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Practicing inadvertent Dual Agency is against the law in California.

By
Real Estate Broker/Owner with (831) 626-4000 CA #01772851 HI #RB-21268

When a prospective buyer attends an OPEN HOUSE, at what point does the agent holding it start talking about "agency"? This is most important to you, the buyer, because you need AN AGENT WHO HAS A FIDUCIARY RELATIONSHIP WITH YOU.

Before you "show your hand", meaning how much you like the home and might want to make an offer on it, you need to know if this agent is working for you or against you.

IF HE IS THE LISTING AGENT OF THE SELLER, HIS FIDUCIARY RELATIONSHIP WILL BE WITH THE SELLER.

So here is what can unintentionally happen:

The opening words from the agent will (or should be):

"ARE YOU REPRESENTED BY AN AGENT?"

If you DO have an agent you are working with, say so and GIVE HIS/HER NAME. Congratulations, YOU ARE REPRESENTED BY SOMEONE WHO SHOULD NEGOTIATE FOR YOU, BECAUSE THEY HAVE A FIDUCIARY RELATIONSHIP WITH YOU.

If you don't have an agent you are working with, you are now considered an "unrepresented buyer", and the agent has a chance to "double end" the sale of the house you are viewing. Oh goody for that agent, but here's the thing:

AT THIS POINT THE AGENT NEEDS TO TELL YOU AT LEAST ORALLY ABOUT "AGENCY", WHOM HE/SHE REPRESENTS.

AND IT ISN'T YOU, the agent represents the SELLER and that means, any favorable negotiation lands on HIS side of the fence, not yours.

THINK ABOUT THIS.

Many buyers believe that ONLY THE LISTING AGENT can give you THE BEST DEAL when purchasing a home, because he/she is "in touch with the seller" and will negotiate on your behalf.

THAT IS JUST NOT SO,

The listing agent BY CONTRACT represents the FIDUCIARY INTERESTS OF THE SELLER.

If this is not explained to you by the agent,

AN "INADVERTENT DUAL AGENCY" HAS BEEN CREATED,

AND IT IS AGAINST THE LAW.

Many law suits have been filed because of this (possibly) unintentional, "accidental" Dual Agency that can come about in many ways, during an Open House being one.

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Information for California Real Estate Brokers and agents:

Blog 1: Continuing Education to Renew CA Broker's License.

Blog 2: What a Brokerage has to have available in case of a DRE Audit.

Blog 3: Don't give inadvertent Legal or Tax advice to clients.

Blog 4: Inadvertent Dual Agency is against the law in California.

Posted by

Hella Mitschke Rothwell, Broker/Owner/REALTOR 

 

Let me be your independent real estate broker for oceanfront and oceanview property in California and Hawaii.  If you are a seller/owner, I will travel to your property to help get it ready for sale, then list and market it. If you are a buyer and we have a Buyers Representation Agreement in place, I will preview property on your behalf anywhere in California and Hawaii.  Please call me to discuss how I can help you.

Search Hawaii Listings on www.HellaHawaii.com

Member: Honolulu Board of REALTORS; National Association of REALTORS; Hawaii Association of REALTORS; Del Norte Association of REALTORS; California Association of REALTORS; MLSListings, Inc., the premier MLS listing service in Northern California.

 

________________________________________________________________

Hella Mitschke Rothwell (R)

Real Estate Broker/Owner/Realtor®
Licensed in California #01772851 & Hawaii #RB-21268

Tel. 808-226-1095 or 831-626-4000 

Fax 1-877-822-9332

www.HellaHawaii.com

www.HellaRothwell.com

www.RothwellRealty.com

HAWAII OFFICE: 1128 Ala Napunani Street, #1809, Honolulu, HI 96818

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Email: HellaRothwell@gmail.com


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Disclaimer: Hella Rothwell does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

Comments (32)

Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
Not only logical with most times? If you had somebody with your car no matter if you intended it or not, it's still a crime. Love and light, Laura
Nov 23, 2013 03:43 PM
Aaron Hofmann
Atlanta Communities - Smyrna, GA
aka Mr. Smyrna Vinings

While dual agency is allowed in Georgia, it's definitely not something recommended. If you represent the seller and the buyer walks in unrepresented, the best they can be is unrepresented. The only time dual agency should occur is if you have pre-existing relationship with both a buyer and a seller. Say you've been working a buyer and a seller for awhile and now the buyer decides he likes your seller's home, then you would have a dual agency situation. Too many agents think they can pick up the buyer that walks in as a client as well, but you already have a fiduciary obligation to your seller client.

Nov 23, 2013 06:14 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

On the mortgage side, I like seeing two agents in every transaction, the transaction has better chance of going smoother. When there is only one agent, more challenges show up and if they are not represented at all, not fun at all.

Nov 23, 2013 07:26 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

It's the same here in North and South Carolina. However, because so many agents hold open houses to generate buyer leads, I've found that most never ask these questions and most home buyers don't really understand the impact of dual agency. It's an eye opener for both home buyers and sellers when they really understand what dual agency means.

Nov 23, 2013 08:42 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Hella, here in my State full disclosure is required when substantive discussions about real estate are initiated.

Nov 23, 2013 10:16 PM
Lorrie Semler, REALTOR® in the Dallas area. Call/text 972-416-3417
HomeSmart Stars - Addison, TX
Real Service. Real Results. Real Estate

And then there are the attendees at the open house who lie and say they're not represented.

