(Flickr photo by orangesparrow)
If a broker is representing a buyer, that broker has a fiduciary duty to that buyer.
What if a broker has two buyers who want to make offers on the same property? Is it possible to fulfill a fiduciary duty to each of them?
Based on a ruling by an Ohio appeals court earlier this year, maybe not.
The case is recounted at length on the Realty Times Web site by Bob Hunt, who notes that the lower court was found to have erred in dismissing one of the claims at trial — the claim of breach of fiduciary duty. The judges said that the lower court should have tried the facts of the claim rather than dismiss the entire suit.
The facts to be explored concerned the disclosure of confidential information — in this case, a broker telling a friend that a client was in the process of writing an offer. The friend ended up with a house that the plaintiffs wanted to purchase.
In Ohio and elsewhere, including here, an important aspect of fiduciary duty is to keep confidential all confidential information.
Such information, the appeals court said, is “all information that a client directs to be confidential or that if disclosed would have an adverse effect on the client’s position in the real estate transaction. . . and all information that is required by law to be kept confidential.”
The court also held that the lower court had to rule whether writing competing offers for two different parties was a breach of fiduciary duty.
According to Hunt, the California Association of Realtors has a form entitled “Disclosure and Consent for Representation of More than One Buyer or Seller.” The intent is to cover the situation of agents from the same brokerage writing offers on behalf of different clients.
I was taught that more disclosure is better than less, and I have rigorously subscribed to that precept ever since. Therefore, the California form sounds like a good idea to me if only to create as much transparency as possible.
In markets such as ours, in which there are mammoth brokerages, it is easy to imagine affiliated agents writing offers for different buyers for the same property without even knowing the competition and its purpose. How harmful would it be for clients at least to be informed of the possibility?
It seems to me that only the least ethical of brokers would stoop to covertly representing two buyers hoping to purchase the same property.
Yet I’ll bet it happens.
Tomorrow: Weekly Roundup
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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
M: 347-886-0248
F: 347-438-3201
Malcolm@ServiceYouCanTrust.com
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