In a nut shell he was misrepresented since the agent did not disclose up front that he was representing the seller also.

In Ontario, the agent would have to disclose the dual agency (multiple representation) relationship to all parties.  Dual agency is problematic enough that we have special forms for non-client relationships (described as "customer service").

In terms of recourse, Mike could request compensation from the agent, file a complaint with the appropriate regulatory authority, or sue for breach of fiduciary duty.

Wow Laurie my head is a spinning after reading your post. An "Open Listing" is just an unwritten, oral agreement between Seller and Agent that doesnt specify payment. Of course in any real estate transaction full disclosure is always best to clarify who represents who in any transaction. So if Mike's agent represented the seller was there a written listing agreement or contract between mikes agent and seller? If there was then this obviously wasnt an Open Listing"! And so if Mike represented the seller but he also represented the Buyer as a Dual Agent and Undisclosed Dual Agency is against the LAW!Correct me if I missed something?

Cape Cod Realtor

Mike, thank you- it would appear that simple, but things in NY are...different (yet, subject to the same disclosure laws)- your response is very appreciated!

Anthon- I appreciate the perspective. Dual agency would have negated the buyer agency- and alerted the buyer that something was not going according to plan (particularly as he had offered payment (and paid it upon closing) for the buyer agency opportunity). Opinion.

Stephen, here it is: dual agency is permitted in NY.

The agent that Mike engaged had Mike sign a buyers agency contract, stipulating payment, fiduciary, etc.

Right before closing, Mike's agent faxed a NEW DISCLOSURE (to replace the buyer representation/fiduciary) stating that his company/him in fact, represented the SELLER. At the time that Mike and his Realtor (then "representing" Mike) located the property, it was an open listing- no listing company.

Thank you- my head was spinning, too.

Yikes. The "undisclosed" dual agent wasn't what I was looking at; the removal of buyer agency after having accepted information (that, under seller agency would be disclosed to the seller, to the detriment of Mike) was my concern. You've presented a whole 'nother can of worms that could apply, imo.

I don't take open listings... ever! And if Mike had no representation, then in Florida, the agent should have had him sign a "no brokerage relationship" disclosure. However, Florida is pushing more and more toward being a "Transaction Broker" state. The FAR heavily discourages any type of single agency, and dual agency was replaced by Transaction Brokerage a long time ago. Dual agency is not legal here.

But as I already said, in Florida, Mike would have had to sign a notice on non-representation aka "no brokerage relationship".

Thank you, Lisa-  Mike had representation upon locating the home, with a signed buyer agency agreement. If, however, it was NOT disclosed to him that an agreement was made at any point with the seller that compromised the buyer agency, it sure seems as though it should 1. not have happened or 2. not have happened. I appreciate the perspective. 

Damn Laurie, NY sucks!! OK here's my opinion baring in mind that I am not familiar with NY agency laws. Paying the compensation does not create an agency relationship. IF Mike signed a Buyer's Broker Agreement with his "agent" then I presume this created an agency agreement although that is not necessarily the case. For example I can work under a BBA without being an agent in Florida.

But let's assume he did have an agency agreement. So my question would be...would having an agency agreement with a buyer prohibit me from also having an agency agreement with the seller, since dual agency is legal?   Could the buyer prohibit his agent from forming a dual agency relationship? I would think so. I would think that just disclosing "dual agency" after the fact is not enough. The fact that it was not disclosed is certainly a violation of agency laws and probably licensing laws as well. Mike needs to talk with an attorney if he wants to to pursue legal action against his agent. BUT....if no harm was done and Mike is happy with his purchase it may no be worth it. At a minimum though he needs to contact the Broker involved and make him aware of the situation. 

