Mortgage broker: One agent can't fairly represent buyers and sellers
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
Earlier this week the California Supreme Court evened the score for every homebuyer who chooses to purchase a home from the same real estate brokerage.
From now on, that real estate brokerage and all of its agents (regardless of written disclosures for whom they represent) owes the same fiduciary duty to the buyer that the seller receives from the listing agent within that brokerage.
Briefly stated, a Coldwell Banker agent named Chris Cortazzo listed a Malibu mansion and subsequently provided a brochure indicating the home has roughly 15,000 square feet of living area. The listing agent also obtained information from the tax assessor’s office indicating the home had 9,434 square feet of living space.
Hiroshi Horiike purchased the mansion using another Coldwell Banker agent, believing it to be 15,000 square feet. Two years later, Horiike learned of the square footage discrepancy and sued Coldwell Banker and the listing agent for breaching their fiduciary duty to disclose the home’s accurate square footage.
Several industry experts say the “dual agency” practice is a conflict of interest.
As an equal fiduciary, for example, how can a brokerage negotiate the sellers’ highest price and at the same time get the best deal for the buyer? This defies logic.
Several states specifically prohibit dual agency, including Colorado, Kansas, Florida and Wyoming, according to this National Association of Realtors.
If agents are legally allowed to double end a transaction, they move from client representation to shuttle diplomacy, Kirby and Gina Ellis of Next Level Real Estate Academy told me.
Yet, they are going to receive all of the commissions, the Ellises said. So the system rewards the agents at the expense of consumers.
Real estate agents are an uneven bunch. Some are the salt of the earth, always outstanding. Others, well, you know.
On top of that, larger brokerages tend to think incestuously for sake of adding profit. Double-ending deals, affiliated business relationships, marketing servicing agreements of escrow, mortgage and title insurance are all examples where consumers may pay a lot more.
Get independent representation wherever possible in all matters real estate.
“It’s like having two husbands. How can I be a good wife to two husbands,” said 15-year agent Julie Locke of Keller Williams Newport Beach.
Locke refuses to represent buyers and sellers in the same transaction, always referring one party out to another firm.
Jeff Lazerson - Mortgage Columnist since 2011