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New York lawsuit calls Dual Agency deals into question

September 16, 2018
Buyers are realizing sometimes it pays to be represented by a Buyers Agent vs working with an Agent who also represents the Seller.

A White Plains, New York, homebuyer filed a suit against Houlihan Lawrence, among the largest real estate brokerages in upstate New York, accusing the firm of “predatory behavior” through a legal practice known as Dual Agency that has come under increased scrutiny in recent months. Although NY State has the highest level of Dual Agency, in The State of Florida there are two forms of representation: the Single Agent and the Transaction Broker. 90% of all transactions are with a Transaction Broker and most often than not, Florida Realtors will co-broke a transaction with the Buyer being represented by a dedicated Agent.

“This suit seeks to recover millions of dollars in sales commissions that homebuyers and sellers who were duped into dual-agent transactions paid Houlihan Lawrence for loyal representation that they didn’t receive,” said attorney Jeremy Vest in a joint statement with partner William Ohlemeyer.

“It also seeks to ensure that, going forward, no homebuyer or seller ends up in a dual-agent transaction without fully understanding the important rights they lose in that situation.”

Vest, believes the case could have repercussions far beyond their client, and are seeking to file a class action lawsuit on behalf of other former Houlihan Lawrence clients. For now, however, Goldstein is the only plaintiff in the case.

The brokerage, which boasts 1,300 agents across upstate New York and Fairfield County, Connecticut, represented both the buyer and seller in nine out of 10 of its biggest deals in Westchester in 2017 and, among home sales in Bronxville, a whopping 80 percent of all transactions in excess of $2 million was through dual agency, according to the lawsuit.

Dual agency is legal in New York State, but only under the condition that the agent receives “informed consent” from the buyer or seller — defined as “lay[ing] bare the truth, without ambiguity or reservation, in all its stark significance.”

Critics, however, argue that dual agency frequently opens the door to obvious conflicts of interest, and it becomes more complicated when it’s not a case of one broker representing both buyer and seller, but rather, a case of two brokers at the same firm working on the same sale from opposite sides.

In those cases, the firm itself is legally considered one, dually acting “agent,” and the degree to which the two brokers are collaborating on the sale is far less clear.

In June, the Canadian province of British Columbia banned the practice entirely, and in the United States, Colorado, Florida, Kansas and Wyoming prohibit dual agency. Other real estate experts believe it should be banned nationally.

“It’s like attorney-client,” Nathan White, of Link Real Estate Group, told Inman in June. “You can’t have an attorney representing the plaintiffs and the defendant neutrally. It’s great from a money perspective, but why are we allowed to do it?”

A spokesperson for Houlihan Lawrence on Thursday responded to Inman’s request for comment with a statement.

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