Legal Question in Real Estate Law in California

Agent represents Both Buyer and Seller, is there conflict of Interest?

I am looking to buy a home and the agent selling the home said he would represent me. The seller is the agents mother. He said that although his mother is the seller, he is required to represent both parties equally and that I didn't have anything to worry about. After making an offer and submitting request for repairs, the agent does not seem to be acting in my best interest making statements that I didn't need to repair things like a busted water heater or firewall. Since he is representing his mother, is this a conflict of interest? Although I am a first time home buyer, many of the comments he's made do not seem to be in my best interest, but that of his mothers. Should I back out of the contract? Any advice would help. Thanks.

Asked on 4/03/06, 7:56 pm

4 Answers from Attorneys

Robert F. Cohen Law Office of Robert F. Cohen

Re: Agent represents Both Buyer and Seller, is there conflict of Interest?

The agent owes you a fiduciary duty to represent your best interests. Did the agent present you with a dual representation disclaimer that you signed? I think you might have grounds to rescind your contract with the agent and hire your own. Are you in escrow, yet? Are there any contingencies in the sales agreement like it must pass inspection?

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Answered on 4/03/06, 8:26 pm

Re: Agent represents Both Buyer and Seller, is there conflict of Interest?

You are in a nasty situation. The problem for you is that you are already in it, and it would be necessary for you to have an attorney review the underlying documents to ascertain how you should proceed.

Real estate transactions are incredibly complicated deals, and the fact that the average person does not retain an attorney to at least review the underlying obligations is amazing.

At any rate, to answer your question, yes, there is a conflict of interest. But that does not mean that you have the right to undo the transaction and/or back out of it. Many buyers and sellers are represented by the same agent; that's why it's called dual agency. The issue will be whether or not you consented to it in writing before you opened escrow.

In addition, as a potential buyer, there was no need for you to use the selling agent to represent yourself; you could have, and should have, obtained your own agent. The commission would have been paid by the seller, not you.

If you have made a deposit into escrow, you need to be very careful about backing out. You may legally lose this deposit.

If you have no money in escrow, you also need to be careful, because you could become liable for damages if you withdraw wrongfully.

There are many issues that you should have an attorney address. Find a real estate litigator or transactional attorney familiar with the pitfalls of these types of transactions. If you would like to discuss further, please feel free to call or email.

Good luck.

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Answered on 4/03/06, 9:09 pm
Cynthia Beckwith Law Offices of Cynthia Beckwith

Re: Agent represents Both Buyer and Seller, is there conflict of Interest?

I agree with what the two previous attorneys wrote, and I am writing only to add a few things. Even if you waived any conflict by proceeding with the deal knowing of the relationship between the realtor and the seller and/or by signing the "dual representation" form (acknowledging that you understood that the realtor was representing both buyer and seller), the realtor still has the obligation to represent your interests. As soon as possible (because contingency periods in purchase agreements are generally very short), you should review the purchase agreement and what's been done with an attorney. At a minimum, you will want to show the purchase agreement to the attorney. The conditions under which you could back out of this deal will be defined (strictly) in the purchase agreement.

You should also put all of your requests to your realtor (for things to be done under the purchase agreement) in writing and make sure you get copies from your realtor of any letters or other documents he gives to the seller.

However, keep in mind that any disagreement you

have with your realtor is not, in and of itself, a basis on which to back out of the deal, and if you back out without having one of the grounds specified in the purchase agreement, you will probable be liable at a minimum for the liquidated damages specified in the contract.

Good luck.

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Answered on 4/03/06, 11:27 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Agent represents Both Buyer and Seller, is there conflict of Interest?

I too would like to add just a bit to the ample amount of good advice you've already received...

Even if you can't back out of the purchase contract and can't back out of the dual-representation agency agreement, there's nothing that obliges you to believe or act upon (or fail to act upon) everything the agent says. If he says it's unnecessary to repair the water heater, repair (or, better, replace) it anyway.

On important issues, ask someone else. One source of advice on some aspects, such as paperwork or the mechanics of closing, might be your escrow officer or your lender. If you have questions regarding the condition or fitness of the property, retain your own home inspector.

Finally, for legal questions, see a local lawyer.

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Answered on 4/04/06, 2:29 am

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