eal estate brokerage representing both the buyer and seller in a deal owes the same fiduciary responsibilities to each party. The case centered on Chinese millionaire Hiroshi Horiike’s $12.25 million purchase of a Malibu property. California’s Second District Court of Appeals ruled that Coldwell Banker was operating as a dual agent and owed a fiduciary responsibility to Horiike through both of its agents. The firm appealed the decision, but the Supreme Court affirmed it.
Separately, in New York, Douglas Elliman’s Roger Erickson was issued a $2,000 fine and ordered to complete 10 hours of ethics training for allegedly having secretly worked as a dual agent on a 2009 deal.
Stribling-Kivlan said she frequently fields questions about dual agency at her firm, and it’s included in agent training. Garfinkel also does training at REBNY, including “lunch and learn” meetings in his office. In addition to answering agent inquiries, tactics have included role-playing exercises and a video series. Firms should have a policy and procedure in place for explaining dual agency and not being able to offer the “full realm of undivided loyalty,” Garfinkel said.
For Pamela D’Arc, a broker at Stribling, it’s a familiar experience. If a direct client approaches her about a listing, she said she is quick to explain she represents the seller — and walk them through the disclosure before signing anything.
“Sometimes people take for granted that the layman understands the process,” D’Arc said. “What’s second nature to the broker is not second nature to a buyer.”
Inevitably, as in any industry, there are bad actors or simply negligent ones. The trouble is that policing the operations of a company full of independent contractors isn’t easy, said Donna Olshan, head of Olshan Realty. “They call their own shots, do their own thing,” she said. “Day to day, oversight can be lax.”
But the consequences of getting caught can be significant. In California, during this decade, at least 16 agents have been disciplined — including licenses being suspended, restricted or revoked — due to violations involving dual agency, according to the state’s Department of Real Estate.
There can also be monetary penalties. Illinois has had around 14 instances of enforcement involving this issue since 2010. In February 2015, for example, one agent was placed on “indefinite probation for a minimum of two years for failing to obtain a written listing agreement and a written dual agency agreement in a real estate transaction,” according to the state’s Department of Financial and Professional Regulation.
Another agent in the state was placed on probation for two years and fined $4,000. Yet another was indefinitely suspended and fined $25,000 for” failure to disclose license status to client and for improperly acting as a dual agent in a transaction in which he was the buyer.”
Though it may be difficult to monitor agents, firms still need to encourage agents to “over-communicate” — and give more than just a slap on the wrist when they find wrongdoing, Steinberg said.
“It’s the industry’s role to self-regulate,” he said. “So we don’t have to have outside people sue the industry.”
Tags: houlihan lawrence, Residential Real Estate
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