Friend possibly victim of real estate dual agency

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CrossOverGuy
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Friend possibly victim of real estate dual agency

Post by CrossOverGuy » Thu Mar 20, 2014 12:40 am

My friend told me that she had recently agreed to sell her co-op in Manhattan for what sounded like a good sum, not long after an open house. However, she mentioned that her real estate broker had pressured her and her husband to accept this one person's offer. However, the agent also mentioned there was another offer (apparently from someone who she did not bring in - possibly from the multiple listing or someone at the open house). The agent seemed to pressure my friend to take the lower offer; I think the agent might have said something like the higher offer came from people who might have had a problem get financing for a mortgage. (How would this agent know this if it wasn't her client?) I told my friend that it sounded like this agent wanted her commission above all else. My friend and her husband signed something agreeing to the lower offer (though they had countered the original offer to bring it up a bit). Plus, her agent didn't put a contingency in this agreement that my friend and her husband need to procure a place to move to; unfortunately they don't make much of a salary -- he's on Social Security and she does some musical directing - making it hard to even qualify for a decent rental in NY. I told my friend to see a lawyer. It sounds like the agent might be guilty of dual agency (or some other malpractice) -- by not having her client's best interest at heart and possibly also be working for the buyer when she should be representing my friend (the seller). A non-disclosed and non-agreed upon dual agency is illegal in NY. If my friend had taken the higher offer, the real estate agent would have probably had to split her commission with the other agent. I've advised my friend to get a lawyer pronto to see if there is any recourse since if this closes she and her retired husband will have to be out in a few months.

Any feedback? Thanks.

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celia
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Re: Friend possibly victim of real estate dual agency

Post by celia » Thu Mar 20, 2014 4:55 am

I'm not sure what the problem is since your friend apparently accepted the offer. When she accepted, she knew she would have to vacate the place. Why does she think it unfair if the agent is collecting the whole commission (other than it possibly being illegal)? It nets her the same amount whether the commission goes to one agent or is split for two agents.

Ultimately it was her choice of which bid to accept. She thought she got a good price at the time and even countered to get the price increased.
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denovo
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Re: Friend possibly victim of real estate dual agency

Post by denovo » Thu Mar 20, 2014 5:01 am

First take it up with the agent or her listing company to see if they will settle or are willing to and hint you will file a complaint with the state real estate licensing board.

Jack FFR1846
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Re: Friend possibly victim of real estate dual agency

Post by Jack FFR1846 » Thu Mar 20, 2014 7:55 am

How much of a difference were there between offers?

I'm just throwing that question out there. If the low offer were $500k and the higher offer was $505k, who cares. If the lower was $500k and the higher $600k, then it's worth looking at.

With all of this, keep in mind that there are legal papers signed. Trying to break that deal could mean potential legal bills and damages to the buyer who put money down in good faith. If they really have a problem with all of this, they should hire a lawyer and state clearly what they want.
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donall
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Re: Friend possibly victim of real estate dual agency

Post by donall » Thu Mar 20, 2014 9:06 am

Real estate agents make money when a property is sold. NY coops often have strict guidelines for accepting new owners. Perhaps the two factors were the source of the pressure from the real estate agent.

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ddb
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Re: Friend possibly victim of real estate dual agency

Post by ddb » Thu Mar 20, 2014 9:10 am

CrossOverGuy wrote:Any feedback? Thanks.


I am not aware that real estate agents are required to act in the best interest of their clients.

Based on the limited info provided, doesn't sound to me like there's much here to "go after".

- DDB
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damjam
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Re: Friend possibly victim of real estate dual agency

Post by damjam » Thu Mar 20, 2014 9:19 am

From NYS disclosure form:
A seller’s agent has, with-out limitation, the following fiduciary duties to the seller: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account.


From the same document:
A real estate broker may represent both the buyer and seller if both the buyer and seller give their informed con-sent 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

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Steelersfan
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Re: Friend possibly victim of real estate dual agency

Post by Steelersfan » Thu Mar 20, 2014 9:28 am

It sounds like you suspect the agent was also representing the buyers.

Until you can prove that, there's nothing to do.

Take it a step at a time, maybe by getting a hold of the buyers and asking them who their agent was. Don't tell them why you're asking.

