MULTIPLE REPRESENTATION
We all talk about newsagents and travel agents, but most of us don't spend a lot of time trying to understand what it means legally to be a real estate representative. We get upset when our real estate representative doesn't call us, but we don't really know what we are owed; what we can demand. In legal terminology your representative owes you a fiduciary responsibility. Simply put, your real estate representative in any situation owes you the obligations of:
These are real obligations with real costs that the Courts will defend on your behalf.
In the same way that we don't think about the obligations of our real estate representative, we don't often think too much about who is our real estate representative. For most us it is the salesperson with whom we are dealing. However, in law our real estate representative is the brokerage for whom that salesperson works. Understanding this is central to understanding the obligations that you are owed in situations where both the buyer and seller are represented by salespeople who work for the same brokerage. This is called multiple representation.
Until recently, whether the "client" of a real estate salesperson was a buyer or a seller the Courts held that the real estate salesperson owed this fiduciary duty only to the seller. Buyers sometimes felt that their interests were being betrayed by “their” real estate salesperson. This wasn't the fault of the salesperson; it was simply the way the Courts insisted that the salesperson behave.
Today we are working within a different legal framework. The courts recognize that a real estate salesperson working on behalf of a buyer has a fiduciary responsibility to protect the best interests of that buyer and not, as was previously the case, the seller. This is very significant and affords the buyer the protection that they may have previously only believed they had.
Today, whether you are a buyer or a seller of real estate you are owed a fiduciary responsibility by your principal brokerage and its representatives. This fiduciary responsibility is unconditional when your brokerage is only acting for you as the seller or only acting for you as the buyer. However, if the same brokerage (not necessarily the same salesperson) is representing both the buyer and the seller in the same transaction then the brokerage has a conflict of interests and the law not only sanctions but insists upon a reduction in that brokerage's fiduciary responsibilities to both the buyer and the seller. In this case the brokerage and its representatives can no longer advise their clients, they may only inform them.
The obligation of the brokerage in this case is one of disclosure. But be sure that you understand the nature of that disclosure. For example, let's say you are a buyer represented by Salesperson A. You ask salesperson A to prepare an offer on a property that is listed by Salesperson B, who works for the same brokerage as salesperson A. In this case the brokerage is in a multiple representation position and salesperson A is not allowed to provide you with advice that is counter to the interests of the seller. Nor is salesman B allowed to provide the seller with advice that is counter to your interests as the buyer.
The law requires that the brokerage disclose this conflict, but does not require that the consequences of multiple representation are brought into sharp focus for the buyer and seller.
Like many salespeople I will find myself in situations where the brokerage for which I work is in a multiple representation position. It is difficult to avoid. However, I think that it is important for you to really understand what you can expect from me in all situations, and with this in mind you can expect me to be totally frank and open in identifying the class of issues on which I am legally denied the opportunity to be perfectly frank and open.