Dual Agency in Massachusetts

Bob Falter, Ph.D.GRI, ABR, SRES, e-PRO, LMC, SFR, BPOR

Produced by Paula K. Savard

Dual Agency in Massachusetts

• An individual agrees to represent both the buyer and the seller in the same transaction.

• Buyer and Seller must each have knowledge of dual representation and consent to it in writing.

• The individual agent is a dual agent.

• The firm with whom the individual agent is associated is a dual agent.

License Law now designed to

• Identify that dual agency exists.• Provide guidance to licensee on how to

function as a dual agent.• achieve informed written consent to dual

agency.• Explain dual agency to the public.

Statute and Regulation

• Legislature made the law.• Board of Registration of Real Estate Brokers

and Salesman made and enforces the specific regulations regarding licensees.

• However you choose as your way of doing business, and your BROKER’S choices are specifically described in the regulations.

History of Brokerage Relationships in Massachusetts

• Statute of Massachusetts Law Chapter 112 Section amended with new section 87AAA ¾.

• a. Disclosure Applies to 1-4 residential.• b. may act as a dual agent.• c. may act as a designated agent.

History of Real Estate Relationships, Board of Registration of Real Estate Brokers and Salesmen

REGULATIONS• 1960’s Licensure… Grand fathered existing

practitioners.• 1990 Disclosure.. Unless otherwise agrees all broker

and salespersons represent the seller.• 1993 Disclosure.. Seller Agency, Buyer Agency, Dual

Agency with informed consent. Each relationship is the responsibility of every licensee in the firm.

History of Real Estate Relationships, Board of Registration of Real Estate Brokers and Salesmen

Regulations• 2005 Disclosure… Seller agency, Buyer Agency, Dual

Agency with informed consent, Designated Agency, Facilitator.

• Does everyone in the firm have a fiduciary duty to advocate for each and every client of the firm? OR

• Does the individual agent and their supervising broker have the fiduciary duty to advocate for their designated client?

Sample Placard for Open House

• Our firm proudly represents the seller of this property.• We can offer you buyer representation as well.• If you are currently represented by your own agent, when you

sign in, please leave your agent’s name and phone number as well as your own name.

• 254 CMR 3.00(13)(a)(3) at an Open House the RE licensee must conspicuously post and/or provide with other written materials any relationship so that the attendees can understand the relationship they may have with the licensee conducting the open house.

LICENSE LAW DEFINITIONS

• AGENT - one who represents the interests of another (principal or client or real estate broker).

• PRINCIPAL - commonly known as the person who engages the agent for representation.

• CLIENT - A person who has empowered another to act as his/representative.

LICENSE LAW DEFINITIONS

• Client relationship = fiduciary relationship• Fiduciary relationship requires agent to put

principals interest first above all others. Fiduciary requires confidentiality, obedience to lawful instruction, loyalty, accountability and diligence.

LICENSE LAW DEFINITIONS

• CUSTOMER - a person without representation involved in a transaction. All agents have a duty to treat customers fairly.

• Neither clients nor customers are bound by the license laws or the code of ethics.

• VICARIOUS LIABILITY - liability created not because of a persons actions, but because of the relationship between the libel person and other parties.

LICENSE LAW DEFINITIONS

• Example of Vicarious Liability: Real estate Broker is vicariously libel for the act of their salespeople while the salesperson is acting on behalf of the broker even if the broker did nothing to cause the liability.

• Informed Consent: Consent to certain act, this is given after a full and fair disclosure of all the facts needed to make a conscientious choice.

LICENSE LAW DEFINITIONS

• Fiduciary - A relationship that implies a position of trust or confidence where in one person is usually entrusted to hold or manage property or money of another.

• Term fiduciary describes the faithful relationship owed by broker (and salesperson) to a principal

• Fiduciary owes complete allegiance to the client.

ESTABLISHMENT OF AGENCY

• EXPRESS WRITTEN CONTRACT WHERE AGENT AND PRINCIPLE AGREE TO TERMS.

• EXPRESS ORAL CONTRACT WHERE AGENT AND PRINCIPLE AGREE TO TERMS.

• IMPLIED AGENCY.. YOU ACTED LIKE AN AGENT OR SPOKE LIKE AND AGENT, THEREFORE, YOU ARE AN AGENT.

Agents Obligations “OLD CAR”

• Obedience - agent must carry out lawful instructions of the client.

• Loyalty - agent must act in the best interest of the client.

• Disclosure - all information relevant to the transaction must be given to the client.

Agents Obligations “OLD CAR”

• Confidentiality - agent has a duty to keep client’s information or discussions confidential. This duty survives the termination of the agency relationship. This duty does not apply to legally required disclosures such as know physical or hazardous conditions in the property.

Agents Obligations “OLD CAR”

• Accountability - agent must protect and account for all money.

• Reasonable Care and Due Diligence - agent must act competently, capable of performing duties within the scope of the licensing requirements.

Brokerage Relationships and Duties for Each

• SELLER AGENCY. Real estate agents represents the seller as a client and treats the buyer as a customer.

• SELLER AGENTS duties to seller include• OLD CAR… obedience, loyalty, disclosure,

confidentiality, accountability and reasonable card and due diligence.

Brokerage Relationships and Duties for Each

• Seller Sub Agency• That the broker may cooperate

with another broker who is then a sub agent of the seller. Further, that vicarious liability is the potential for a misrepresentation or an act or omission of the sub agent and that the seller authorizes the broker or salesperson to offer sub agency.

• Seller has expressly authorized his agent to use other agents to market the seller’s property.

• Specific legal requirements to offer sub agency.

• Consent must be obtained at the execution of an agreement to sell with the seller.