CrossOverGuy
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Re: Friend possibly victim of real estate dual agency

Post by CrossOverGuy » Thu Mar 20, 2014 9:57 am

How much of a difference were there between offers?


I think it was about a $50,000 difference between the offers from what my friend says.

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damjam
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Re: Friend possibly victim of real estate dual agency

Post by damjam » Thu Mar 20, 2014 10:38 am

CrossOverGuy wrote: Plus, her agent didn't put a contingency in this agreement that my friend and her husband need to procure a place to move to

It might blow up the deal since the sellers did not state their desire for this contingency earlier, but if they have not signed the sales contract yet they can probably still add it.
The sellers should have their own real estate attorney. In NY the attorney for the seller draws up the sales contract. In NY this is not done by the Real Estate Agent.

denovo
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Re: Friend possibly victim of real estate dual agency

Post by denovo » Thu Mar 20, 2014 10:43 am

ddb wrote:
CrossOverGuy wrote:Any feedback? Thanks.


I am not aware that real estate agents are required to act in the best interest of their clients.

Based on the limited info provided, doesn't sound to me like there's much here to "go after".

- DDB


Whether or not it was met here is an open, question but traditionally RE agents have a fiduciary duty.

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ddb
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Re: Friend possibly victim of real estate dual agency

Post by ddb » Thu Mar 20, 2014 11:26 am

denovo wrote:
ddb wrote:
CrossOverGuy wrote:Any feedback? Thanks.


I am not aware that real estate agents are required to act in the best interest of their clients.

Based on the limited info provided, doesn't sound to me like there's much here to "go after".

- DDB


Whether or not it was met here is an open, question but traditionally RE agents have a fiduciary duty.


News to me, and some quick searching verifies your point. Thanks for the enlightenment!
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denovo
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Re: Friend possibly victim of real estate dual agency

Post by denovo » Thu Mar 20, 2014 11:50 am

OP,

Per the above link it looks like dual agency is ok as long as it was disclosed as indicated. I would first find out if the buyer was represented by the same agent, and see if that disclosure form was signed. If that's the case, it looks like they don't have a case, but this isn't legal advice.

travellight
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Re: Friend possibly victim of real estate dual agency

Post by travellight » Thu Mar 20, 2014 12:31 pm

Agree with the above. A friend just had the same experience and rejected the offer. Not all are savvy enough to recognize this.

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FrogPrince
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Re: Friend possibly victim of real estate dual agency

Post by FrogPrince » Thu Mar 20, 2014 12:37 pm

Real estate agents are sleazy - I am shocked! Seriously though - yes, technically this is a violation of their fiduciary duty. But keep in mind that if they are moderately smart, they have someone else in their office represent the buyer. So on paper this other agent is representing the buyer, but in reality they have an off-the-record arrangement with the other agent. Of course, hard to tell if this ever happened in this case, but would not be the first time.

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Watty
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Re: Friend possibly victim of real estate dual agency

Post by Watty » Thu Mar 20, 2014 3:49 pm

One thing to check for is to see if there was an arbiratration clause in the listing agreement that they signed.

The fact that they don't want to sell now until they find some place else to live is pretty uch anon-starter now that they have signed the contract to sell their house.

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dm200
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Re: Friend possibly victim of real estate dual agency

Post by dm200 » Thu Mar 20, 2014 4:29 pm

Seems to me that the time to ask these questions and bring up these issues is BEFORE accepting the offer.

Calm Man
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Re: Friend possibly victim of real estate dual agency

Post by Calm Man » Thu Mar 20, 2014 5:39 pm

OP, I don't know if you have the full story. In Manhattan, it is almost always the case that one has a lawyer for a coop buy or sale (condos too). The place is a landmine. And coop boards takes weeks and sometimes months to approve a buyer. There is no way that a realtor would be a dual representative and not disclose it as they would lose their license.

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jfn111
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Re: Friend possibly victim of real estate dual agency

Post by jfn111 » Thu Mar 20, 2014 5:48 pm

FrogPrince wrote:Real estate agents are sleazy - I am shocked! Seriously though - yes, technically this is a violation of their fiduciary duty. But keep in mind that if they are moderately smart, they have someone else in their office represent the buyer. So on paper this other agent is representing the buyer, but in reality they have an off-the-record arrangement with the other agent. Of course, hard to tell if this ever happened in this case, but would not be the first time.

