Brokerage and Dual Brokerage: On this form is DB Business Brokers, LLC position on broker-in-charge responsibilities which requires disclosure of some concepts and definitions concerning the relationship between a principal and a broker in the sale of business. While the listing and sale of a business is not a transaction requiring the use of this form, the information provided is completely applicable to the business sale, and you are requested to read it carefully and acknowledge that you have been advised of its contents.
When a broker lists a business for sale, the broker-in-charge becomes the “broker” representing the seller. The same broker also often works with prospective buyers, and by the nature of that relationship, can become a buyer’s broker as well; this is called “dual brokerage.” Although a buyer and seller are sometimes represented by different brokers of the same brokerage firm, this is also a dual brokerage, because the Broker-in-Charge who employs each of the brokers is the broker for both parties.
Full Disclosure: DB Business Brokers policy is that the buyer and the seller of a business are each required to fully and fairly disclose to the other, any and all information which is known to that party, or reasonably should be known, and which may or will be “material” to the other party’s decision to enter into the transaction. A broker must fully disclose all relevant information known to the broker to the party or parties that the broker represents. A broker, whether acting only for one party, or as a dual broker, must make the same such disclosures to the other party, or to the other party’s broker, and cannot withhold any material information which such agent may know, or in the exercise of reasonable diligence, should discover.
Price and Valuation: DB Business Brokers have a common sense exception to the above that a dual broker must disclose all information in his or her possession. In representing both seller and buyer, the broker may not, without the express permission of the respective party, disclose to the other party that the seller will accept a price less than the asking price or that the buyer will pay a price greater than the price offered, even though there otherwise might be a duty to do so. Likewise, a broker acting as a dual broker will not disclose valuations or appraisals prepared by the broker for the seller (but may disclose any comparable sales figures which may have been a major factor in such evaluation), nor the contents of any previous negotiations, contracts or offers between either the buyer or seller and any other parties. This is the only way negotiations can be conducted when the broker represents both the buyer and the seller.
Acknowledgment of Disclosure and Agreement to Dual brokerage: Each party, by signing below, acknowledges and agrees that:
SELLER’S BROKER: When you enter into a discussion with a business broker regarding a business transaction, you should from the outset understand what type of agency relationship or representation you wish to have with the broker in the transaction.
A Seller’s broker under a Representation Agreement with the Seller acts as the broker for the Seller only. A Seller’s broker-in-charge or a broker of that broker-in-charge has the following affirmative obligations:
To the Seller: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealing with the Seller.
To the Buyer and the Seller:
BUYER’S BROKER: A broker is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above.
A selling broker can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations:
To the Buyer a fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Buyer.
To the Buyer and the Seller:
BROKER REPRESENTING BOTH SELLER AND BUYER, a duty to disclose all facts known to the broker materially affecting the value or desirability of the business that are not known to, or within the diligent attention and observation of, the parties. A broker is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above.
A broker, either acting directly or through a broker-in-charge, can legally be the broker of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer. In a dual brokerage situation, the broker has the following affirmative obligations to both the Seller and the Buyer:
In representing both Seller and Buyer, the broker may not, without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.
The above duties of the agent in a business transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own interests. You should carefully read all agreements to assure that they adequately express your understanding of the transaction. A business broker is a person qualified to advise about business sales. If legal or tax advice is desired, consult a competent professional.