Thanks, BB- I think that the problem lies in the fact that it was not disclosed to him until 48hrs before closing that he was never represented.  New York offers consumers seller (and sub) agency; buyer agency, dual agency, dual agency with designated salespeople, and broker agency, which is indecipherable. Mike entered the transaction fully  represented, but it turns out that the representation changed without disclosure at some point in the transaction- dual agency wasn't even addressed.  As I understand it, the house is great, but there must be enough of a bad taste (over hindsight details that occurred)to pursue it a bit- it would bother me, too, unless everything was somehow flawless.

Thank you- your input is quite valued. And if anyone wants a STEAL OF A DEAL in Florida (pay attention, snowbirds) see this post (I'm going to try to link it).

http://activerain.com/blogsview/510046/Real-Estate-Investor-Opportunity

I am seriously going to look at my HELOC- $53/ sf????

Hey Laurie.  So the thing is having done real estate on long island for many years and having dealt with FSBO's I can see where the issues are.  The fact that the agent sent the form to the attorney means to me that she is inexperienced working as a buyer's agent and the contracts and agency forms are probably confusing.  If I hadn't moved to Westchester County I would still be confused and doing things incorrectly.  If Mike is happy with his house, feels he paid a fair price I think he should move on with his life after a discussion with the agent involved.  There is a learning curve for agents on this stuff and it sounds to me like out there they are just beginning to do this stuff.  You could say that the agent did a great job getting the house for Mike as it is really difficult to get a FSBO to contract.

Laurie - Very interesting scenario, I agree with Miriam there is a learning curve, and from your previous posting buyer agency is very new to Long Island.  Glad Mike was happy with his decision to to buy the house.

Miriam and Jennifer, both of whom have opinions of value to me in a significant way: the buyer of the house was offered, accepted, and paid for buyer representation upon the first substantive meeting with his real estate agent, and signed an agreement to that fiduciary. You guys know it, and get it.

Having done so, no information regarding price he was willing to pay, financial ability to exceed that amount, or inability to do so- I'm not privvy to this- was understood to be information subject to being relayed to the seller, per the agency contract signed by both Mike and his broker. Except, he finds out 48 hours before closing that it could have been, despite a legal contract signed assuring confidentiality.

In the nth hour, the understood-throughout the process-agency was interrupted with an "Oops- I represent the seller" disclosure completely unexpected by the buyer.

Except, under the auspice of the buyer agency contract that he signed (and as a result, is enforceable, I would surmise, but contact a lawyer) this is a potential breach (not a lawyer- sp.) of contract. Too much info collected from Mike throughout the process to ensure a fair transaction, much less the (paid for by Mike) buyer agency expected.  But I could be wrong- and respect your input- THANK YOU.

Hi Laurie...or do I now address you as Options?

Certainly looks like undisclosed Dual Agency to me....it's supposed to be about the Consumer! Doesn't look like NY thinks that way?

Joan, I'm a bit perturbed about the Options- I'm not sure why it's suddenly showing up differently.

Your response is perfect, and without complication- thank you!

It may be worth it to Mike to pursue a rebate on any amounts he paid directly to the buyer agent.  Disclosure after-the-fact violates a number of agency obligations / duties:  honesty, fair dealing, protecting client interests, etc.  The 11th hour fax is, in my opinion, the brokerage attempting to cover-its-behind.  But given the need to close the transaction, it can be argued that Mike signed the acknowledgement under duress.

Laurie, you are right.  However in the environment you are in - it just isn't that clear to all else.  A discussion between this buyer and agent is in order.  Representing a seller can mean getting the house sold not necessarily breeching anything.  Fine lines and shades of grey.

Anthon, I don't know what course Mike will take, and appreciate your opinion regarding his possibilities. It's unfortunate that agency isn't taken seriously enough/understood enough by some in the real estate contingent- makes the whole industry look bad.

