FACTS:
XYZ Realty has two affiliated brokers, the BIC and a provisional broker. A consumer contacts XYZ Realty to inquire about a property listed by the brokerage. The provisional broker answers the call. During the conversation, first substantial contact is established. The provisional broker asks the consumer for their email address and sends the Working With Real Estate Agents Disclosure (WWREA) electronically and immediately reviews it with them. After the disclosure is provided, the consumer decides to allow the provisional broker/brokerage to represent their interests in the transaction. Next, the consumer enters into a written buyer agency agreement that authorizes designated dual agency. The consumer further tells the provisional broker they are preapproved for a $600K mortgage.
The provisional broker notifies the BIC about the brokerage’s new client and their preapproval amount for a mortgage. The BIC reviews the agency agreements, disclosures, and provisional brokers’ client notes. While reviewing the information, the BIC informs the provisional broker that their seller-client previously authorized designated dual agency in their listing agreement. The BIC also states they will notify the seller that they are now in a designated dual agency relationship. The BIC then designates the provisional broker as the agent for the buyer-client and themself as the designated dual agent for the seller-client.
The BIC reassures the provisional broker that the information they submit in the transaction file will not be disclosed to the seller-client; however, to comply with License Law and Commission rules, they must submit all their transaction records to the brokerage so the BIC can review them.
ISSUE: Did the BIC and provisional broker comply with Rule 58A .0104?
ANALYSIS: No. Rule 58A .0104(j) specifies that a broker-in-charge shall not act as a designated broker for a party in a real estate sales transaction when a provisional broker under his or her supervision will act as a designated broker for another party with a competing interest.
License Law and Commission rules state that a designated dual agent may be non-provisional or provisional brokers. Further, a BIC can be a designated broker for a party in a real estate sales transaction. However, the BIC cannot act as the designated dual agent for a party in a real estate sales transaction when a provisional broker under their supervision acts as a designated dual agent for another party with a competing interest.
In this scenario, the BIC and the provisional broker indicated to the seller-client and buyer-clients incorrectly that XYZ Realty could practice designated dual agency. Under License Law and Commission rules, it is not permissible for XYZ Realty to practice designated dual agency because there are only two affiliated brokers in the brokerage, the BIC and the provisional broker. Rule 58A .0104(j) clearly indicates that a BIC may not be a designated broker for a party in a real estate transaction if a provisional broker under their supervision is the designated broker for the competing party.
If the BIC wants XYZ Realty to practice designated dual agency, the BIC must have more affiliated brokers under their supervision. If the BIC has more affiliated brokers under their supervision, the BIC may represent a party in a designated dual agency transaction if a non-provisional broker is the designated dual agent for the competing party.
However, the Commission states a best practice for BICs is to not represent a party in a designated dual agency situation. If BICs adopt this practice it can reduce the chance that a BIC may violate Commission rules for either, (1)failing to maintain and review transaction records, or (2) learning confidential information about the other party and using or (failing to use) that confidential information to the advantage of their client in a designated dual agency situation.
BICs should establish policies and procedures to ensure compliance with License Law and Commission rules.
If a BIC chooses to be one of the designated dual agents in a transaction, the BIC would need to designate another broker in the office to collect/review records from the transaction for the client the BIC is not designated to represent. This will essentially prevent the BIC who is a designated dual agent from having access to confidential information about the other party in the transaction. It may also provide comfort to the other designated dual agents that they can provide records in compliance with Rule 58A .0108(d) and not have their client’s confidential information inappropriately shared with the other party in a designated dual agency transaction.
If the BIC and their provisional broker act as designated dual agents for competing parties in a transaction, they may be subject to disciplinary action by the Commission for failing to adhere to Rule 58A .0104.
Resources:
N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0104(j)
Articles: 2022-2023 General Update Course
BICs and Designated Dual Agency Transactions- Room for Conflicts
Video: https://share.synthesia.io/1bba22d8-cc03-4eba-af98-634e78a07d49