Single Agency versus Dual Agency versus Transaction Brokerage

Posted by Round Table Realty on Friday, November 3rd, 2017 at 9:24pm.

Single Agency, Dual Agency and Transaction Broker Relationship

What is Agency?

Dual agency is outlawed in many states, including Florida. The issue with dual agency is that the sales associate (licensed agent) enters into a relationship with a client to whom he or she owes a fiduciary duty, also known as obedience, loyalty, disclosure and confidentiality but he or she couldn't do that for both. She is working on behalf of one client in all matters pertaining to a specific real estate transaction. That is the definition of agency.  In Florida, we refer to having a fiduciary duty as single agency.

The Problem with Dual Agency

Dual agency is just what it says it is: an attempt to act in both the buyer and seller’s best interest at the same time on the same transaction. Is this even possible? Of course not, it would be impossible to act in both the buyer and seller’s best interests at the same time and that is why dual agency is outlawed in most states.

Enter the Transaction Broker

However it is possible for an agent to handle the transaction for both the buyer and the seller. In Florida, we have a limited agency classification known as transaction broker. While it kind of sounds like dual agency, it is not. Essentially, the agent is working for the transaction and not for the buyer or the seller and has not entered into a fiduciary relationship with either party. That means he or she is a neutral party or referee between the two parties. He or she does owe both parties limited confidentiality however. That means he or she is not allowed to tell the seller that the buyer will offer more than that which they offered or tell the buyer that the seller will take less than list price.  A concern is raised because most Real Estate buyers and sellers do not know this and expect that their Realtor is working for them and would in fact share with them this kind of information.

Many Florida real estate brokerage firms that work strictly as transaction brokers because they say that working as transaction brokers avoids some difficulties and confusion. I disagree.  They believe that the agent is not likely to forget what his or her role is if it is the same all the time on every single transaction.  However many many Real Estate agents find themselves torn because they want to work in their client' favor and cannot step into that neutral mindset.  In fact, as a transaction broker Real Estate agents have customers and not to refer to them as Clients even though many transaction agents like to use that word to describe the buyers and sellers.  They believe it sounds better and it probably does.  Many Realtors want to sound and look like they're single agents for their 'clients' however they could be breaking license law by blending all of the agency relationships together and using that which suits them at whatever particular time it might be.

The chart below illustrates the differences between the two types of agency. The limited transaction broker relationship offers only limited confidentiality and no obedience or full disclosure. (See section below titled Full Disclosure for more information).  Many home buyers and sellers would be shocked to find out what their Realtor might say they can't disclose when their feet are put to the fire, often too late in a transaction to rectify the situation.

 Why Choose Tranaction Broker over Single Agency?

 It seems like a no-brainer that a client would want to have single agency over that of transaction broker. However, there are a few reasons why a single agent might need to transition from single agency to become a transaction broker:

  1.  The client (a buyer) wants to purchase a property that is already listed with his agent or another agent of the same brokerage firm.
  2.  The client (a seller) decides to sell his property to a buyer who was introduced to his property by his listing agent or another agent of the same brokerage firm.

It is possible that each agent of the firm might have unique knowledge and so the brokerage is unable to offer confidentiality to the client and must transition.

In fiduciary relationships, the client has agency with the brokerage firm which the agent works for, so two agents of the same firm cannot offer single agency, only a transaction broker arrangement.

Differences in Agency Relationships -- Florida


Single Agency  
Transaction Broker  
1. Dealing honestly and fairly;
1. Dealing honestly and fairly;
2. Loyalty;
 
3. Confidentiality;
Limited Confidentiality
4. Obedience
 
5. Full disclosure;
 
6. Accounting for all funds;
Accounting for all funds
7. Skill, care, and diligence ;
Skill, care and diligence
8. Presenting all offers timely unless
Presenting all offers timely unless
directed otherwise in writing:
directed otherwise in writing:
9. Disclosing all known facts that
Disclosing all known facts that
materially affect the value.
materially affect the value.
 

Full Disclosure

The lack of "full disclosure" under the Transaction Broker relationship may bother the client in that there are certain things the agent must hide from you. They cannot however hide these types of facts:

"Disclosing all facts that materially affect the value of residential real property and are not readily observable to the buyer." 

In a single agency relationship, if the buyer's agent (from another firm) informs your Realtor that his buyer will pay more, single agency requires the seller's listing agent to inform you of that when he presents the buyer's offer to you. As a transaction broker, the agent cannot bring this up even if he has that secret information.

As the official Florida Association of Realtors © Transaction Broker Notice states:

Limited representation means that a buyer or seller is not responsible for the acts of the licensee. Additionally, parties are giving up their rights to the undivided loyalty of the licensee. This aspect of limited representation allows a licensee to facilitate a real estate transaction by assisting both the buyer and the seller, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.

 

Round Table Realty

-Realtor

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