brokers are involved. Involving a second affiliated broker, does not

automatically change the dual agency relationship to designated dual agency.

Additional authorization is required from both clients to practice designated dual

agency. This will be discussed further in the section.

Is dual agency legal in North Carolina?

Yes. Dual agency is legal in North Carolina as long as both parties (e.g. seller and buyer)

have provided written authorization for the agent to represent both parties in the

transaction.

“Did I Say Too Much or Too Little?”

Nelson, an agent with See Homes, represents Renee, a seller-client. In the listing

agreement, Renee provides written authority for See Homes to practice dual

agency. She also tells Nelson that he is not to share any of her confidential

information during the transaction. Renee informs Nelson that she has noticed a

weird smell coming from the right side of her house. Nelson walks outside to the

right of the house and notices puddles of water in the yard. Nelson tells Nancy

that it is normal for puddles of water to accumulate during heavy rainfall and

the new buyers can easily fix the issue. Nelson lists Renee’s property later that

evening and does not include any information about the water puddles in the

yard.

Donna, an unrepresented buyer, contacts Nelson and inquires about Renee’s

property. During the conversation, Nelson reviews the property details with

Donna and the WWREA Disclosure form. Nelson informs Donna that he can

represent her in the transaction if she would agree to dual agency

representation. Donna agrees to dual agency representation in the written buyer

agency agreement. Nelson communicates to Renee that he is now acting as a

dual agent in the transaction.

Nelson discloses the material facts to Donna. He further tells her that Renee will

accept $10K less than the list price of the home because she knows the property

needs some repairs. A couple of hours later, Donna submits an offer on Renee’s

property for $10K less than the listing price. Nelson reviews the offer with Renee;

she accepts the terms of the offer and enters into a contract with Donna.

Did Nelson violate Commission rules? If so, how?

Does a dual agent owe fiduciary duties to both the buyer and the

seller clients?

Yes. A dual agent owes the same fiduciary duties to both principals in a transaction.

Therefore, a dual agent must ensure that their clients are aware of the responsibilities

and fiduciary duties owed by a dual agent and provide their consent for representation.

What if the dual agent is aware of material facts regarding a property? Must the

dual agent disclose the material facts? Yes. An agent, whether acting for one client

side or both in a transaction, must disclose all facts to their principal that may influence

their decision about a property, including material facts. Therefore, a dual agent (just

like in any transaction) must disclose material facts to all parties in the transaction,

which happens to include both principals. Although material facts must be disclosed to

both principals, the dual agent must not disclose confidential information of either

client, or advocate for one client over the other during the transaction.

According to the Bulletin article, Dual Agency: When Is It Appropriate?, practicing dual

agency lawfully is challenging because the buyer and seller must agree to be

represented in an adversarial relationship by the same agent/firm. Therefore, a dual

agent must act with a combination of discretion and fairness that can often times be

difficult to balance.

Note: Brokers can potentially have more exposure to claims of conflicts of interest

when practicing dual agency. The article, Dual Agency: When Is It Appropriate? Is

reprinted at the end of this section.

Is it mandatory for sole proprietorships or firms to practice dual

agency?

No. A sole proprietorship or firm has the authority to determine the type(s) of agency

representation it will offer potential clients.

What is unauthorized dual agency?

Unauthorized dual agency occurs when a broker or brokerage company has an agency

agreement to represent one party in a transaction, but also represents another party

in the same transaction without the express written authority (i.e., authorized dual

agency) of each party. Unauthorized dual agency is illegal in North Carolina.

What is required for an agent to legally practice dual agency?

According to N.C. Gen. Stat. § 93A-(6)(a)(4), a licensee violates Real Estate License Law

if they act for more than one party in a transaction without the knowledge of all parties

for whom they act. Therefore, in order for a broker to legally practice dual agency they

are required to obtain written authorization at the beginning of the agency

relationship. The only exception for obtaining written authorization at the start of the

relationship is when a buyer or tenant is represented by a broker in an oral agreement

in adherence to Rule 58A .0104(a).