Hey, Miriam- I think that the problem is non disclosed seller representation- people take different approaches (as you know) when making a purchase, depending on which side of the buying process they/their agent is on. Bottom line, IMO: these agreements are legal documents, and should be viewed with the seriousness for which they are intended. A disclosed change in agency is fine; I just can't wrap my brain around an undisclosed (and last minute) change, for any reason- makes the whole transaction seem suspect to the party offended by this, and is entirely avoidable. Thanks!

Hi Laurie, Nice layout of the crime scene!  One and most importantly the buyer has implied representation because of the agents actions.  Here is a little tidbit that any lawyer will jump all over and easily win.  The only way to void the buyer agency, if in fact, buyer agency was established with a written agreement is to have another written contract...the one the lawyer and agent wants the buyer to sign...voiding or relinquishing representation. 

Depending on how the second or part two contract was written...the buyer would not be obligated to pay anything to the buyer's agent since the obligations of the buyer's agent were not fulfilled.

You can in fact purchase property with a "show and sell" agreement and not offer representation to the seller.  This may be affected by state statues but most states allow contracts that do not offer "sales" agreement but a "purchase" agreement instead.  I am not a lawyer and am not offering a legal or implied legal opinion but I would definitely refer the caller to seek a real estate specific attorney.  This is a problematic and the buyer may have rights that were violated.

Nice post Laurie.

Most new agents do not have the experience to know this.   In real estate we can never assume.  That is a fatal mistake.  Before theagreement is tendered you must know and understand what and who you are dealing with.  The safety net in most areas is an MLS which offers exclusive right to sell where all parties are represented and entitles to some compensation.  MLS boards also for the most part have an exclusivity wiht their members that they must use an exclusive right to sell to remain members.

Gary, thank you. I don't know what direction this will take, but am certain that if agents don't view paperwork that is signed by consumers with a bit more knowledge, there are going to continue to be unhappy home buyers/sellers!

Jim, the open listings don't appear on the mls- basically, it's a fsbo. Thank you for the input!

Lisa... Open Listings.. I don't think are worth the trouble.  I like having everything in writing.. nothing left up to interpretation.

Shucks.  This is so simple that perhaps only the simple minded will understand.

UNDISCLOSED DUAL AGENCY IS FRAUD.

Nuff said.

I could go into great detail but what's the use.  He closed.  That, however, doesn't bar a complaint to the NY real estate board or suing the agent for a clear EDINA violatio of the law. 

 http://www.dos.state.ny.us/lcns/realestate/1736.htm

Dual Agent
A real estate broker may represent both the buyer and seller if both the buyer and seller give their informed consent in writing. In such a dual agency situation, the agent will not be able to provide the full range of fiduciary duties to the buyer and seller. The obligations of an agent are also subject to any specific provisions set forth in an agreement between the agent, and the buyer and seller. An agent acting as a dual agent must explain carefully to both the buyer and seller that the agent is acting for the other party as well. The agent should also explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and seller are giving up their right to undivided loyalty. A buyer or seller should carefully consider the possible consequences of a dual agency relationship before agreeing to such representation.

Valerie, I know little about them except (now) that local brokers make them much more difficult than they need to be- sometimes, getting "both ends" (i.e., listing with the open seller for the purpose of collecting more $) is not worth what Lenn has so eloquently explained to be fraudulent to the buyer.

Lenn, thank you for your input. Mike's question (we haven't met) pertained to exactly what buyer agency IS- and like many LI consumers, his question remains unanswered with the behavior of the real estate contingent. For whatever reason, it seems that some in our real estate contingent feel either above the law (unacceptable); unable to understand the implications of misrepresentation (unacceptable); or just plain ignorant with respect to the real estate industry- typically at the expense of the buyer. Mike is happy with the house, but because (hindsight) there were things that occurred that appear more seller represented than buyer represented, he's livid, and wants answers. Without offering legal advice (as you have not), any explanation from you is quite welcomed. He has access to this thread, and likely is not aware that your response is about as good as he'll get from anyone in the industry, myself included. THANK YOU. Feel free to add anything that strikes you- my objective is simply to provide input, when what he'll hear from LI agents is, "Eh- forget it." It will never change if agents continue to engage in behavior that is unacceptable anywhere else, without comprehension behind their actions. As evidence of Mike's call, consumers are not accepting, "Eh-forget it."

