By Paul Cowhig, Advisor, Professional Standards
Like or hate it, the banning of dual agency was intended to prevent conflict of interest scenarios like these.
Two Clients and an Agent
It sounds like a movie title. But it’s a situation that arises frequently.
You have a buyer client who wants to see one of your listings. While there is immediate potential for conflict in this scenario there is no actual conflict until that buyer wants to proceed past casual interest.
If you’ve prepared properly there will be no problem showing the home. The conflict arises when the buyer gets interested and wants to go beyond simply knowing the basic listing information and a viewing. So…what do you do?
First of all, you should have already brought up the possibility of this conflict back when you established your agency relationships with the buyer and the seller. If you did that, you also introduced them to the relevant forms that would be required and discussed the ways the conflict could be resolved, namely;
- Stop acting for either client and refer them both to other real estate professionals for representation; or
- If both clients agree, stop acting for one client and continue acting for the other client.
If you already covered that, you can remind the buyer: “Remember back when we first started we discussed the conflict that would arise if you wanted to view one of my listings? As I explained then, I can show you my listing and I can give you general information. But, if you want to pursue it further I will be in a conflict of interest between two clients and must stop acting for one or both of you.”
Hopefully they say, “Right. I remember. But let’s go look at it.”
Now you call your seller and have the other side of that same conversation, after which you can go ahead and show the house.
If the buyer isn’t even interested in the home, you simply carry on with your agency representation for both parties.
I want this property
If your buyer client expresses interest in going beyond viewing and now wants more detailed information and possibly write an offer, you are now in conflict. You must then present both your clients with the form, ‘Agreement Regarding Conflict of Interest Between Clients,’ for their consideration. As per that document you have two options;
- Stop acting for either client and refer them both to other real estate professionals for representation; or
- If both clients agree and sign the disclosure form, stop acting for one client (the ‘released client’) and refer that party to another real estate professional and continue acting for the other client (the ‘continuing client’).
Based on the above one of 3 things is going to happen;
- You will stop acting for either party and refer both out;
- If they both agree you will refer one and continue to represent the other; or
- If they both agree (and you are willing) you will continue to represent one and deal with the other as an unrepresented party and write the deal. Otherwise known as double ending which, while discouraged, is still technically allowed.
“Please release me, let me go”
The explanation of the disclosure form should contain an honest recommendation to the released party to get their own independent representation. Technically you may be able to deal with the released client as an unrepresented party, but you are strongly advised not to do this. Why?
Risky business
Because dealing with this former client as an unrepresented party in order for you to ‘double end’ is a risk. If something goes sideways and one party is unhappy, you are the only person in the deal that they can hold accountable. This could lead to complaints, law suits and damage to your reputation. In any case, double ending in my opinion is in direct conflict with the spirit of the ban on dual agency.
That said, we understand it’s just not that simple. Your released client may resist the idea of another agent representing them and genuinely want you to ‘just write the offer’ regardless.
Also, the willingness of your continuing client to be satisfied with this may depend on the released client having independent representation. Let’s be honest – every version of this kind of scenario will be somewhat unique.
The point I am making here is that the manner in which you addressed potential conflicts and how they could/will be resolved at the start of your client relationships, will have a lot to do with what happens now that the conflict has actually arisen. If you have prepared them well in advance it should be a minor blip on the way to a smooth, successful transaction.
Council video
Council has published a video explaining situations where the Agreement Regarding Conflict of Interest Between Clients form is necessary. Go to the video link and drag the playhead cursor to fast forward at the 4 minute mark to hear what Pat Poyner, Council legal counsellor, says about using this form.