Also, as noted before, express written authority for dual agency shall be reduced to

writing not later than the time that one of the parties represented by the broker makes

an offer to purchase, sell, rent, lease, or exchange real estate to another party.

What if a broker does not receive written authority to practice dual agency? If a

broker represents more than one party in a transaction without the written authority

of each party, the broker may be in violation of Commission Rule 58A .0104(d) which

specifies:

A real estate broker representing one party in a transaction

shall not undertake to represent another party in the

transaction without the written authority of each party.

Such a violation by a broker may require a forfeiture of any commission or other

compensation for participation in the transaction.

Can one agent practice dual agency?

Yes. A sole practitioner or affiliated agent of a firm may practice dual agency and

represent both parties in the transaction as long as it is permitted in the office policies.

Note: This diagram shows one broker and/or sole practitioner who works for both the

buyer and seller in the same transaction. Both the prospective buyer and prospective

seller must consent and provide written authority to the broker and/or sole

practitioner to engage in dual agency.

Can different agents within the same firm practice dual agency?

Yes. A firm is practicing dual agency when it represents more than one party in the

same transaction. In order for dual agency to be practiced legally, the prospective

buyer and seller must both provide written authority for the firm to practice dual

agency. Therefore, a broker affiliated with the firm may work directly with the

prospective buyer-client and another affiliated broker with the same firm may work

directly with the prospective seller-client; both affiliated brokers remain in dual agency

with both clients, just like all of the brokers affiliated with the firm.

If one broker in the firm assists the prospective buyer and another broker in the

firm assists the prospective seller, isn’t it automatically considered designated

dual agency? No. If there are two agents affiliated with the same firm representing

the buyer and the seller in the transaction, this is considered dual agency. Although the

brokers work for the same firm, they have not been designated to represent only the

interest of the buyer and/or seller. Designated dual agency does not exist

automatically. It is created when the parties provide written authority and the firm’s

policies permit it.

“The Dual Agency Firm”

John and Tasha are brokers affiliated with XYZ Homes. John represents Tim, a

seller-client, and Tasha represents, Sara, a buyer-client. Tim and Sara have

provided authorization for XYZ Homes and their agents to practice dual agency

in the agency agreements.

Sara is interested in purchasing Tim’s property. Tasha informs Sara that she will

provide her with all of the seller disclosures, CMA’s, and property information to

assist her with making an offer on Tim’s property. Tasha further proceeds to tell

Sara that she can not advise her on what offer to submit on the property.

XYZ Homes only practices dual agency. It does not allow the practice of

designated dual agency.

Are John and Tasha designated dual agents for Tim and Sara, respectively? YES/NO

NOTE: This diagram is an example of the most common form of dual agency. This

example displays two brokers who are both affiliated with the same firm and/or

company. Broker A is working directly with the buyer and Broker B is working directly

with the seller. The firm and/or company and all of its brokers represent both the

buyer and the seller. The brokers have divided loyalty between the buyer and seller.

Both the prospective buyer and seller must consent and provide written authority for

the firm and/or company to engage in dual agency.

Can dual agents share confidential information with either

principal?

No. A dual agent must treat buyers and sellers fairly and equally and cannot help one

party gain an advantage over the other party. Dual agents owe both their clients the

same fiduciary duties and must not divulge confidential information about either party

to the other without prior permission.

Can a dual agent reduce potential conflicts of interest by fully

explaining their duties and obligations owed to each client?

Yes. A dual agent can reduce potential conflicts of interest by explaining the fiduciary

duties they owe to each principal while practicing dual agency. Additionally, if a client

is not comfortable with the firm representing both parties from the neutral dual

position, the firm can offer designated dual agency representation as an option if it is

offered by the firm. Both principals would have to approve designated dual agency

representation.

