Dual Agency – It’s Hard To Do.

Couple Talking To Realtor About A Transaction

I was hired by property buyers a few months ago and again recently.  They are trying to buy a property they presently rent from an older guy who apparently believes he can force the world to spin in the opposite direction.  He doesn’t like women much either, especially women lawyers.

My clients on the other hand are a dream.  Nice couple, good business folks, good listeners and good decision-makers.  They run an adult care home.  I would pay them to care for my mom.

So my lovely clients are represented by a broker who also represents the seller.  This is a good, conscientious, diligent  broker.  So what’s the problem, you ask?

The buyers need seller financing.  The seller will reluctantly give it but for only a short time and at an incredibly high effective interest rate.  And, like Popeye, he wants what he wants, even if it is inconsistent with common sense, the fair play doctrine  and good faith.  Unfortunately, my clients are kind of stuck.  It’s the right property, they are operating their business in it now and it’s hard to find good adult care homes.

Starting from the reality that I (and you) are not in the fairness business, I drafted a land sale contract that benefited my clients in ways the cranky seller likely would not catch because he’s too cheap to hire a lawyer.  I sent land sale contract to the dual broker to forward to the seller.

Now, what I expected was that she would forward the contract to the seller and suggest he engage a lawyer to advise him.  Instead, she read the contract, then sent it to him with a list of the ways that it is not exactly what he wanted.  This is why I hate dual agency.

To be fair, the broker had the best of intentions but she made two mistakes.  First, she interpreted a non-OREF contract for a client.   That is practicing law without a license.  It’s ok to read it if you want to learn, grow, think and figure out.  It’s not ok to tell your client what it says.  Ever. Even if you are not dual.

Second, under the law, the dual broker is not permitted to disclose to the seller anything that is not in the buyer’s best interest.  It was in the buyer’s best interests to have the benefits I included in the draft.  By explaining to the seller that it was not exactly what he wanted, she denied her buyer the protection I had offered him. This was not in the buyer’s best interests.

It is possible that the seller would have caught the terms of which I write, but probably not all of them.  Now my client is back to the huge effective interest rate and will have to pay me to redraft. 

There is a line that a dual agent just can’t cross.  In this case the broker was trying to do the right thing and she really didn’t see how she had erred, even after I pointed it out to her.  I think with dual agency, brokers tend to think that the line isn’t there until an issue crops up but it is always there when  you represent both sides. 

What should the broker have said?  Hopefully she had already had a conversation with each client  about the practical limitations of dual agency (can’t give you advice about price or terms, can’t give you any information not in the other side’s best interest, etc.). If so, her only communication to the seller regarding the draft agreement should have been:  “Here is the draft agreement, please review it and let me know what you want me to do.  If you have questions, please run them by your attorney.”

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