July 6th - 2004

Merv's Column: When a seller's agent becomes the buyer

Are you still an "agent" with fiduciary duties when you become the "buyer?"

Are you still an "agent" with fiduciary duties when you become the "buyer?"

The REALTOR listed a shopping center and then bought it from the seller for $11 million. She did not close the deal but assigned the contract, with the seller's consent, after she confirmed to him that the property was still worth $11 million. The actual buyer closed the deal and the seller paid the REALTOR's fee of $110,000 for the $11 million deal. At no time did the REALTOR tell the Seller that she was receiving an "assignment fee" from the buyer of $1.2 million.

The California judge said that she did NOT breach her duty to the seller because at the time of the assignment she was no longer his agent, but was acting for herself as a buyer. The appeal court disagreed and decided that the REALTOR DID breach her fiduciary duty to her seller.

Roberts v Lomanto 5 Cal Rptr 3d 866

MERV'S COMMENTS
Remember that the onus will be on the REALTOR to prove that he or she acted properly. As a judge said in a 1975 case: "It is in the interest of equity that persons upon whom members of the public rely for advice, knowledge and trust must act with the best good faith and if there is any dispute must be able to demonstrate unequivocally that they did so act. Any doubt must be resolved in favour of the person who relied on them."

Might there be a different result if the REALTOR had closed the deal, and then resold it? Maybe, but as the appeal court said that would have required her to pay the $11 million purchase price - "a nasty inconvenience that the assignment avoided."

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