I solved this problem today. It wasn’t even that tough, once I started looking at it the right way.
As I pointed out earlier today, the issue is this language in the AAR Consent to Limited Dual Representation form:
neither Broker nor Broker’s Licensee(s) can represent the interests of one party to the exclusion or detriment of the other party [emphasis added]
What that language says, in my opinion, is that no Arizona brokerage that has undertaken Disclosed Dual Agency using that form has done so in a way that would withstand the questioning of a plaintiff’s attorney.
I believe it is impossible for any brokered real estate transaction to close according to the strict terms of that language. Instead, every Arizona brokerage that has undertaken Disclosed Dual Agency using that form has routinely, repeatedly and serially acted in ways detrimental to both buyers and sellers, each in their turn, throughout every one of those transactions.
This was not malicious. To the contrary. The Disclosed Dual Agent was acting in the best interests of each client, each in their turn, and each of those clients had an absolute veto power over everything that was done at each step of the process. The problem is simply that a brokered real estate transaction is too complicated to be effected without expert advice. In tendering that advice, in all good will, the Disclosed Dual Agent will have acted to the detriment of the other party every time he gave good, solid, useful advice to the party before him.
(I will concede for the benefit of quibblers that someone could try to deliver the type of completely prostrate, advice-free “service” required by that language, provided that the quibblers will concede that both buyer and seller fired their prostrate agent as soon as they apprehended the type of “service” they were to receive. In other words, the conduct required by the form is theoretically possible, but it has never, ever happened.)
Here’s the cute part, though: The actual problem is the form itself.
The statute law of Disclosed Dual Agency (A.R.S. ? 32-2153(A)(2) (“Acted for more than one party in a transaction without the knowledge or consent of all parties to the transaction.”) and A.A.C. R4-28-1101(F) (“A salesperson or broker shall not accept compensation from or represent more than one party to a transaction without the prior written consent of all parties.”)) is nowhere near as restrictive. As with the AAR “As-Is” Addendum, the language on the form is overly broad.
(Inlookers take careful note: I am talking exclusively about Arizona real estate law. I looked at Disclosed Dual Agency forms from other states today, and the argument I am making here may apply in your state, but I have no way of knowing this. Caveat lector, and take any questions to your broker or your attorney.)
The solution — and I mean the complete solution to the entire retarded problem in Arizona — is simply to rewrite the form:
Before:
Duties and Limitations: The Broker now represents both Buyer and Seller and both parties understand that neither Broker nor Broker’s Licensee(s) can represent the interests of one party to the exclusion or detriment of the other party. The parties understand and further consent to the following:
That is revised to this:
After:
Duties and Limitations: The Broker now represents both Buyer and Seller equally but separately. Both parties understand that Broker or Broker’s Licensee(s) may advise each party separately as to how best to proceed with this or any subsequent negotiations, subject to the restrictions delineated below, even though such advice may be deemed to be disadvantageous or detrimental to the opposing party. Both parties understand that Broker or Broker’s Licensee(s) will be working actively and equally for each party, with no bias toward either party, to help each party obtain the best attainable, mutually-satisfactory outcome from any negotiations between the parties. By this notice, both parties consent to these terms and further consent to the following:
“The restrictions delineated below” include the usual caveats about keeping the parties’ confidences. All we are doing is making overt and consensual what is now de rigeur but covert and technically non-consensual — the Disclosed Dual Agent (or Agents) giving strategic and tactical advice to each party in their turn.
In a day or two I’ll prepare a complete form from this language, adding definitions and disclosures absent from the AAR form. As a pro forma matter, I will run this past AAR General Counsel Michelle Lind, but I know this language will hold up in court: Consenting adults in Arizona can contract in writing to any lawful purpose, including the waiver of statutory rights.
I still don’t like Dual Agency, but this language makes it clean and above-board.
And outcomes like this, incidentally, are why I question everything. You can’t fix anything without taking it apart…
Technorati Tags: arizona, arizona real estate, dual agency, phoenix, phoenix real estate, real estate marketing
Jeff Brown says:
Greg – Every state, and I can’t believe AZ is an exception, has certain statutory rights that cannot be waived.
An example could be tenant/landlord law. Many contracts had tenants waiving all kinds of rights until CA decided tenants were too stupid to breathe on their own. Now there are many rights they can’t waive. And if the contract still calls for the tenant to waive their rights? Those clauses are voided, and the contract is still good.
November 20, 2006 — 7:52 pm
Greg Swann says:
Do not compare California to any other state. Your courts are insane, as is the Ninth Circuit Federal Court.
