One agent representing both the buyer and the seller in home-buying negotiations has been a big controversy in the real estate world. In fact, a breach of dual agency has reached the California Supreme Court concerning the matter. The case involving a Malibu homebuyer against brokerage Coldwell Banker has created an array of commotion on the topic.

The Real Estate Blog asked real estate professionals their opinions on the topic of dual agency.

Brian Youd

Although it may sometimes be difficult, Oregon Real Estate Agent Brian Youd said double agents can perform their duties to both parties in an ethical manner.

“It is, at times, a difficult dance, and I believe that each real estate agent needs to decide for themselves if they are able to represent both parties in a transaction,” Youd said. “I feel that with clear communication, a Realtor can effectively serve both parties and help each achieve their goals in a transaction — ultimately selling or purchasing a property.”

The case

In the state of California, as listed in the “Orange County Register,” Hong Kong multimillionaire Hiroshi Horiike bought a home for $12.25 million in cash in 2007. The house was advertised as having 15,000 square feet of living space; however, county records indicated the residence was under 9,500 square feet.

Edward Estes, Jr.

“The Horiike case poses some real problems with large brokerage firms, where knowledge of one item is potentially deemed to be known by everyone in the company… and what if the company has multiple offices throughout the county or counties?” Edward Estes Jr., a California real estate broker, said.

Horiike’s agent and the listing agent worked for Coldwell Banker, so the brokerage was the dual agent of the buyer and seller.

When Horiike discovered the house was not as large as he thought, he sued the listing agent and Coldwell Banker in 2010, claiming they violated their fiduciary duty to him. The jury disagreed with Horiike, but Horiike prevailed on an appeal.

The Supreme Court

The final decision of the case conflicting Horiike, a Malibu homebuyer, against brokerage Coldwell Banker, could result in a huge upset against those in favor of the losing side in the real estate industry.

The danger in this case involving the Supreme Court of California is that they will set a precedent which other countries and states will follow, Youd said.

Bob Herd

“I believe that as often happens when involving the courts, the minority — in this case, the transaction that went sideways — will have an adverse, long-lasting, binding, and perhaps, industry-altering effect on real estate transactions in the future,” he said.  “I do not believe this case is a case for the courts. Underlying the specific case involving the Malibu property is the greater question of whether dual agency is a viable option in real estate.”

In contrast, some think the Supreme Court was necessary in the case.

“The Supreme Court should probably be getting involved,” said Bob Herd, a California real estate broker. ”We have an initial verdict and have it overturned by the appellate court, so the rule of law must be followed. I only hope the issue decided is more about willful nondisclosure than dual agency, as the problem would have existed either way.”

What’s your take on the subject? Let us know in the comments below.