Real estate licensees have a duty of absolute fidelity to their client. How then, can you not violate that duty when you serve as a dual agent? Agents have been asking themselves this question for longer than I have been practicing law and don’t always like the answer. One prominent real estate agent in California is facing this issue in a lawsuit filed by his former clients.
In January 2011 a couple retained the services of a real estate agent to assist them with selling their property in beautiful Watkins Cove – a picturesque location occupied by six beachside residences with wide ocean frontages. Although the home was appraised in 2008 at $12 million, the agent recommended a list price of just under $9 million. Over the next 14 months, and no solid offers, the price was repeatedly lowered until it was eventually listed at $6.45 million. The agent, who was well aware of the couple’s difficult financial situation, eventually offered to purchase the property himself and acquired the home in 2012 for $5.795 million. The property was subsequently renovated and flipped for $15 million.
The lawsuit, which is to be tried in the Santa Monica Superior Court, alleges that the agent neglected to properly promote the property because he saw a unique opportunity for himself. He rarely attended many of the showings and open houses and ignored the request to play up unique aspects of the architecture. The clients maintain they were willing to make improvements to help the sale but were advised by the agent this wasn’t necessary. In short, they argue he did not explore all reasonable available options for his clients.
PRACTICE POINTER: Any time licensees represent dual parties, particularly when one of the parties is the agent, breach of fiduciary duty issues can easily arise. Although dual agencies are a commonly accepted practice, an agent should always exercise extreme caution and even seek guidance from their broker to review the transaction to ensure even the appearance of a breach is not present.
If you have any questions regarding Dual Agency matters, please contact our office today. 702-798-4955