A designated agent most commonly refers to a real estate professional who works at an agency that represents both the buyer and the seller in a property sales transaction. The agency assigns one of its agents to work exclusively with the buyer and another to work exclusively with the seller. In this way, the agency attempts to circumvent the conflict of interest inherent in dual agency.
"Designated agent" has developed a special meaning under the law for real estate transactions. Unless special arrangements are made, real estate agents are advocates for the seller of property. The seller hires the agent and lists the property with him, authorizing him to show the property to interested parties and to negotiate a favorable selling price.
Buyers interact with real estate agents, and agents work closely with buyers to identify their needs and to show them properties. This close interaction often leads a buyer to believe that the agent is working in his best interests. The agent, however, is only legally obligated to help the seller, despite any representations to the contrary. In fact, the agent's commission is based on the sales price, providing no motivation for the agent to consider the buyer's best interests.
Most jurisdictions require agents to disclose to buyers the fact that they only represent the seller in the transaction. Once the disclosure is made, some places allow the buyer to waive the conflict and have the real estate agency represent them as well. This is called a dual agency, and it requires the agent to work on behalf of both parties in a neutral manner to complete the sale.
In addition to permitting dual agency, some jurisdictions allow a real estate agency to assign a designated agent to both parties. The designated agent is required to advocate on behalf of his assigned party and adhere to strict confidentiality. Even though the same agency is representing both sides of the transaction, the separate assignments allow the transaction to proceed with both parties vigorously represented.
A real estate agency located in a jurisdiction that allows dual agency does not have to offer the designated agent option, but public policy favors the approach. Lawmakers feel using a designated agent restores the advocacy component to the transaction. The opinion is that standard dual agency promotes the fallacy that the agency can represent both sides of a sale neutrally and still reach a result that is in the best interests of each party, rather than the agency itself.