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Real Estate · Agency Relationships

What disclosure obligation does a broker have when the brokerage will act as a dual agent in a transaction?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

The brokerage must disclose the dual agency and obtain the informed, written consent of both the buyer and the seller, and limit confidential disclosures between them

  1. A No disclosure is needed
  2. B Disclosure only to the seller
  3. C Disclosure only after closing
  4. D The brokerage must disclose the dual agency and obtain the informed, written consent of both the buyer and the seller, and limit confidential disclosures between them

Why this is the answer

When a brokerage represents both buyer and seller in the same transaction (dual agency), the broker must disclose this relationship to both parties and obtain their informed, written consent, usually before or at the time the conflict arises. The brokerage must then act impartially and may not reveal one party's confidential information — such as how high a buyer will go or how low a seller will accept — to the other. Many firms manage this through designated agency instead. Because the broker is responsible for the firm's agency practices, failing to disclose and obtain consent for dual agency is a significant violation that the broker exam emphasizes.
Source: ARELLO Broker Agency Disclosure

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About this topic: Agency Relationships

Agency relationships at broker level cover creating and terminating agency, dual agency and designated agency, fiduciary duties, and how the broker's agency extends to the licensees in the office. This is one of 6 Broker (National) questions on agency relationships, each with a full explanation on a single study page.

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