Lenn - while you are correct about Dual Agency that is not what happened here.  FSBO's don't for the most part discuss agency disclosure nor do they care about it.  It is not possible to get informed consent in writting. Next this agent was, I am sure, put into an impossible situation.  I would not be surprised if the disclosure was sent more out of this is what we always do than having to do with the representation.  You really have to work in this environment to understand.  When I was on Long Island we would send the Agency Disclosure to the attorney - which is totally ridiculous.  Agents wasn't working as a Dual Agent.  Agent was most likely not representing the seller either.  Agent was just trying to get the house for the buyer. When I was on LIBOR their attorney was petitioning to get rid of agency as they considered it absurd. 

Miriam, here's my guess: buyer and buyers agent (with a signed BA contract) find the house. Rather than coming in as ONE HALF of the equation (buyers agent) the SELLER is asked to sign a listing agreement by the broker (rather than the seller paying for only the buyers agent, he's paying for both listing/buying sides). The result of this action is that it has compromised the buyer agency contract, and as a listing "side", fiduciary was owed to the seller. Until changes are made (and I agree- they should be) the agency disclosures, if not followed to the letter, will create big problems for anyone that ignores the content in favor of "both ends" without full disclosure. I am GUESSING that this occurred, as the buyer is not privvy to the total commission paid above and beyond what HE paid for BA. I didn't ask. This is a GUESS.

Laurie...

I have to park. This is deep and I'm all out of work mode. I'll be back though. Today I just don't have hard core Real Estate in me. It's been like that around here all day :)

TLW...ROAR!

I'm about to ask Sean get my speakers up so that I can go laugh with your latest post- I'll just thank you in advance, here, TLW!

I read Miriam's comment.  However, I'm basing my opinion (MD, VA Broker opinion, not legal opinion) on the post wherein it says.

THE DISCLOSURE READ THAT IN FACT, MIKE'S AGENT REPRESENTED THE SELLER.

If the Buyer's Agent, under written agreement, is disclosing that they represent the Seller, that can only be Dual Agency.  Since Dual Agency must be agreed to in writing by both the buyer and seller, the agent was practicing Undisclosed Dual Agency.  Since the Buyer did not agree to Dual Agency, the form whereby the Agent disclosed that she was also the listing agent, clearly exhibits Undisclosed Dual Agency, which is FRAUD.  We kow that the Buyer had a BA Agreement.  We know that the agent send a disclosure to the attorney that the agent represented the Seller.  No matter how you cut it, it had to be Dual Agency.  However, a Buyer and Seller must agree to DA.

I can think of a dozen ways this could come about.  Fact is, it did come about.  The Buyer who started out with a BA Agreement, found a house that was owned by an unrepresented seller.  In order to present the contract, the agent probably did what we used to do many years ago, get a limited, one time showing, etc. listing contract.  HOWEVER, we did that before the days of Buyer's Agency. 

Once the agent had a BA Agreement, she should have presented the contract to the seller as a customer, not a client.  Further, she should have disclosed to the unrepresented Seller that she, the agent represented the Buyer.   Then she could have negotiated the contract and advocated for the Buyer as agreed. 

The indisious thing about Dual Agency is that the buyer will never know whether the final contract, price, terms and conditions were the best that he could have gotten with that seller, had the agent not been "representing" the Seller too. 

It's insidous when the Buyer doesn't know what the agent told the Seller in confidence.  Nor, what confidences told to the agent thinking that she had a duty of fiduciary, that the agent disclosed to the Seller. 