In any case, the form language I am showing is not waiving any rights that are not already being waived by the AAR form. This language will hold up as well as anything in Arizona courts. On appeal, all bets are off, of course.
By the time I’m done, I will have the best Dual Agency disclosure form in Arizona.
November 20, 2006 — 8:02 pm
Kevin Boer says:
My question to the two sides in this argument:
Greg and Cathy: With dual agency’s legal definition covering any two agents affiliated with the same brokerage, I believe there are only two ways that would enable avoiding dual agency:
1) Every agent opens up his own one-person shop and hopes he never grows big enough to get into the awkward situation of having a buyer interested in one of his listings.
2) Change the laws so that dual agency refers only to a single agent, not all agents in a brokerage.
1 is impractical and 2 is unlikely to happen any time soon, as I understand it.
Any comments?
To Russell et. al: Greg’s example in a previous post was quite long. Here’s a shorter one. I have two clients: Bob the buyer and Sally the seller. Bob happens to be interested in Sally’s listing.
Sally’s home is listed for $100K, but she has told me that while naturally she wants as much as possible, she would accept $90K for it.
Bob would prefer to pay only $85K for the home (the less the better, obviously) but has told me he would be willing to pay $95K if he had to.
Clearly, there is a deal to be made — anywhere between $90K and $95K will satisfy, though not elate, both clients.
Here’s the question: How can I possibly represent the best fiduciary interests of one client without betraying the fiduciary interest of the other?
If I were representing Bob alone, and had no idea about Sally’s parameters, I might be able to get Bob the home for $90K.
If I were representing Sally alone, and had no idea about Bob’s parameters, I might be able to get $95K for her home.
How would you deal with this situation representing both clients?
November 20, 2006 — 8:14 pm
Greg Swann says:
> I believe there are only two ways that would enable avoiding dual agency
It’s not necessary to avoid it. What is necessary, and has been absent heretofore, is full disclosure of what is actually happening in a Dual Agency, provding for buyer or seller to seek separate representation if they so choose.
I think your example is poor. It’s the same type of example you will find on the AAR or CAR web sites. Buyers and sellers always know what numbers they want to put on the forms. It’s the rest of the transction that is largely stage-managed by the agent. If that agent is a Disclosed Dual Agent in Arizona, using the current AAR form, every bit of that stage management is an agency violation. This is why my example was so elaborate, to show how little is actually determined ab initio by the client.
It is entirely possible to keep each clients’ confidences while you advise each party as to what tactics they might use — provided each party has consented to your giving tactical advice to the other party.
November 20, 2006 — 8:28 pm
Kevin Boer says:
Not to be pedantic, (ok, I am being pedantic 🙂 ) but at least here in the Bay Area, clients do rely on their agents for advice about what $ figure they should put on their offers and counteroffers. I’ve had conversations with both buying and selling clients in which one of the three hours we spent discussing a bid was spent solely discussing price.
So, at least here, even this kind of simple example puts us in a conundrum, quite apart from the more complex example you cite. With prices here in the Bay Area, just add a “0” on the end of my example. 🙂
November 20, 2006 — 8:40 pm
Athol Kay says:
Dual agency will always occur more and more as the brokerage grows.
In Connecticut the possiblity for dual agency occuring is always covered during the listing/buyer-rep presentation. Once an actual dual agency occurs both parties have to agree and sign off on it.
Connecticut Law allows that a dual agent can be the same individual for both parties, but my brokerage (Coldwell Banker) only practices Designated Dual Agency. (Which I happen to agree with).
November 20, 2006 — 8:44 pm
Greg Swann says:
Okayfine. You can easily advise on price or any other matter without betraying the other party’s confidences — by reference to comps, for instance. What you cannot do in Arizona under the current AAR Consent to Limited Dual Representation disclosure form is offer any advice at all. If each party has consented to permit you to advise the other party, subject to keeping each party’s confidences, the problem goes away. If one or both won’t consent, it’s a normal transaction. If both do consent, then what is already happening de facto in Disclosed Dual Agency transactions will have been ratified de jure.
November 20, 2006 — 8:49 pm
Jeff Brown says:
>By the time I’m done, I will have the best Dual Agency disclosure form in Arizona.
My bet is on you.
Just remember – Anything you author, if considered even remotely ambiguous by Judge Nimbus, will by statute be construed against you.
November 20, 2006 — 9:34 pm
Greg Swann says:
> Just remember – Anything you author, if considered even remotely ambiguous by Judge Nimbus, will by statute be construed against you.
Agreed. That’s why I want definitions and disclosures for everything, maybe a bold disclosure that consent is not required, etc.
November 20, 2006 — 10:10 pm