Brokerage Relationships and Duties for Each

• Vicarious liability. • Under sub agency is the

potential for a seller or buyer to be held liable for an act or omission of the sub agent.

• subagents duties to the client include OLD CAR

• Except in the instance of DUAL AGENCY the subagent assumes the same split loyalty as the principal agent..

Brokerage Relationships and Duties for Each

• Buyer Agency• Duties include

Confidentiality Obedience Accountability Loyalty Disclosure, Diligence and Reasonable Care

• Real estate agent represents the buyer

Brokerage Relationships and the duties of each

• Dual Agency• Agent assists both parties• Agent is neutral and unable

to advocate for either the seller or the buyer with regard to any conflicting interest.

• Represents seller client and buyer client in the same transaction

• Has WRITTEN informed consent of both the seller and the buyer

• Maintains Confidentiality of Material Information

• Is Accountable for funds

Brokerage Relationships and the duties of each

• NON AGENT OR TRANSACTION BROKER (SALESPERSON)

• Facilitator works to complete the transaction.• Facilitator is bound by license law and Chap 93

A, but has no fiduciary relationship to buyer or seller.

Brokerage Relationships and the duties of each

• Facilitator must disclose all know material defects in the property.

• Facilitator duties consist of accounting for funds, and other facilitator duties undertaken.

• A accountability is the only duty under Massachusetts license law.. Brokerage Relationships and the duties of each.

Brokerage Relationships and the duties of each

• Designated Agent - A real estate licensee who has been specifically designated by the broker with whom they are affiliated to represent the buyer or the seller in a transaction

• Buyer or Seller client must agree.

When does Dual Agency Occur?

• Two different agents from the same firm represent both the buyer and the seller in a transaction.

• Traditional agency business model.. In house transaction.

• In such companies, even though the listing agent represents the seller and the buyer’s agent represents the buyer, both agents and their firm are dual agents since agency duties have not been restricted to individuals.

When does Dual Agency Occur?

• When a brokerage firm is authorized to appoint different individuals as designated seller’s agents and designated buyer’s agents, respectively, and their clients get into the same transaction.

• The appointing Agent becomes a dual agent.

Disclosure and Consent

• Mandatory Agency Disclosure is vehicle for licensees to disclose the agency relationship to Buyers and Sellers.

• It also provides a definition of dual agency.

• Consent to dual agency is a separate step.

Disclosure and Consent

• Under Massachusetts law, advance consent may be obtained in a listing agreement or a buyer agency agreement or in a separate consent form.

• Written consent must be obtained prior to signing a written agreement for purchase.

• A sample consent form is in your packet.

Duties of a Dual Agent

• Treat both clients honestly.• volunteer disclosure of known material defects to

the buyer.• provide market information available from a

property listing service or public records, if requested.

• prepare and present all offers and counteroffers at the direction of the parties.

Consent Forms for Dual Agency

• Consent may be obtained in listing or representation agreement.

• Stand alone consent form• If Consent is obtained prior

to occurrence, “Notice of Dual Agency” must be provided prior to offer.

• Consent forms must be signed by buyer and seller and broker or salesperson: however signatures may appear on separate forms.

• Consent forms must be kept a minimum of (three ) 3 years.

• Process for Dual Agency: 1) Disclosure, 2) Consent, 3) Notice (if applicable).

WHEN CONSENT SHOULD BE OBTAINED

• BEFORE THE TRANSACTION IS IDENTIFIED in listing agreement or buyer agency agreement.

• If this is done, SUBSEQUENT NOTICE OF OCCURRENCE with offer, is required.

• Consent must be obtained before the Occurrence of Dual Agency but no later than the execution of an Offer to Purchase.

What can a Dual Agent do for BUYERS AND SELLERS

• Objective is equal treatment and Neutrality for both Seller and Buyer.

• Treat Seller and Buyer with honesty and accuracy• Provide helpful information and description about

property to the Buyer.• Disclose all material fact about the property to the

Buyer.

What can a Dual Agent do for BUYERS AND SELLERS

• Explain Real Estate Terminology and Procedures.

• Provide licensed Property Inspectors List.• Assist the Buyer with financing Options.• Provide Public Record information, CMA

(same one to both Buyer and Seller).• Assist in Preparation of Offer to Purchase.

What can a Dual Agent do for BUYERS AND SELLERS

• Explain Consensual Disclosed Dual Agency as it relates and compares to other Agency Relationships.

A Dual Agent Should NOT

• Disclose confidential (information about people, motivation ) information received from either party, except:

• if disclosure is expressly authorized,• if such disclosure is required by law,• if such disclosure is intended to prevent illegal conduct,• if such disclosure is necessary to prosecute a claim against a

person represented or to defend a claim against the broker or salesperson.

A Dual Agent Should NOT

• Disclose that a buyer will pay a price or agree to terms other than those in the Offer, or that a Seller will accept price or terms other than those in the listing.

• Engage in conduct that is contrary to the instructions of either party

• Dual agents should separate information on that transaction from other agents in the office.

How to Disclose Agency at an Open House

• No individual notice is required to be provided to people attending.

• Agent disclosure by sign, poster, or distributed listing literature or property description form conspicuously and discloses any pre-existing agency relationship.

How to Disclose Agency at an Open House

• On such distributed material, the disclosure shall be more conspicuous than on any other written material.

Other Requirements of a Dual Agent

• All agents must, by law, present property honestly and accurately.

• Must disclose all know material facts related to the real estate.

• Must comply with License Law and 93A.• Must comply with MA and Fed Lead Paint

Law.

COMPENSATION METHODS

• COMMISSION BASED ON SALES PRICE• FLAT FEE• FEE FOR SERVICE/MENU OPTIONS• MONEY CREDITED TO SELLER AT CLOSING• Entitlement to compensation is not created by the

agency relationship