I'm not licensed in NY, but, thanks to the Internet, I read the NY Agency law and it is quite similar to MD.  Of course, throughout the transaction, the Buyer believed that the Agent represented his interest, including

"A buyer's agent has, without limitation, the following fiduciary duties to the buyer: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account. A buyer's agent does not represent the interest of the seller."  http://www.dos.state.ny.us/lcns/realestate/1736.htm

BTW, who pays what to whom for agency services is totally unrelated to agency representation. 

This is a classic Edina case.  I believe it settled for about $30,000,000. 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

http://www.economics.emory.edu/Working_Papers/wp/curran_99_19_paper.pdf 

Edina Realty Settles Federal Class Action Suit Alleging Dual Agency Violations

Note: This case is not published in an official reporter and may not be cited as authority. Consult with counsel before relying on this case.

In Bokusky v. Edina Realty, the district court addressed alleged dual agency violations by a real estate agency. The court order certified a federal class action suit against Edina Realty (Edina). Thereafter, in what Edina's president called a "prudent business decision," Edina settled federal and state claims for dual agency violations.

The class of plaintiffs consisted of buyers and sellers of residential property wherein agents of Edina represented both the buyer and seller in the same transaction. The plaintiffs maintained that Edina agents "systematically failed to disclose the inherent conflict of interests in dual agency transactions" by relying solely on a form disclosure of the agency relationship contained within the purchase agreement. In a six-count federal complaint, the plaintiffs alleged breach of a Minnesota statute requiring written disclosure of dual agency, breach of a Minnesota Department of Commerce Regulation governing representation of multiple parties in a transaction, fraud, breach of fiduciary duty, breach of contract, and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Plaintiffs sought damages in the amount of $200 million. Treble damages were available.


Bokusky v. Edina Realty, 1993 WL 515827 (D. Minn. 1993). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]

Lenn, I knew you'd get it across FAR better than I ever could- THANK YOU for taking the time and presenting information that explains WHY there's a big problem here.

Laurie,  You say that dual agency is permitted in New York, but isn't it supposed to be "disclosed" dual agency?  He was misrepresented, in my opinion and mislead. How can someone represent a buyer with a buyers agency agreement...which usually give full fiduciary duty, responsibilities, etc etc and not disclose his/her responsibilities to the seller?  Breach of buyer contract here. 

All that Realtor had to do was "disclose" the dual agency in the first place and let the buyer make his choice whether to get another Realtor or stay with the original Realtor. What an amazing story!

Haha. good post.

Karen, THANK YOU. I'm going to delete the post, and just leave the quality comments at this point.

Except, Alan's...  :)

*Lenn- too late

Lenn, it is much more likely that the agent, not used to all this stuff, is confusing payment with fiduciary.  She didn't work as a dual agent.  I would guess Laurie, that your guess is incorrect.  I wish someone could get the agent involved to explain what happened.  All of you are right.  The agent had the option to not get the house for the buyer, that's it.  Been there.  Lenn I am well versed in the Edina case.  You do not understand what Laurie is dealing with.  One foot in front of the other, it is truly hard to imagine the cob webs.  My guess is that the commission had to come out of the proceeds, that Mike could not just write the check independently, and that the seller refused to pay a buyer's agent..... or sign an agency disclosure form, or discuss dual agency.....been there, done that.

Miriam, I presented what I understood Mike's scenario to be, based on our phonecall. Mike chose to pay the BA out of his pocket- it wasn't part of the transaction price. The seller appeared (based on my understanding) to be cooperative. The Realtor was not a problem throughout the transaction, either; but when the Realtor's broker insisted on having the disclosure signed by Mike, and as a result, faxed it to the attorney for Mike's signature, things took a turn for the worse (in Mike's eyes) because despite liking the Realtor, Mike was left to wonder what the hell happened to his buyer agency, and why did this occur two days before closing, instead of at the start of the transaction (which is when, upon the advice of his attorney, he called the agent and was not satisfied with the answer provided). Upon closing (and having time to consider the implication of the agreement), Mike took a look at issues that occurred during the transaction, and began see conflicts that were resolved in the seller's favor, not his own, through the course of the purchase. As a result, he sought out an understanding of just what "buyer agency" is, because it did not appear to be demonstrated in his transaction despite having signed a contract for BA with the Realtor. Evidently, enough transpired throughout the course of the purchase to make him seek out answers, because they were not provided by his agent (at least, to Mike's satisfaction). Mike's question to me was, what is buyer agency- what does it MEAN. It was then that he provided the details, and expressed his fury over feeling "duped"- with the change in agency being enough of a red flag for him to seek answers.