NOTE: Designated dual agency cannot be practiced by a sole practitioner.

“The Errors of Latrice’s Ways”

Latrice, a broker with A+ Realty, lists her residential property with her firm.

Latrice completes all seller disclosures and marks “No Representation” on the

Residential Property and Owners’ Association Disclosure Statement.

Sarah, an unrepresented buyer, is interested in Latrice’s property. Latrice

informs Sarah that she owns the property but can still represent her during the

transaction if she provides Latrice with her written, informed consent. Sarah

signs the written buyer agency agreement and provides written authority for A+

Realty to practice dual agency.

Latrice and Sarah view the property. During the walk through, Latrice provides

Sarah with information regarding the property such as the seller disclosures she

completed and a Comparative Market Analysis for the area. Latrice also makes

Sarah aware that she cannot advise her on what price to offer because she is

acting as a dual agent.

Sarah tells Latrice that her pre-approval amount is $417,000, and states that this

is also the price she wants to offer for the property. Latrice completes the

Standard Form 2-T, Offer to Purchase and Contract using the information

provided by Sarah. Upon completing the offer, Latrice signs it and enters into a

contract with Sarah.

Sarah closes on the property within 30 days.

What errors, if any, did Latrice make during this transaction?

Can a broker selling their own residential property act as a dual

agent and represent a buyer in the transaction?

No. According to Rule 58A .0104(o), a broker who is selling property in which the broker

has an ownership interest shall not undertake to represent a buyer of that property.

Reality check: how can the seller-broker not share the buyer-client’s confidential

information with themselves?!

Can a broker selling their own commercial property act as a dual

agent and represent a buyer in the transaction?

It depends. A broker who is selling commercial real estate as defined in Rule 58A .1802,

in which the broker has less than 25% ownership interest, may represent a buyer of that

property if the buyer consents to the representation after full written disclosure of the

broker’s ownership interest. If the broker has more than a 25% ownership interest in

the property, then they cannot represent a buyer in the transaction.

Can a firm/company act as a dual agent for a property listed by an

affiliated broker-owner?

Yes. A firm/company may act as a dual agent for a property listed by an affiliated

broker as long as the broker representing the buyer on behalf of the firm does not have

an ownership interest in the property. The buyer must also consent to the

representation after full written disclosure of the affiliated broker’s ownership interest

in the listed property.

DESIGNATED DUAL AGENCY

Designated agency is a subcategory of dual agency. Subsections (j)-(m) of Rule 58A

.0104 authorizes real estate firms to engage in an optional form of dual agency known

as designated agency, in certain sales transactions involving in-house dual agency.

Designated dual agency involves appointing or “designating” individual broker(s) in a

firm to represent only the interests of a seller and other individual broker(s) in the

same firm to represent only the interests of a buyer in a transaction.

“How Many Wrongs Make a Right?”

Stephanie, the BIC of XYZ Homes, designates Frank to represent Stacey, the

seller-client and Donnell to represent Chris, the buyer-client, after both

principals provide written authorization for designated dual agency. Prior to

being designated dual agents, neither Frank nor Donnell have prior confidential

information about the principals. Further, Stephanie reminds Frank and Donnell

not to share any confidential information about their clients without the clients’

permission.

The next day, Frank and Donnell are having a conversation. Frank tells Donnell

that his client, Stacey, will accept any amount over the asking price because she

has to catch up on her past due alimony payments.

Did Frank violate Commission rules? YES/NO If so, how?

Should Donnell inform Chris of the information he learned from Frank? YES/NO

Why or why not?

What is designated dual agency?

Designated dual agency exists when both the buyer and seller clients provide written

authorization for the firm/company that represents them both to designate one or more

individual brokers to represent only their interests during the transaction. In other

words, one or more brokers represent only the interests of the seller-client, and one or

more brokers represent only the interests of the buyer client.

