National Real Estate Exam (PSI)General Principles of AgencyHard
A listing agent secretly helps the buyer negotiate a lower purchase price and shares confidential seller information with the buyer, all without the seller's knowledge. The seller believes the agent is working exclusively on their behalf. This situation is an example of:
- AUndisclosed dual agency, a breach of fiduciary duty
- BDisclosed dual agency
- CDesignated agency
- DProper subagency representation
Show answer & explanationAnswer & explanation
Correct answer: A. Undisclosed dual agency, a breach of fiduciary duty
When an agent secretly represents or favors both sides without informed consent, it constitutes undisclosed dual agency, which breaches the duties of loyalty, confidentiality, and disclosure owed to the seller. This can make the transaction voidable and exposes the agent to liability.
Why the other options are wrong
- B. Disclosed dual agency requires informed consent from both parties, which is missing here.
- C. Designated agency involves two separate agents representing each party, not one agent secretly favoring both.
- D. Subagency involves an agent working for the seller's broker with the seller's knowledge, not secret betrayal of confidentiality.
Undisclosed Dual Agency
When an agent secretly acts for or favors both parties in a transaction without informed consent, violating fiduciary duties of loyalty and confidentiality.
- Illegal in most jurisdictions without consent
- Can void the transaction or listing agreement
- Exposes agent/broker to disciplinary action and lawsuits
Memory trick: Secret sides sink the ship