I should have expressed this more clearly- thank you, Miriam, for your input!

Yes, indeed, I now understand a bit more of this story, pieces are now clearer.  When the disclosure was sent over, since there was a contract, since the agent was a buyers agent with a contract, why was the disclosure that the agent was representing the seller?  Why did it not say buyer's agent?

That's the million dollar question (or, 30 million dollar question). My guess is that a listing agreement was signed with the seller at some point, negating the  BA agreement (unbeknownst to the buyer) until two days before closing. He did not receive a satisfactory answer from the agent, which compelled Mike to seek out opinions re. his situation.

It's not uncommon with open listings (evidently) or FSBO for the agent with the buyer to secure payment via a listing agreement- but to do so without knowledge on the part of the buyer is the crux of Mike's issue, as his agreement with the Realtor came first. If my guess is incorrect, I'll update- but the buyer was not privvy to whatever was occurring between his agent and the seller, so it's a bit convoluted.

I am a New York agent, and what the Buyer should have signed is a disclosure of duel agency. The form used is the same, but a different paragraph applies and different boxes are checked.  

Wow can that really happen?   Did it really happen?   And close?   Boy something does not sound right with all of that

Rosario, thank you- I think, had that been presented whenever it was in play (dual agency) the buyer might not have felt quite so annoyed.

Desiree, this buyer and I had a conversation; my take is presented based on the scenario that I understood occurred with him and the parties involved in the home purchase. I am not aware of the position taken on the "other side"- the extent of my participation was to take this scenario (yes, he closed- issues with the house, but loves it) and try to make sense of his perception of how things went for him. Thanks! Loved your last blog-

Hi Laurie,

Happy Memorial Day and best wishes.

Tommy

Thanks, Tommy!

I'm not sure I fully understand your story, but I'll go ahead and add my 2 cents anyway.

First of all, in Florida, Agency agreements have to be signed up front. So the buyer would have already signed a Buyer's Agency agreement or a Transaction Broker agreement. (TB replaced Dual Agency in FL a long time ago.) The only alternative is the 3-in-1 which is when the buyer signs the BA, the TB, and a permission to transition between the 2, as needed.

As for the open listing, this is where I'm unclear. Are you saying the agent in this story was the listing agent for the open listing? In FL, this would have caused an automatic transition to the Transaction Broker representation, if the 3-in-1 had been signed. Otherwise, the TB agreement would have been the only agreement used anyway. It's the only way we can legally operate.

My only other thought was how I sell FSBOs. The seller pays my commission, but they represent themselves. I have them sign a "Notice of Non-Representation". Then I can represent the buyer as either a Transaction Broker or a Buyer's Agent.

Lisa, at the time of the property viewing, it was a FSBO, with the seller willing to cooperate with agents. The way that you indicate your own practice with FSBO'S is how it should have gone. It would appear, however, that the BROKER, after having agreed to represent the buyer, likely charged the seller a "listing" fee via a listing agreement with the seller after the buyer expressed interest. This would allow the listing agent/buyer agent (same agent- illegal) to receive a full boat listing commission instead of the designated amount typical to represent ONE SIDE. So, if this is the case, the seller got screwed by paying too much (both "sides"), and the buyer was completely disadvantaged by undisclosed dual agency.