Sleazy, I resent that :( though there are some that give us all a bad name. It's still dual agency when the buyer and seller are represented by the same Broker. It might well be two different agents but if they both have their licenses held by the same Broker it's still DA.

deikel
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Re: Friend possibly victim of real estate dual agency

Post by deikel » Thu Mar 20, 2014 7:11 pm

Sounds more like the sellers want to chicken out of the contract now that they realized what they did IMO. They are surprised that they have to move out and made no plans where to go ? Well why did they list than ? Maybe you can argue a good agent would have checked that off the list upfront (in order not to waste his/her time with reluctant sellers).

Just because the agent gave reasonable reasons against one buyer vs another could be considered the work of a very good agent - and the information might have been obtained from the buyers agent who is a friend of the sellers agent ....they all know each other anyway

You did not mention on what price the 50k difference was ? If on 500k, than that is not an unreasonable offer if it speeds up the whole process of selling by some time.

Your speculation that there is dual agency involved is just that - speculation. WIthout knowledge if that was the case and no paperwork was signed to acknoeledge that.....tough luck.

I am not saying this was the greatest agent - clearly not if the seller feels steamrolled after the fact; but there is a mile of a difference between an illegal activity and just a bad agent. The seller does not sound particularly savvy either IMO (they do not have to, but playing with that much momey should warrant caustion).

A lawyer is needed if the seller wants to get out of the contract, there are some steps along the way that could give an option to exit without backlash.
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SDBoggled
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Re: Friend possibly victim of real estate dual agency

Post by SDBoggled » Thu Mar 20, 2014 10:03 pm

Hi,

A couple of points (I don't have enough info to make any sort of judgement, e.g. need to read all the docs that were signed):

In CA the buyer and seller have to sign a form that states whether there is a dual agency... your seller may have signed such a form?

In CA in the standard offer you have to specify what % is being borrowed... so it may be that the % was high (not necessarily indicative of difficulty of funding)... also the higher bidder may have left in loan contingencies and other contingencies that the lower bidder did not. Some contingencies like (inspection) let the buyer totally walk away.

It is not necessarily nefarious: as it is not uncommon for a seller to accept a lower bid because of terms: As a buyer, I was recently on the winning side with $25k lower bid... no dual agency, just superior terms. (I have also lost out with an equal bid, because of terms). As others have said $50k may not be unreasonable depending upon the value of the property.

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FrogPrince
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Re: Friend possibly victim of real estate dual agency

Post by FrogPrince » Thu Mar 20, 2014 11:48 pm

jfn111 wrote:
FrogPrince wrote:Real estate agents are sleazy - I am shocked! Seriously though - yes, technically this is a violation of their fiduciary duty. But keep in mind that if they are moderately smart, they have someone else in their office represent the buyer. So on paper this other agent is representing the buyer, but in reality they have an off-the-record arrangement with the other agent. Of course, hard to tell if this ever happened in this case, but would not be the first time.

Sleazy, I resent that :( though there are some that give us all a bad name.


I wouldn't call any boglehead realtor sleazy :)

At its heart, however, the seller-agent or the buyer-agent relationship represents another example of the principal-agent problem. The agent cares about their commission and will push for the deal that maximizes it, rather than what's best for either the buyer or the seller. And don't get me started on the whole percentage of the deal thing - that should be a flat fee.

I wish there was a Vanguard of real estate agents ;)

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Steelersfan
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Re: Friend possibly victim of real estate dual agency

Post by Steelersfan » Fri Mar 21, 2014 8:09 am

FrogPrince wrote:At its heart, however, the seller-agent or the buyer-agent relationship represents another example of the principal-agent problem. The agent cares about their commission and will push for the deal that maximizes it, rather than what's best for either the buyer or the seller. And don't get me started on the whole percentage of the deal thing - that should be a flat fee.

I wish there was a Vanguard of real estate agents ;)


The Freakonomics guys have a good analysis of the incentives of real estate agents and how they are not aligned with those of a home seller:

https://www.youtube.com/watch?v=17jO_w6f8Ck

This case seems like a perfect example.

