‘Double agent?’ A rift over how real estate is bought and sold reaches the California Supreme Court May 1, 2016 Updated May 2, 2016 7:07 a.m.
Hiroshi Horiike, a Hong Kong multimillionaire, at his mansion in Malibu in 2014. In a lawsuit that could have major implications for many of the state’s real estate brokers and agents, Horiike said the size of his home was inflated when he bought it. J. EMILIO FLORES, NEW YORK TIMES FILE PHOTO By MARILYN KALFUS / STAFF WRITER
The Register asked real estate students at SaddlebackCollege to share their opinions on the issue of dual agents. We edited their responses for brevity: “How would it be possible to deliver the highest selling price for the seller and at the same time obtain lowest price for a buyer? This situation goes beyond legality and becomes a moral issue. As a broker/agent, are you willing to lower your morals just to make an extra buck?” – Lisa Woodward “A real estate agent is bound by a strict code of laws, whether they are working for the buyer, the seller or both. With bank assessors typically involved – as well as a variety of special inspectors providing their opinions – there is little else to be feared from a dual agent.” – Scott Welker “I am put off by the fine line that a dual agency forces real estate agents to straddle. Real estate transactions by their nature are complicated, and the fiduciary duties throw one heck of a monkey wrench when it comes to not violating trust owed to both principals. So yes, I think maybe this should be a banned practice.” – Letty Maddox When Martin Welc asks his real estate classes at Saddleback College if one agent should represent both the buyer and the seller in a negotiation over a house, the students widely disagree. “We ask them: ‘Dual agent or double agent?’” said Welc, co-chairman of the college’s real estate program, in encouraging the students to play devil’s advocate. “We look at all of the pros and cons. We say, ‘Can this be done?’” It is done, but the controversy over its fairness to buyers and sellers goes beyond a homework assignment. Real estate agents, lawyers and consumer advocates all have opinions about it. Now a rift involving what’s known as “dual agency” has reached the California Supreme Court. Those on both sides of the argument know the high court’s decision in the case – pitting a Malibu homebuyer against brokerage Coldwell Banker – could shake up the industry. “There is a great deal of concern about this ruling in the California real estate community,” said Bob Hunt, a San Clemente agent and a director of the California Association of Realtors, of the appellate court’s conclusion. “It runs counter to the way – rightly or wrongly – that agents and brokers have thought things were.” A FINE LINE A dual agent must walk a fine line, careful not to favor the buyer or seller. There are details that cannot be shared – for example, the agent can’t tell the buyer the seller is frantic to unload the house because of a divorce or job change. Nor can the agent share with the seller how much the buyer privately said she’s willing to pay. Lee Stimmel, a San Francisco attorney who opposes double-ending deals, said the rules create a conflict of interest for the lone agent, who must serve two masters as a “superhuman.” But as Hunt and many other agents see it, a dual agent, privy to what’s motivating each side, is in a position to more swiftly and efficiently get a deal done. “Hiring a real estate salesperson is not the same as buying a burger,” the association says in court papers. “It is all about the relationship … The real estate salesperson is the equivalent of a therapist, a bartender, a friend.” In California and many other states, the law mandates that a broker must have a fiduciary responsibility to clients. But laws in about two dozen states have allowed agents to act as “facilitators” or “transaction brokers” without fiduciary loyalties, according to a report on Inman, a real estate industry site, titled “Buyer and Seller Beware: Your agent may not represent your best interests.”