What If You're a California Listing Agent and You're Thinking About Representing the Buyer?

In California residential real estate, a dual agent—one who represents both the buyer and the seller—must navigate a minefield of fiduciary obligations and potential liabilities. Also, two agents working under same broker are also dual agents in a transaction. Below is a summary of the key liabilities and legal responsibilities:

Key Fiduciary Duties and Liabilities

1. Fiduciary Duty to Both Parties
A dual agent owes each party the duties of loyalty, confidentiality, honesty, and full disclosure. This means the agent must:

• Disclose Material Facts: Inform both the buyer and seller of any information that could affect their decisions.
• Avoid Conflicts of Interest: Balance competing interests without favoring one party over the other.

  

  Agent standing across from seller, buyer behind.
  

   
  

• Obtain Informed Consent: Secure written consent from both parties acknowledging the dual agency relationship.

2. Strict Disclosure Requirements
Under California Civil Code §2079.13, dual agents are required to provide a clear, written disclosure of their dual role. Failure to disclose—or inadequate disclosure—can lead to:

• Legal Claims: Breach of fiduciary duty, misrepresentation, or fraud.
• Disciplinary Action: Potential sanctions by the California Department of Real Estate.
  

3. Liability for Associate Actions
If the dual agent’s salespersons or broker associates act negligently or breach their duties, the supervising agent (and by extension, the brokerage) may be held liable under the principle that the duty owed by an associate is equivalent to that owed by the principal broker.

4. Negotiation and Confidentiality Pitfalls
The dual agent must be careful during negotiations:

• No Secret Profits: The agent must not use confidential information from one party to benefit the other.
• Neutrality in Negotiations: The agent should present offers and counteroffers without bias, ensuring each party gets a fair deal.
• A dual agent may not reveal to either party facts relating to the financial position, motivations, bargaining position or other personal information that may impact price, in addition to the restrictions already mentioned.
  

Dual agency in California residential transactions is legally permissible only when both parties are fully informed and provide written consent. A failure to adhere to strict disclosure and neutrality requirements can expose the dual agent to significant legal liabilities—including breach of fiduciary duty, misrepresentation, and potential disciplinary actions. By understanding and rigorously following these guidelines, a dual agent can mitigate risks and help ensure a fair transaction for both buyer and seller.

 

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

What If You're a California Buyer And You're Thinking about Using the Listing Agent?

In California residential real estate transactions, using a dual agent—where one agent represents both the buyer and the seller—comes with several risks for both parties. Also, when agents from the same brokerage are working with different parties to a single transaction, each agent is considered a dual agent, even if each individual agent communicates and works exclusively with a single party. A dual agent owes equal fiduciary duties to both parties to a transaction. Here’s what you need to know:

Agent With Buyer and Seller

Risks for Buyers and Sellers When Using a Dual Agent in California

1. Conflict of Interest

A dual agent has a fiduciary duty to both the buyer and seller, making it difficult to advocate fully for one party’s best interests. This can result in:

• The seller not getting the highest possible price.
• The buyer not securing the best deal.

2. Limited Advocacy and Negotiation

Since the agent must remain neutral, they cannot aggressively negotiate on behalf of either party. This may lead to:

• Buyers overpaying for a property.
• Sellers accepting lower offers than they might have with an independent agent.

3. Reduced Confidentiality

A dual agent has knowledge of both parties’ financial situations, motivations, and negotiation strategies. While legally required to maintain confidentiality, the risk remains that sensitive information may be inadvertently used to the disadvantage of either party.

4. Potential Legal Issues

California law allows dual agency, but it requires full disclosure and written consent from both the buyer and seller. Failure to do so can lead to legal disputes, lawsuits, or even the cancellation of the transaction.

5. Ethical Concerns and Perceived Bias

Some buyers and sellers feel that a dual agent cannot be truly impartial, potentially leading to distrust in the process. This can complicate the transaction and create unnecessary tension.

How to Protect Yourself in a Dual Agency Transaction

• Understand your rights: California law requires disclosure of dual agency relationships—make sure you’re fully informed.
• Request transparency: Ask your agent how they plan to handle negotiations fairly.
• Consider hiring a real estate attorney: Legal guidance can help protect your interests.
• Explore alternative representation: If you’re uncomfortable with dual agency, you can choose separate agents for better advocacy. When one agent  represents only the buyer, the buyer is then not using the listing agent who already represented the seller.

In California, dual agency—where a real estate agent represents both the buyer and the seller in a transaction—is legal but subject to stringent regulations to protect all parties involved. Here's an overview of the legal framework governing dual agency in the state:​

Legal Framework for Dual Agency in California

1. Definition and Legality

Under California law, dual agency occurs when a real estate agent or brokerage represents both the buyer and the seller in the same transaction. This arrangement is permissible provided that specific legal requirements are met. 