Buffetologist
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Re: Friend possibly victim of real estate dual agency

Post by Buffetologist » Fri Mar 21, 2014 10:11 am

Last time I sold my house, our realtor was very open with us. We took the offer from a young couple who had their financing in order, which was $2K lower than my highest offer.

During the P&S negotiation, they wanted further concessions. I was not inclined to make them since I had other offers. My broker told me in the name of full disclosure, that he had procured this couple at an open house and was in line for both listing and selling commissions, but assured me that he was my and only my fiduciary. All of the other offers, there was a different selling agent who he would have had to split the commission with.

He ended up knocking down his commission $1K so that I could offer the couple a $1K concession and the deal went through. I appreciated the candor and the inevitable conflict of interest that he faced and disclosed.

I'm wondering if original poster's broker was getting a full commission from this buyer and only have commissions from others. While not a dual agency, it's still a conflict of interest without disclosure.

stan1
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Re: Friend possibly victim of real estate dual agency

Post by stan1 » Fri Mar 21, 2014 10:32 am

Buffetologist wrote:During the P&S negotiation, they wanted further concessions. I was not inclined to make them since I had other offers. My broker told me in the name of full disclosure, that he had procured this couple at an open house and was in line for both listing and selling commissions, but assured me that he was my and only my fiduciary. All of the other offers, there was a different selling agent who he would have had to split the commission with.



In California the informality of what you just described would have been unethical and possibly illegal. Realtor would have had to disclose to you at the time the offer was made that he/she was representing the seller as well as you the buyer, and you and the buyer would have had to sign paperwork acknowledging this.

Buffetologist
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Re: Friend possibly victim of real estate dual agency

Post by Buffetologist » Fri Mar 21, 2014 2:54 pm

The Realtor was not representing the seller. The realtor disclosed to the seller at the open house that he was representing me. The seller had no representation. In the P&S they had legal counsel.

Nonetheless, in this case, there was no one else to share the commission and because the other offers had selling agents, this created a potential conflict of interest for him which he properly disclosed.


The way it's done around here is commission is split between listing agent and selling agent, both of which represent the seller. At the seller's discretion, they can agree that the selling agent's commission can be used to pay a buyer broker who would have to disclose that they represent the buyer.

cbeck
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Re: Friend possibly victim of real estate dual agency

Post by cbeck » Fri Mar 21, 2014 11:07 pm

A fiduciary obligation would require that the agent not put his own interest before those of his client. RE agents do not have a fiduciary obligation to their clients in NY. In fact, few agency relationships of any kind are held to this very high standard. Brokerage firms were able to fend off attempts to impose on stock brokers a few years ago. Somehow people think that that fiduciary obligations are much more common than they are.

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jfn111
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Re: Friend possibly victim of real estate dual agency

Post by jfn111 » Sat Mar 22, 2014 7:29 am

FrogPrince wrote:
jfn111 wrote:
FrogPrince wrote:Real estate agents are sleazy - I am shocked! Seriously though - yes, technically this is a violation of their fiduciary duty. But keep in mind that if they are moderately smart, they have someone else in their office represent the buyer. So on paper this other agent is representing the buyer, but in reality they have an off-the-record arrangement with the other agent. Of course, hard to tell if this ever happened in this case, but would not be the first time.

Sleazy, I resent that :( though there are some that give us all a bad name.


I wouldn't call any boglehead realtor sleazy :)

At its heart, however, the seller-agent or the buyer-agent relationship represents another example of the principal-agent problem. The agent cares about their commission and will push for the deal that maximizes it, rather than what's best for either the buyer or the seller. And don't get me started on the whole percentage of the deal thing - that should be a flat fee.

I wish there was a Vanguard of real estate agents ;)

As has been alluded to in several posts the agent wants to make a commission or a Fee. (New companies are sprouting up like Redfin that don't work on the typical commission model.)
Rather then maximize commission most agents will push for the deal that's most likely to get done. I deal in mainly REO and work with cash investors. The banks love cash buyers and will often take a lower bid knowing they can close in 30 days. The lower bid results in less commissions for both agents but we will happily do them every day knowing the deals will close quickly.

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