Nov 23, 2013 11:15 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Finding the happy in the deal for all involved is not hard to do..for some maybe I grant that. If one literally puts all cards on the table so the the game is transparent, then the chance for win-win to take place becomes a group effort. I don't wish to over-simplify, but it is doable...good post

Nov 23, 2013 11:42 PM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Chris Ann: Thank you so much for the feature on the group "Bartender, make it a double". This subject about dual agency touches all of us, often inadvertently.

Debbie: It should be brought up the minute the answer "no, I am not represented", and before you show the house. But I know that doesn't happen much, probably not until the paperwork is about to be signed, and that is one of the forms.

Jay and Michelle: In California, that makes sense, although it is still dual agency in your case.

Ralph: Something we all need to think about unless we are strictly buyers or sellers agents.

Debe: That's why I wrote this blog this way, maybe buyers will read it and understand the difference.

Jon: Give your clients plenty of your cards just in case they walk into the "den" of an "open house".

Laura: "Unintended" is still illegal.

Inna: Agents don't think they will be caught with these statements because, if they do sign an offer, all is explained on the form which they have to sign. But I bet they won't explain the form of "agency" either.

Aaron: Each agent has to do what's comfortable for him/her, but within the legal limits.

Joe: I bet you see this all the time. Do you ever say anything to an "unrepresented" buyer? But that would be outside your purview.

Nina: Sounds like the illegal act of "unintended" dual agency is prevalent across the country, at least at open houses. But, again, the agents probably fix it (they think) by then having the "unrepresented" buyer sign the "agency" form where it is explained to them that they ARE unrepresented and they are ok with it. (Shaking my head here.)

Michael: Is an "open house" where you talk about the property considered "substantive"? At what point?

Lorrie: OH YES! THOSE.

 

Nov 23, 2013 11:54 PM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Richie: There is a fine line, especially at open houses, but "inadvertent" dual agency exists the moment the agent finds out he has an "unrepresented" buyer in front of him. And when do you fix this?

Nov 24, 2013 12:08 AM
Chad Hooper
Evergreen Realty, Homesmart - Laguna Niguel, CA
Selling Dream Homes in The OC

Great post, dual agency came up more in NY then it does here in CA, but CA embraces buyer brokerage more than NY.  A great post, thanks for sharing and CA & HI, two awesome markets!  

Here's to a strong finish in 2014!

Chad

Nov 24, 2013 01:19 AM
Mitch Muller - Charlotte NC Real Estate
ProStead Realty Charlotte, NC CRS SRES mitch@prostead.com - Charlotte, NC
Certified Residential Specialist

Hella, this is excellent advice for the consumer and for Realtors. Agency can be made simple if it is only explained, unfortunately therein lies the problem.

Nov 24, 2013 02:29 AM
Frank Nolan
Nolan Realty Team / Pacific home Brokers - Palos Verdes Peninsula, CA
Jump and the net will appear
Great Post Hella, I think you hit the nail on the head with the perspective of the buyer thinking they will get a better deal by signing with the sellers agent. I hear that all the time from buyers. "Well I will just put in the offer with the agent that has the listing because they can negotiate direct with the seller". While we as agents understand this isn't the case, it is up to us to educate buyers on this fact.
Nov 24, 2013 03:56 AM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Hella, there is a lot of discussion about what constitutes substantive discussions. I would think as soon as possible when the topic of real estate is discussed with the customer.

Nov 24, 2013 06:19 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I give my buyers a stack of my business cards, if they intend to visit open houses without me. That way, they can walk in, hand the card to the open house agent and not have to say another word. They're also left alone. Those buyers who think they can get a better deal by going to the listing agent are basically saying they hope the listing agent is unethical or they themselves are completely stupid, and I don't think it's the latter.

//
Nov 24, 2013 07:06 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Hella, there are Agents that have a hard time walking way for trying to steal a Buyer.  No one deal is worth risking your license.  Some seem to have a hard time understanding that.

Nov 24, 2013 07:45 AM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Chad: Thank you. And, yes, CA & HI is a great combination for me.

Mitch: "Agency" has to be brought up "as soon as practicable" - and therein lies the "when is that".

Frank: Why it is so hard to explain is a mystery to me. But it is.

Michael: There needs to be a clarificaion on that because otherwise it is never "practicable" (the time given.

Elizabeth: It goes back to the olden days, when agents were agents of the principal and buyers didn't have anyone. And neither one talked about it.

George: So few agents get caught at it, it perpetuates itself.

 

 

Nov 24, 2013 09:25 AM
Lana Robbins Realtor ® Licensed Real Estate Broker
Aloha Kai Real Estate - Clearwater, FL
Licensed in Florida, Washington, and Hawai'i

Hi Hella. Interesting. Dual agency is forbidden in the State of Florida too. The State of Washington allows it.

Nov 24, 2013 09:53 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Hella first congrats on your Gold Star, second you are so right about this post, I wish this was given to every potential buyer before they began their home search. I see it in all price points the idea that "they will get a better deal" I also see it with Developers who "just want the deal".....great subject too bad so many do not get it, Endre

Nov 24, 2013 01:13 PM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Lana: Dual Agency IS allowed in California, but with WRITTEN consent by both the buyer and the sellerInadvertent dual agency, as can happen during an Open House and which is NOT LEGAL in California, can be averted by telling the buyer whom the agent represents.

Endre: Maybe if we keep sending this message out, something will stick.

Nov 24, 2013 11:29 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

Most lawsuits against licensees arise out of conduct that either lead to a breach of a fiduciary duty owed to the principal or the expanding legal duties owed to a third party. 

Sep 20, 2023 02:26 AM