Although the buyer and seller are both clients of the same firm/company, the buyer

has a designated agent and the seller has a designated agent. Therefore, the designated

agents represent only the interests of their respective clients. Be aware that an

individual broker cannot be designated and represent only the interests of one party if

the broker has received prior confidential information concerning the other party in the

transaction.

NOTE: This diagram displays a space between Broker A and Broker B. Broker A and

Broker B work for the same firm and/or company and the firm/company represents

both the buyer and seller in the same transaction. However, Broker A has loyalty only

to the buyer and Broker B has loyalty only to the seller.

When is authorization required for designated dual agency?

Pursuant to Rule 58A .0104(d), the written authority for designated dual agency shall

be reduced to writing not later than the time the parties are required to reduce their

dual agency agreement to writing.

Remember, the written authority for dual agency must be obtained at the formation of

the relationship except when a buyer or tenant is represented by a broker without a

written agency agreement. Under such circumstances, the written authority for dual

agency shall be reduced to writing not later than the time that one of the parties

represented by the broker makes an offer to purchase, sell, rent, lease, or exchange

real estate to another party.

Note: If the buyer agency agreement is in writing from the outset of the agency

relationship, then both the listing agreement and buyer agency agreement need to

include written authorization for dual and/or designated dual agency before any in-

house listings can be shown.

NOTE: Both parties must request designated dual agency in the written agreements

before it can be practiced.

What is an advantage of designated dual agency?

The advantage of designated dual agency over standard dual agency is that each of the

firm’s clients (seller and buyer) receive representation more like single agency than

dual agency.

In the typical dual agency situation, client advocacy is lost because the dual agent may

not advocate for one client to the detriment of the other client.

This leads to the dual agent remaining impartial at all times. However, designated dual

agency allows agents to fully represent the interests of their respective clients, allowing

agents to advise their clients during the transaction.

Can a sole practitioner practice designated dual agency?

No. A sole practitioner is one broker; therefore, one broker cannot practice designated

dual agency. Designated dual agency requires one or more brokers to be designated to

represent only the interests of the seller and one or more other brokers to be designated

to represent only the interests of the buyer.

Must a firm/company practice designated dual agency?

No. A firm/company has the ability to determine what type(s) of agency representation

they will offer to prospective clients.

What is required for a firm/company to practice designated dual

agency?

In order for a firm/company and its affiliated brokers to legally engage in designated

dual agency, the designated brokers must NOT know confidential information about the

opposing parties prior to designation. In other words, the agent being designated for

the buyer must not have/know confidential information about the seller, and vice

versa.

If a brokerage company would like to have affiliated brokers eligible to offer designated

dual agency, it would be in the company’s best interest to publish policies that support

the confidentiality of information about the company’s clients. For example, a company

policy might limit the sharing of any client’s confidential information to only affiliated

brokers that legally need to know the information. This policy would minimize the

possibility of a broker not being eligible for designation because they already possess

confidential information about one of the sides of the transaction.

NOTE: According to Rule 58A .0104(m), a broker designated to represent a buyer or

seller shall disclose the identity of all of the brokers so designated to both the buyer

and the seller. The disclosure shall take place no later than the presentation of the

first offer to purchase or sell.

Is designated dual agency automatic when two brokers from the

same firm each represent the buyer-client and seller-client?

No. If there are two agents affiliated with the same firm representing the buyer and

seller in the transaction, this is considered dual agency. Although the two agents work

for the same firm/company, they have not been designated to represent only the

interests of the buyer or seller. Designated dual agency does not exist automatically

unless it is stated in the written office policies and written authority is provided by the

client.

“Here We Go Again”

Lisa and Stan are brokers with ABC Realty. Tom and Mary are clients of the firm

and have authorized ABC Realty to practice dual agency and requested the firm

to designate brokers to represent each of their respective interests. The BIC of

ABC Realty has designated Lisa to represent Tom, the seller-client, and Stan to

represent Mary, the buyer-client.

