Massachusetts Home Buyer Guide

The U.S. Department of Housing and Urban Development (HUD) issued new guidelines in July that prohibited dual agency in Federal Housing Authority (FHA) short sales; however, after pressure from the National Association of Realtors, HUD announced it has postponed the dual agency guidelines, according to an article in Inman News September 26, 2013

The new rules, revealed through a letter to mortgage servicers in July, were suppose to take effect October 1, 2013 and would have prohibited brokers and agents from representing both buyers and sellers in FHA short sales. The National Association of Realtors (NAR) opposed the new guidelines. HUD's new, now postponed, guidelines state, "To meet [Pre-foreclosure Sales] Addendum requirements, brokers and their agents may only represent the buyer or the seller, but not both parties."

As worded, the guidelines appear to prohibit both dual agency and designated agency in the Commonwealth of Massachusetts. 

Most Realtors practice dual agency in one form or another; however, NAR claimed in a letter to Federal Housing Commissioner Carol Galante that it opposed the new rules because the rules would just make it harder for the federal government to get the most bang for its buck. The NAR also defended dual agency because "the dual representation must be disclosed in writing and accepted by both parties before the dual agency representation can commence."

The Massachusetts "Mandatory Licensee-Consumer Relationship Disclosure" defines dual agency as follows: "A real estate agent may act as a dual agent representing both the seller and buyer in a transaction but only with the express and informed consent of both the seller and buyer. Written consent to dual agency must be obtained by the real estate agent prior to the execution of an offer to purchase a specific property. A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent. A dual agent does, however, still owe a duty of confidentiality of material information and accounting for funds. The written consent for dual agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople (Board)." (emphasis added)

The Massachusetts "Mandatory Licensee-Consumer Relationship Disclosure" defines designated agency as follows: "A real estate agent can be designated by another real estate agent (the appointing or designating agent) to represent either the buyer or seller, provided the buyer or seller expressly agrees to such designation. The real estate agent once so designated is then the agent for either the buyer or seller who becomes their client. The designated agent owes the buyer or seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put their client's interests first and negotiate for the best price and terms for their client. In situations where the appointing agent designates another agent to represent the seller and an agent to represent the buyer then the appointing agent becomes a dual agent. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent. The dual agent does not represent either the buyer or the seller solely only your designated agent represents your interests. The written consent for designated agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople (Board)." (emphasis added)

Several local and national organizations support HUD's new guidelines prohibiting dual agency in FHA short sales, including the Massachusetts Association of Buyer Agents and the National Association of Exclusive Buyer Agents (NAEBA). NAEBA wrote its own letter to Assistant Secretary of Housing Carol Galante expressing its concern with dual agency. NAEBA wrote, "We disagree that the new policy would place more homeowners at risk for foreclosure. In fact, we would counter that the opposite is true. Real estate agents are retained to represent their clients. In a traditional sense, that representation would include full fiduciary duties to that client including obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. In a dual agency situation, a real estate agent can no longer provide these full fiduciary duties or full representation."

As stated above, dual agency and designated agency is legal in Massachusetts, but without an exclusive buyer agent there can be a question of loyalty.