Like I’ve always said, well done and fully disclosed,…”Dual-Agency is four times the work, five times the responsibility, and six times the liability. See this great article on why Single-Agency is a consumer’s best friend! Silicon Valley Realtor® Pat Kapowich
In a case that has received much attention from the real estate industry, the California Supreme Court has ruled that a real estate agent working with a seller owes a fiduciary duty to disclose material facts to the buyer in the transaction when both the buyer’s and seller’s agent are licensed under the same broker. In a unanimous decision, the state Supreme Court affirmed the decision of the appellate court and ordered a new trial.
The Horiike v. Coldwell Banker case stems from conflicting information on a property’s square footage. The home buyer, Hiroshi Horiike, purchased a mansion in Malibu and worked with a Coldwell Banker real estate agent in Beverly Hills. The property was listed by a Coldwell Banker agent in another office. Horiike claims he was misled about the property’s square footage. The flier stated the home had approximately 15,000 square feet of living property, but Horiike claims that after the sale he learned the home actually had about 10,000 square feet.
Most square footage measurements do not include outdoor living areas in square footage, but the city of Malibu includes some outdoor living areas in determining square footage. These facts were fully disclosed by the agent, but apparently the buyer never read the information.
Horiike sued the seller’s agent, Chris Cortazzo, stating Cortazzo and Coldwell Banker breached their fiduciary duty and failed to advise him to hire a third party to verify the actual square footage. He did not sue his Beverly Hills agent.
In the 2012 jury trial, the jury fully exonerated the seller’s agent and Coldwell Banker on the buyer’s claims for negligent misrepresentation, intentional misrepresentation and concealment. An appellate court overturned the trial court ruling. Coldwell Banker appealed to the California Supreme Court, which this month affirmed the lower court’s ruling that listing agents owe fiduciary duty to buyers when both buyers and sellers are represented by agents from the same brokerage.
This case affects a controversial real estate practice known as dual agency, which applies to an agent who represents both the buyer and the seller in a real estate transaction. It also involves transactions in which two agents are working for the same broker and one agent represents the seller and the other agent represents the buyer. California law allows brokers to represent both parties with their informed consent.
According to the California Association of Realtors, the state Supreme Court decision does not outlaw dual agency. The duty to disclose known material facts affecting the property has long existed in residential transactions, and the higher court decision does not change that obligation.
In its ruling, the court stated, “Even in the absence of a fiduciary duty to the buyer, listing agents are required to disclose to prospective purchasers all facts materially affecting the value or desirability of a property that a reasonable visual inspection would reveal.”
“In California, listing agents representing the seller have always understood they have a duty to disclose known material facts about a property whether they share a common broker or not,” says Karen Trolan, president of the Silicon Valley Association of Realtors. “The Supreme Court ruling underlines the fact that real estate agents must act as fiduciary to both buyers and sellers when the agents are licensed with the same brokerage. Key to every transaction is honesty with all parties, full disclosure and paying attention to every detail.”