Lisa lists Tom’s property for $875,000. Mary is interested in purchasing Tom’s

property and Stan submits an offer on Mary’s behalf.

While advocating for their respective clients, Stan informs Lisa that Mary needs

to purchase a property quickly because she needs to start a new job. Therefore,

she is willing to offer more to entice Tom to accept her offer if necessary. Lisa

is shocked by Stan’s comment and begins to walk towards the BICs office.

Has Stan violated Commission rules? YES/NO

Why or why not?

Can a broker practicing designated dual agency share confidential

information about their client?

No. A designated dual agent is required to act only in the best interests of their client

and this includes ensuring confidential information is not shared with anyone, including

the opposing designated party, without permission.

Pursuant to Rule 58A .0104 subsections (k) and (l), the broker so designated shall not,

without their client’s permission, disclose to the other party or the broker designated

to represent the other party:

(1) that a party may agree to a price, terms, or any conditions of sale other than

those offered;

(2) the motivation of a party for engaging in the transaction, unless disclosure is

otherwise required by statute or rule; and

(3) any information about a party that the party has identified as confidential, unless

disclosure is otherwise required by statute or rule.

What if a designated dual agent acquires confidential information about the firm’s

other principal (e.g., the opposing party) after being designated? Should the

designated dual agent disclose this information to their principal? Yes. Designated

dual agency allows a broker to exclusively represent a designated principal’s interests

including advocating on their behalf and advising them during the transaction. If a

broker learns confidential information post-designation about the designated

principal’s opponent, who is also the firm’s principal, the broker would need to share

this information with their designated principal.

Although, the designated agent must inform their principal of the information they have

acquired post-designation, the brokerage company may incur civil liability and/or be

subject to disciplinary action due to the poor handling of confidential information of

their other principal.

NOTE: Rule 58A .0104(k) and (l) prohibits a designated dual agent from disclosing

information about their designated principal which does not rise to the level of

material facts to the company’s opposing principal (or designating agent for the

opposing principal) without the consent of the broker’s own designated principal.

In order to prevent improper disclosure of confidential information in designated dual

agency transactions, a BIC should have office procedures and policies in place to

maintain the confidentiality of client information.

Can designated dual agents be full or provisional brokers?

Yes. Designated dual agents may be full or provisional brokers pursuant to Commission

rules. However, a BIC cannot act as the designated agent for a party in a real estate

sales transaction when a provisional broker under their supervision acts as a designated

agent for another party. A firm/company may have a policy that prohibits the practice

of designated dual agency by specific agents.

“The BIC & the PB”

Mary, a consumer, contacts ABC Homes to inquire about a property listed by the

firm. Victoria, a provisional broker, answers the call. After Victoria provides

and reviews the Working with Real Estate Agents Disclosure, Mary decides that

she wants Victoria to represent her in the transaction and enters into a written

buyer agency agreement authorizing designated dual agency.

Before showing the property to Mary, Victoria speaks to Jamie, the BIC, about

Mary’s interest and desire for designated dual agency. Since there are only the

two of them in the firm, Jamie tells Victoria that she will be the designated

agent for Mary and he will be the designated agent for Alan, the seller-client.

Jamie also assures Victoria that any information she submits in the transaction

file will not be disclosed to Alan although Jamie still has to review it.

Did Victoria violate Commission rules? YES/NO Why or why not?

Did Jamie violate Commission rules? YES/NO Why or why not?

Can a BIC practice designated dual agency?

Yes. A BIC can be a designated broker for a party in a real estate sale transaction.

However, a BIC cannot act as the designated agent for a party in a real estate sales

transaction when a provisional broker under their supervision acts as a designated agent

for another party with a competing interest according to Rule 58A .0104(j).

