What does the term 'dual agency' mean?

Dear Kari,The agent selling our house has a buyer who wants to make an offer. How do we know the agent is not going to clue-in the potential buyers to let them know we would tolerate a severely reduced price? If the buyers had a different agent this inside knowledge would not be a factor. What should we do?Answer:When you are buying or selling a home, it's important to understand the concept of "representation." Understanding who is representing you and what they are bound, by law, to do for you is paramount to making an informed decision about who you choose to help you sell your home or to buy a new one.The legal structure within which Realtors work is called "agency." A good analogy is a triangle: The brokerage firm a Realtor works through is the top point of the triangle. As the buyer or seller, you are the "principal," or customer, the second point of the triangle. The Realtor you hire is the third point. The three points form the agency, the legal structure. Your Realtor's responsibilities are defined by state law, the Realtor Code of Ethics (an industry guideline), and the general principles of agency (remember the triangle: the brokerage at the top; then the principal; then the Realtor). It's the duty of your Realtor to exercise good faith, undivided loyalty to your best interest, and full and fair disclosure about the property and the transaction involved. Real estate law imposes these duties on Realtors through various laws, rules and regulations. Your Realtor's duty to exercise undivided loyalty means that she or he must protect your position as the customer at all times and tell you any and all facts that may affect or influence your decisions regarding the property and transaction. Also, your agent must obey all your instructions, as long as they are lawful, and keep your confidence. Your Realtor must also take reasonable care and skill in performing all the assigned duties and account for all money and property while acting for the principal – you.With the growing number of very large and widespread brokerage companies, the issue of "dual agency" comes up frequently. Imagine that triangle again, but this time with the brokerage at the top, the buyer and seller at the other two points, and the Realtor floating in the middle. Dual agency occurs when the same brokerage firm is handling the business transactions of both the buyer and the seller. It also occurs when the Realtors representing the buyer and the seller are employees of the same brokerage, even if they work in different branch offices. Another instance of dual agency is when one Realtor represents both the buyer and seller. A Realtor may act as a dual agent only with the consent of all parties involved. Under the Fiduciary Duty Act, Section 2079.16, the consent to dual agency must be by written agreement. It requires each principal signing the form to confirm that they understand that the dual agent will be working for both the seller and buyer; that they understand that they may engage their own agent to act solely for them; that they understand that they are giving up their right to the agent's undivided loyalty; and that they have carefully considered the possible consequences of a dual agency relationship.It's vital that you are aware that dual agency has some limitations. Since the agent has promised confidentiality, loyalty and full disclosure to both parties, she or he must restrict these duties. Said agent is required by law not to disclose that the buyer is willing to pay a price or agree to terms other than those contained in the offer. She or he also must not disclose that the seller is willing to accept a price or terms other than those contained in the listing. Also, the Realtor will not disclose personal information about either the buyer or the seller unless authorized in writing. Finally, in a dual agency situation, the Realtor must disclose to the buyer any and all defects about the physical condition of the property of which she or he is aware. The conundrum for the Realtor in this situation is painfully clear, and some Realtors are uncomfortable with dual agency because of these limitations. Real estate professionals who are well trained and experienced in implementing lawful real estate requirements, and who are truly committed to serving the best interest of the consumer, will undoubtedly know how to practice any form of dual agency correctly. Kari McCoy has been a Realtor for 25 years and owns the Kari McCoy Group, Residential Real Estate, at Coldwell Banker. She can be reached at (916) 941-9540, sold@karimccoygroup.com or at karimccoy.com.