This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
Naturally following from the principles above laid down is the doctrine that a broker is not entitled to compensation from both principals, without their knowledge and consent. This state of affairs arises most frequently in cases of exchange of property between different owners, where one broker represents both parties. If the broker in such a case is invested with the least discretion by either party he cannot accept compensation from both without the consent and knowledge of both principals. The rules of law are well settled upon this subject and have already been referred to. There are, however, a class of men who are distinguished from brokers, at least in the law, to which this rule of law does not apply. These are known as middlemen, and their duties are clearly distinguished from those of an ordinary broker. A middleman may be defined to be one who is employed by both parties, not for the purpose of effecting a sale, or consummating a deal, but solely for the purpose of bringing the parties together, or of opening negotiations between prospective buyers and sellers. Having accomplished this purpose, his functions are ended and his compensation is earned; the amount thereof is generally fixed by preliminary agreement. It will be observed that there is a marked distinction between the two vocations. In the case of a middleman, he is not invested with any discretion whatever; he is not employed to fix the price or terms, or effect the sale. All of these elements are left for the principals to work out themselves. Of course, in such case the rule preventing compensation from both parties cannot apply, because the principals are dealing directly with each other, and no relation of trust or confidence has been established between the middleman and principal and there can be no act done by the agent detrimental to either party.
It is often very difficult to determine where the relationship of broker ends and that of middleman arises. As a middleman sometimes undertakes to go further than he was requested, or than he started out to do, and takes part in the negotiations, it is under these circumstances that uncertainty arises. The whole matter depends upon the character of his employment. If A is employed by B to find for him a purchaser for his house, upon terms and conditions to be determined by B, when he meets a purchaser, I can see nothing improper or inconsistent with any duty he owes B for A to accept an employment from C, to find one to sell his house to C upon terms which they may agree upon when they meet; and there is no violation of duty in such case in agreeing for commissions from each party, upon a bargain being struck, or in failing to notify each party of his employment by the other. The main question in each case is, was the agent invested with any discretion, and did the principal rely in any manner upon his judgment or skill or confidence. If the latter should be the case, he cannot act for both parties.