2.2 Dual Agency and Transactional Brokerage
Key Takeaways
- Dual agency is permitted in Kentucky only with informed written consent from both the buyer and seller, obtained before the dual representation begins
- A dual agent owes a limited fiduciary duty, must stay impartial, and cannot disclose either party's confidential information or negotiating position
- Designated agency lets two licensees in one firm each fully represent opposite sides, while the principal broker acts as the dual agent
- Transactional brokerage owes only good faith and fair dealing and is a way to avoid the confidentiality limits of dual agency
- Confidential information learned before dual agency arises stays protected and cannot be revealed without written permission
Dual Agency in Kentucky
Dual agency exists when the principal broker and all affiliated licensees simultaneously represent the buyer and seller (or lessor and lessee) as clients in the same transaction. Kentucky permits it under KRS 324.121 but only with proper disclosure and consent, because the agent cannot fully serve two opposing parties at once.
When Dual Agency Arises
| Situation | Result |
|---|---|
| One agent represents both buyer and seller | Dual agency |
| Buyer-client wants to purchase that same firm's listing | Dual agency (unless designated agency is used) |
| Two agents in the same firm, no designation | Dual agency for the firm |
| Two designated agents in the same firm | Designated agency (see below) |
Requirements for Lawful Dual Agency
| Requirement | Detail |
|---|---|
| Written consent | Both parties must consent in writing |
| Informed consent | The limitations must be explained before consent |
| Timing | Consent must be obtained before dual agency begins |
| Impartiality | The agent cannot advocate for either side |
What a Dual Agent Can and Cannot Do
| Must do | Cannot do |
|---|---|
| Treat both parties honestly and fairly | Disclose one party's confidential information |
| Disclose known material defects | Advocate or negotiate for one side |
| Account for all funds and documents | Reveal either party's bottom-line price |
| Perform ministerial/clerical acts | Recommend terms favoring one party |
Confidentiality Carries Over
Information learned before dual agency began – for instance, the seller's lowest acceptable price gathered while acting as a single agent – stays confidential and cannot be disclosed during dual agency without written permission. This protection is permanent and survives the transaction.
Worked scenario: A licensee lists a home and learns the seller is relocating for a job and will take any offer above $200,000. The licensee then begins working with a buyer interested in that home. To represent both, the licensee must obtain written dual-agency consent from each. Even after consent, the $200,000 figure remains confidential to the seller; revealing it to the buyer breaches the limited fiduciary duty.
Designated Agency
Designated agency is Kentucky's preferred solution for in-house transactions because it preserves full representation. The principal broker assigns one designated agent to the seller and a different designated agent to the buyer. Each designated agent owes the full OLDCAR fiduciary duties to their assigned client and may advocate for and advise that client normally. Meanwhile the principal broker (or a designated manager) acts as the dual agent for the firm and must keep each side's confidential information from crossing over.
| Role | Status | Duties |
|---|---|---|
| Seller's designated agent | Single agent for the seller | Full fiduciary to seller |
| Buyer's designated agent | Single agent for the buyer | Full fiduciary to buyer |
| Principal broker / manager | Dual agent for the firm | Limited fiduciary; firewall confidential info |
Transactional Brokerage as an Alternative
When neither party wants full representation – or to avoid the impartiality limits of dual agency – a firm may use transactional brokerage. The broker assists the deal without representing anyone as a client.
| Transactional broker DOES | Transactional broker does NOT |
|---|---|
| Deal honestly; no misrepresentation | Advocate for either party |
| Account for all money received | Keep negotiating strategy confidential |
| Present all offers promptly | Advise on price or terms |
| Disclose known material defects | Owe fiduciary loyalty to anyone |
Comparison Chart
| Feature | Dual agency | Designated agency | Transactional brokerage |
|---|---|---|---|
| Represents | Both as clients | Each side fully (separate agents) | Neither as a client |
| Written consent | Required from both | Required (dual-agency disclosure) | May be used by disclosure |
| Advocacy allowed | No (impartial) | Yes, by each designated agent | No |
| Confidentiality | Limited/firewalled | Full to each client | Good faith only |
| Fiduciary duties | Limited | Full to assigned client | None |
Key Point: When buyer and seller are both clients of the same firm, Kentucky requires the firm to disclose the in-company relationship and how it will be handled – dual agency, designated agency, or transactional brokerage – and to obtain the appropriate written consent before proceeding.
Common trap: Students confuse dual agency with designated agency. Under dual agency the same agent serves both, so advocacy is impossible. Under designated agency two different agents serve each side, so each client still gets a full advocate; only the principal broker is the dual agent.
Disclosure and Consent Sequence for In-House Deals
When a single firm ends up on both sides, Kentucky expects a clear paper trail. The exam often presents these steps out of order and asks what comes first:
- Form 400 (Guide to Agency Relationships) is delivered at first contact so each consumer understands the available arrangements.
- The firm identifies that an in-company conflict has arisen (the buyer-client wants the firm's own listing).
- The principal broker selects the arrangement: dual agency, designated agency, or transactional brokerage.
- The required written consent is obtained from both parties before the dual representation operates.
- Confidential information already gathered is firewalled and not shared across sides.
Exam Alert: Consent must be obtained before dual agency begins, never after the fact at closing. A licensee who proceeds and then asks for consent at the closing table has already breached the rule, even if both parties ultimately sign.
In a Kentucky designated agency arrangement, who acts as the dual agent for the firm?
A Kentucky licensee learns the seller's lowest acceptable price while acting as the seller's single agent, then becomes a dual agent with written consent. What may the licensee do with that figure?
Which option correctly describes a transactional broker in Kentucky?