Sellsius real estate marketing blog

I will hazard a guess that Amy prevailed because claiming dual agency applies to the "two parties" meaning buyer/seller; not two buyers.
What do I get if I am right? :)

Did Sam disclose to Amy that he was also representing another buyer on the same property? I would think that would be key in the case. If not, I would think Amy would win.

My family pretty much brought Buyer Agency to New England when it was a virtually untested concept many many years ago. In our exclusive buyer agency agreements we stated that if another buyer client is interested in the same home the buyer agent would hand off one of the buyers to another agent in the office so they could renegotiate the deal. This is the only way to keep it ethical. It is very rare that this happens but you need to protect yourself because things like this do happen.

I'll take a stab at this one. The agent wins as long as he didn't disclose anything to the either of the other buyers in the transaction that would be construed as priviledged information. Each buyer's contract is a separate transaction. Dual agency doesn't apply because he didn't represent both the buyer and seller in the same transaction.

Dual agency? Not sure, but I believe that both buyers would be entitled to disclosure of this obvious conflict. If the agent told both buyers that he intended to represent a second buyer and they chose to continue with him as their representative, Amy has no case. If she wasn't informed, then the agent is cooked.

In NH the agent would win as long as full disclosure was given. Our Buyer Agency contract has a clause that talks about representing 2 buyer cleints who may want the same house.

Did both buyers sign agency disclosures or buyer agency agreements? There's a big difference in the two here in Alabama. Did the buyer agency disclosure discuss this type situation? Not enough information here to make an educated guess.

I have to agree with Ginger's assessment. And Sam wasn't very smart working with two buyers on the same house.

Sam argued that since dual agency allowed him to represent both a buyer and seller, he should be allowed to represent two buyers.

Yes, they did sign buyer rep agreements. As luck would have it, both buyers liked the same house. So he put in both offers and left it to the seller to decide which client got the deal. I am not sure if both buyers knew of the other at the time of the offers.

Interesting dilemma, but real estate is full of those. Much depends on the state laws and any case history the state has and what, if any, disclosures were given to each party.

To take a guess, I would say that the Amy wins because courts tend to favor clients who have been harmed when fiduciary duties are in question.

I could also see the court saying that one fiduciary duty does not directly conflict with the other and are treated as two seperate and un-related agency relationships. Amy's fight may be that the agent knew her offer and could have advised the other buyer accordingly, but it would be speculation.

The responsible thing for the agent to do in this situation is obviously to refer one of the clients to another agent they trust to do a good job.

I am not opposed to dual agency, in fact it can be a very good thing, but this situation has too many areas of perceived (if not actual) breach of agency.

In beautiful Maryland, Dual Agency only exists if the Broker represents the Seller and one of the Broker's agents (us "salespersons" or "Associate Brokers") brings a buyer into the transaction.

Dual Agency does not exist if a single agent happens to be representing two separate buyers unless the Broker (or an agent under the supervision of the Broker) is also representing the Seller.

It does pose the more interesting ethical question, though. The buyer's agent has the fiduciary duty to represent the best interests of his client (the buyers). The only way I can see that happening is to offload one of the buyers to another agent or the Broker. Then the question would be: "Which one?" And if you delegate one of the Buyers does that open you up for grief if that offloaded Buyer is unsuccessful?

I almost had this happen to me once but, luckily, one of the buyers decided on a different house.

The main question is why did the seller accept the second offer? Did both buyer's provide prequalification letters from trusted lenders with their offer? Which offer was more beneficial to the seller from a timing standpoint? I have structured transactions where our offer was lower than another offer on the table but our time frame was more suitable as we did not require the seller to move twice.

I don't think the agent did anything wrong by showing each buyer the same homes. He may have been more derelict in his duties had he not shown each buyer every home available that met their criteria.

Of course trying to guess what a court ruling would be is not easy, especially since we do not have all the evidence. If we guess that, due to the fact that Sam had each buyer sign a buyer broker, he probably is an ethical agent and did not disclose anything about either of the transactions to the other buyer, my vote is for NOT GUILTY.

Seems the law gives two choices. Represent both parties with written consent of both parties OR represent one solely. Agent did neither. She did not represent ONE solely nor did she appear to have written consent to represent two or more in the same transaction.

I have always felt there was more conflict in representing two buyers who want the same house, than a buyer and seller who want to buy and sell the same house. In the former, only one can achieve the objective. In the latter both can achieve the objective.

My hope would be that the agent was found to not have represented the buyer SOLELY who sued the agent. Very similar to my post regarding the buyer who sued Coldwell Banker in CA for representing two buyers on the same house.

http://www.raincityguide.com/2006/08/07/my-favo...

The losing buyer sued, same as in this case. The case was settled out of Court, so we have no precedent from that conflict. As a result of that "case", buyer agency agreements contain a clause that the buyer agrees that the agent (company) may represent two buyers for the same house. If both of these buyers signed a buyer agency agreement containing that clause, the result may be different than if they did not.