In the Commission article, BICs and Designated Dual Agency Transactions – Room for

Conflicts!, the Commission states a best practice for BICs is to not represent a party in

a designated dual agency situation. Basically, if BICs adopt this practice it can reduce

the chance that a BIC may violate Commission rules for either:

• failing to maintain and review transaction records, or

• learning confidential information about the other party and using or (failing to

use) that confidential information to the advantage of their client in a designated

dual agency situation.

If a BIC decides to represent a party in a designated dual agency transaction, the BIC

must establish policies and procedures to ensure compliance with the Commission’s

rules. The BIC should also designate another broker in the office to collect and review

records from the transaction. This will prevent the BIC who is a designated dual agent

from having access to confidential information about the other party in the transaction.

It may also provide comfort to the other designated dual agents that they can provide

records in compliance with Rule 58A .0108(d) and not have their client’s confidential

information inappropriately shared with the other party in a designated dual agency

transaction.

“There is a Difference”

West is a broker affiliated with 123 Homes. West is contacted by Joe, a

prospective seller, because he is interested in listing his property. Joe enters

into a listing agreement with West at the conclusion of the listing presentation.

In the listing agreement, Joe authorizes 123 Homes to practice dual agency and

requests specifically designated dual agency.

West has been working with Fran, a buyer-client. Fran previously provided 123

Homes authorization to practice dual agency in the buyer agency agreement.

However, West does not discuss designated dual agency as an option with Fran.

West informs Fran that the firm just acquired a new listing and that she may be

interested in purchasing this type of property. Fran views the property with West

and decides to submit an offer.

West submits and reviews the offer with Joe. Joe agrees with the terms of the

offer and enters into a contract with Fran. Prior to settlement, Joe reviews the

contract again and realizes that West acted as a dual agent for both parties. Joe

calls West and indicates his anger and dissatisfaction with West also representing

Fran in the transaction.

Did West violate Commission rules? YES/NO Why or why not?

What should a BIC consider before allowing the practice of

designated dual agency in their firm/company?

A BIC should consider developing written office policies to determine how:

• information will be shared,

• files will be managed, and

• confidential information will be protected and not distributed to designated

agents of opposing parties.

For example, the BIC should determine how much information, if any, would be shared

about a property at an office meeting. If the BIC allows information to be shared that

relates to the property only, then the likelihood of an agent extracting personal,

financial, or confidential information about a client during the meeting may be

substantially reduced.

SUMMARY OF IMPORTANT POINTS

• Brokers must act as fiduciaries for their principals while conducting real estate

transactions.

• A fiduciary must:

o be obedient to the principal (e.g., follow all lawful directives);

o be loyal to the principal;

o disclose all facts to the principal that may influence the principal’s decision;

o preserve all personal, confidential information about the principal that is not

a material fact;

o account for the funds of the principal; and

o exercise skill, care, and diligence in the performance of their duties; and

o operate in good faith to promote the principal’s interests

• An agent cannot advance their own personal, business, or family interests above

their principal’s interests.

• An agent must comply with all lawful instructions of the principal that are consistent

with the terms of the agency agreement.

• In every real estate sales transaction, a broker shall, at first substantial contact

with a prospective buyer or seller, provide the prospective buyer or seller with a

copy of the publication “Working with Real Estate Agents,”… review the publication

with the buyer or seller, and determine whether the broker will act as the agent of

the buyer or seller in the transaction.

• An agency agreement must:

o be in writing;

 listing agreements must be in writing before brokerage services are

provided

 buyer agency agreements must be in writing no later than the time one

of the parties makes an offer to purchase, sell, rent, lease, or

exchange real estate to another

o identify and be signed by all parties and include the broker’s license number;

o have a definite termination date on which it automatically expires; and

o contain the fair housing non-discrimination language as stated in Rule 58A

.0104(b).

• All agency agreements must be express from the beginning before any brokerage

services can be conducted.

• An express agreement means that the agreement includes all of the terms of the

agreement between the parties.

