Oregon 30-Hour Real Estate Law Practice Test

Which scenario exemplifies illegal dual agency?

1. Tom advises Ruby to offer below asking price

2. Tom suggests a non-refundable earnest money deposit to Ruby after her disclosure

3. Tom informs both parties of his dual role

4. Ruby decides to withdraw her offer

The correct answer is: Tom suggests a non-refundable earnest money deposit to Ruby after her disclosure

The scenario that exemplifies illegal dual agency focuses on a situation where an agent represents both parties in a transaction without proper consent or disclosure, which can lead to a conflict of interest. In this case, if Tom suggests a non-refundable earnest money deposit to Ruby after her disclosure, it indicates that he is taking an active role in advising one party (Ruby) while also representing the other party. Since dual agency is permissible only if both parties consent and are informed of the potential conflicts, Tom's action may suggest a lack of equal representation, which may be viewed as favoring one party over the other. This imbalance can create a situation where Tom cannot satisfactorily fulfill his fiduciary duties to both parties, leading to a violation of the dual agency laws. Understanding the nature of dual agency is crucial in real estate practice. Agents should always ensure transparency in their representation to maintain ethical standards and avoid potential legal pitfalls.