This one will be the first to have gone to trial, to the best of my knowledge.

Here's Greg Swann's answer :)

http://www.bloodhoundrealty.com/BloodhoundBlog/...

He says it is Undisclosed Dual Agency.

Small correction to my comment above where I said "The losing buyer sued, same as in this case." Actually the WINNING buyer sued for having to pay more money than if their agent/company had not represented another buyer who forced the price up.

This is fun. I can post Greg Swann's answers here and your answers there. I can be the Fake Greg Swann for commenting only HA!

Curious why Greg Swann can't just talk directly with Rudy? :)
Nothing worse than a fake Greg Swann.
Can't we all just blog along?

From the Arizona Buyer Broker agreement, lines 60-61:

Other Potential Buyers: Buyer consents and acknowledges that other potential buyers represented by Broker may consider, make offers on, or acquire an interest in the same or similar properties as Buyer is seeking.

Case closed, at least locally.

Jonathan,

I re-read the post. I says they both signed "Agency Disclosure Forms" not "Buyer Agency Agreements". I agree that most Buyer Broker Agreements would make the case go as you say. But would you change your opinion if they did not sign Buyer Broker Agreements?

I re-read the post and it seems they are going by Agency Law alone and not a Buyer Broker Agreement signed by either buyer.

Phil,

I thought Joe wrote this one. I agree that Rudy can cajole just abouot anyone...including Swann. Joe doesn't have a chance in hell.

ANSWER:

Amy won. The salesperson, and hence the broker, was liable for breach of their fiduciary duty to Amy.

The case is Zuazua v. Tibbles, decided by the Montana Supreme Court in October 2006.

Th Court held that while the Montana code did not prohibit salespersons from representing multiple buyers, by virtue of the language requiring buyers representatives to act "solely in the interests of the buyer", the salesperson could not represent 2 buyers competing for the same property. It is an inherent conflict of interests. To do so is a breach of fiduciary duty.
Note: There was no indication by the Court whether the law could be waived by contract implying that the buyer agreements were silent on the point.

The case was a close one. It was decided 4 to 3.
The dissent, written by Justice Rice, argued, in part, that the agent could submit multiple offers from different buyers but could not disclose confidential information, i.e the competing bid/terms, and therefore, would not pit one buyer against the other to drive up the price (& the resulting commission).

So,in Montana, an agent can represent many buyers and show them all the same houses BUT when it comes to making an offer, the first buyer to do so will preclude the salesperson from submitting offers on that property from other represented buyers. You might want to tell your clients this from the gitgo and include language in your buyer agreement.

Read the decision here: http://tinyurl.com/2zyb9k

You can hear the actual legal arguments and court questions here:
http://audiovideo1.law.umt.edu:8080/Zuazua v Tibbles 10-4-06

Yes, I wrote this one (I'm the lawyer in the group)
--jf

So what should an agent do when a second buyer is interested in a house that another client has already submitted an offer on? It seems from the opinions in the case that if the agent disclosed information to Amy she might still have won since the case talks about dual agency in “solely in the interests of the buyer” but does not mention disclosure.

So basically is the only way to deal with this situation is to refer the client to a different agent. If that is true that is somewhat difficult. Agents work hard to get buyers and it would be unfortunate to have to refer them out in this case.

It seems this would happen more frequently in small towns where there are fewer houses on the market.

Keep in mind this is a Montana case where the law was silent on whether multiple buyers could be represented on the same transaction.

It would be wise to find out what your state law says and act accordingly. And make sure your buyer contracts reflect the law.

Contractual waiver of the law may not be enough to save you a lawsuit.

sellsius,

This is a fascinating case. Given the fact that the brokerage has the agency relationship with the client, couldn't this finding apply when two agents from the same brokerage are representing different buyers on the same property? This likely happens regularly, especially in hot markets.

Would appropriate wording in a buyer brokerage agreement be sufficient to cover such conflicts? Perhaps another good argument for using bb agreements on a regular basis. Nothing settles disputes more effectively than a written agreement that spells out the ground rules.

I'd love to see more of these posts. They are great learning tools.

Yes, the scenario you suggest certainly can, and does, happen, Norm.
So yes, I would spell it out in the buyer rep agreement
Disclosure in the contract will provide some insulation, probably enough to discourage a suit. Since the Court was split, anything that can be construed as full disclosure, or waiver by the clients, can only help. Besides, a client is less likely to be upset if they sign a contract spelling out the ground rules, as you say.

We will continue to post "You Be The Judge". Thanks.

Here's the first one: The Case of the Noisy Neighbor:
http://tinyurl.com/33o5us

I can't believe some are still defending the right for a single agent to write two offers on the same house. One buyer loses but agent wins either way does not seem right to me.

I would say Sam wins because he did not disclose info on each other, and submitted the offer for both. Hmm, it is a tricky one.

I think Amy should win. The law is suppossed to protect individuals in cases such as these. Ben could of pulled out of representing Amy as there was a conflict of interest.

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