• Oral buyer agency agreements must be express and permit the buyer/tenant to work

with other agents for an undetermined time period.

• A buyer agency agreement with a buyer/tenant must be reduced to writing before

the presentation of any offer being made or received by the buyer/tenant.

• If a firm/company or sole practitioner represents more than one party in the same

real estate transaction, this is considered dual agency.

• Dual agency is legal in North Carolina as long as both parties (e.g., seller and buyer)

have provided written authority for the agent to represent both parties in the

transaction.

• A dual agent owes the same fiduciary duties to both the principals in the transaction.

• The dual agent must disclose material facts, but must not disclose confidential

information, or advocate for one client over the other.

• It is not mandatory that a firm/company or sole practitioner practice dual agency.

• Unauthorized dual agency occurs when a broker or brokerage firm has an agency

agreement to represent one party in a transaction but also represents another party

in the same transaction without the express written authority (i.e., authorized dual

agency) of each party.

• Express authority for dual agency shall be reduced to writing not later than the time

that one of the parties represented by the broker makes an offer to purchase, sell,

rent, lease, or exchange real estate to another party.

• A sole practitioner or affiliated agent of a firm/company may practice dual agency

as long as it is permitted by the office policies.

• A dual agent must treat buyers and sellers fairly and equally and cannot help one

party gain an advantage over the other party.

• A dual agent can reduce potential conflicts of interest by explaining their fiduciary

duties while practicing dual agency with both their buyer and seller clients.

• According to Rule 58A .0104(o), a broker who is selling property in which the broker

has an ownership interest shall not represent a buyer of that property.

• Designated agency is a subcategory of dual agency. It involves appointing or

“designating” individual agent(s) in a firm or sole proprietorship to represent only

the interests of the seller and other individual agent(s) to represent only the

interests of the buyer in the same transaction.

• Express written authorization for designated dual agency must be obtained from

both parties by the time any oral buyer agency agreement is reduced to writing,

which is required prior to any offers being made or received.

• The principal advantage of designated dual agency is that each of the firm’s clients

(seller and buyer) receive representation that is more like single agency than dual

agency.

• Rule 58A .0104(k) and (l) prohibits a designated dual agent from disclosing

information about their designated principal which does not rise to the level of

material facts to the company’s opposing principal, or designating agent for the

opposing principal, without the consent of the broker’s own designated principal.

• Designated agents may be full or provisional brokers pursuant to Commission rules.

• A BIC can be a designated agent for a party in a real estate sale transaction as long

as the designated agent for the opposing party is not a provisional broker under that

BIC’s supervision.

ANSWERS TO DISCUSSION QUESTIONS

For Discussion on Page 55

“The Undisclosed Pitfall”

Sam and Melissa are affiliated brokers with ABC Homes. Sam meets with Lucas, a

prospective seller, and Lucas enters into a listing agreement with ABC Homes. He does

not agree to dual agency. Lacy, a buyer-client, enters into a written buyer agency

agreement with Melissa, but dual agency is not discussed.

Lacy views the property owned by Lucas and is interested in making an immediate offer

on the property.

Can Sam and Melissa legally practice dual agency in this transaction? YES/NO Why or

why not?

Answer: No. Sam and Melissa cannot legally practice dual agency. Dual agency

is legal in North Carolina as long as both parties (e.g. Lucas and Lacy) have

provided written authorization for the agents to represent both parties in the

transaction. Lucas did not provide written authorization for dual agency and

Melissa did not even discuss dual agency with Lacy. Therefore, if Sam and

Melissa proceed to represent Lucas and Lacy in this transaction, they are

participating in unauthorized dual agency. Unauthorized dual agency occurs

when a broker or brokerage company has an agency agreement to represent one

party in a transaction but also represents another party in the same transaction

without the express written authority (i.e., authorized dual agency) of each

party. Unauthorized dual agency is illegal in North Carolina.

For Discussion on Page 59