Massachusetts Real Estate Firm Cites California Dual Agency Case as Warning to Consumers
Massachusetts and New Hampshire exclusive buyer agent real estate firm Buyers Brokers Only, LLC warns homebuyers that even sophisticated consumers are confused by dual agency and designated buyer agency, as demonstrated by a recent California Supreme Court case.
The parties (Horiike v. Coldwell Banker Residential Brokerage) argued over the interpretation of a California agency law statute and whether the listing agent owed the homebuyer the same fiduciary duties as his seller client, since the listing agent and the buyer agent both worked for the listing brokerage, Coldwell Banker. The dispute arose over what the homebuyer believed was the listing agent's duty to disclose a discrepancy over the home's square footage.
Coldwell Banker's lawyers basically argued that the listing agent owed full fiduciary duties only to the seller while the buyer agent owed full fiduciary duties only to the homebuyer, even though as the dual agent Coldwell Banker represented both the homebuyer and seller in the transaction.
The lawyers for the plaintiff, Hiroshi Horiike, argued that as dual agent Coldwell Banker owed the homebuyer client-level fiduciary duties (http://www.sacbee.com/
"As this case demonstrates, few consumers fully understand the relationships between real estate brokers and their agents, or licensed associates, who list homes on behalf of sellers and show homes to potential buyers," the National Association of Exclusive Buyer Agents (http://naeba.org/)
The real estate industry tolerates the lack of understanding by consumers because dual agency and designated buyer agency (http://www.buyersbrokersonly.com/
"Many traditional real estate agents would argue that the vast majority of dual agent and designated buyer agent transactions go smoothly," Richard Rosa, co-founder of exclusive buyer agent real estate firm Buyers Brokers Only, LLC, said, "but why would a consumer want to take a chance? Why not avoid the potential obvious conflicts of interest and retain an home-buying advocate who is unhindered by divided loyalties?"
Individual homebuyers today can choose to work with an exclusive buyer agent, but few are aware there is any advantage to doing so, or that the buyer agent provided by most brokerage firms is not their exclusive agent.
"Consumers rarely understand that they are contracting with the broker, not the associate, or that the broker and the associate may become dual agents if the buyer becomes interested in a property listed by the same broker – something that happens fairly often with large brokerage firms," NAEBA argued in its brief to the California Supreme Court. "The broker protects itself by having the buyer sign a disclosure form agreeing to dual agency. Although the buyer rarely (if ever) understands that he is signing away his right to an exclusive agent, the broker and its associates use the form to try and limit their liability ..."
In Massachusetts and New Hampshire real estate agents and real estate brokers must disclose their agency relationship with the consumer before working as that consumer's real estate agent.
"Even when state mandated agency disclosures are properly presented to consumers, consumers believe that they have an agent's undivided loyalty, but that is rarely the case," Rosa, a licensed real estate broker and licensed lawyer, said. "Without an exclusive buyer agent (http://www.buyersbrokersonly.com/
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