2. Fiduciary Duties

Real estate agents owe fiduciary duties to their clients, including loyalty, confidentiality, and full disclosure. In a dual agency scenario, fulfilling these duties becomes complex, as the agent must balance the interests of both parties without favoring one over the other. 

3. Disclosure Requirements

California Civil Code mandates that agents provide a written disclosure to both the buyer and the seller when entering into a dual agency relationship. This disclosure must outline the potential conflicts of interest and the implications of such an arrangement. Both parties must give their informed written consent for the dual agency to proceed. 

4. Limitations on Information Sharing

A dual agent is prohibited from sharing certain confidential information between the parties without express consent. For example, the agent cannot disclose to the buyer that the seller is willing to accept a lower price, nor can they reveal to the seller that the buyer is willing to pay more. This ensures that both parties' bargaining positions are protected. 

5. Legal Consequences of Non-Compliance

Failure to properly disclose a dual agency relationship can lead to significant legal consequences, including the forfeiture of the agent's commission, rescission of the transaction, and potential disciplinary action by the California Department of Real Estate.

6. Recent Trends and Considerations

Recent trends indicate a rise in dual agency arrangements in California, particularly in markets like Los Angeles. While this can offer benefits such as streamlined communication, it also raises concerns about impartiality and the potential for conflicts of interest. Both buyers and sellers are advised to carefully consider these factors and ensure they are fully informed before consenting to a dual agency arrangement. ​

Understanding these legal aspects is crucial for anyone involved in California real estate transactions.

 

 

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

New California State Law Requires Buyer Broker Agreement as of January 1, 2025.

 

Craftsman home in Long Beach

As predicted, Governor Newsom has signed into law AB 7229, the new requirement for buyers and their brokers to sign an agreement with each other before making an offer on  a property.  This law applies to both residential and commercial real estate.  There are some differences from the National Association of REALTORS settlement requirements already in practice, including the fact that the NAR settlement concerns residential property only, whereas the new state law (in effect starting January 1, 2025) covers all properties both residential and commercial, and all licensed agents whether or not they are REALTOR members of the National Association of REALTORS.

"Unlike the N.A.R. settlement, which focuses solely on homes listed on an MLS, AB 2992 requires a written buyer representation agreement for any property, residential or commercial, whether it is listed on an MLS or not. This means that all licensed real estate agents, regardless of the type of property they are showing, must have a signed agreement in place before representing a buyer. This is a significant improvement in transparency for consumers, ensuring that they are fully aware of the services their agent will provide and the compensation structure before engaging in any transaction."  from the Santa Barbara Independent, Oct. 3, 2024 .

Contracts may be renewed, and are limited to 3 months for each contract period. While some people may not understand the significance of having such a contract, as a buyer it is important to understand what is to be expected of the agent and the standard of care to be received by the buyer. Buying a property is a large financial and legal commitment, and both agent and buyer need to be actively engaged with each other. According to the NAR settlement, such contracts must be signed before showing a property which will affect REALTORS, and per state law, commercial agents must have a buyer agreement signed before submitting an offer.

It's worth noting that if the state law requirement for a buyer broker agreement is not met, the Department of Real Estate may remove an agent's license.

If you would like more information on working with a Realtor, please contact me for further explanation and consultation before entering into a contract.

See prior post for buyer broker contracts

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

New Laws Affecting California Real Estate Starting in 2022

Naples Canal

Every year many new bills are signed into California law, and this year is no exception.  Not all have to do directly with real estate, but here are some of the ones that do:

AB 468 concerns emotional support animals (which are not the same as service animals).  While landlords must provide reasonable accommodation concerning emotional support animals per current federal or state law, there are now restrictions on how health providers may provide documentation, requiring specific language, in order to reduce emotional support animal fraud.  To read more about service animals vs. emotional support animals, go to Emotional Support Animal Fraud.

AB 491 Fair Housing Equal Access, a new law which states that in "mixed-income multifamily structures, all occupants must have equal access to common entrances, areas, and amenities as the occupants of market-rate housing units." (California Association of Realtors).  The purpose of this bill is to eliminate the "poor door" for certain occupants of designated affordable housing units who in some instances were not allowed to use certain entrances or common area features.

AB 938 Appraisal Discrimination: To combat this problem which has existed in some geographic areas (nationwide) , after July 1, 2022, Realtor contracts in California which also require the delivery of a Seller's Transfer Disclosure Statement (TDS), must contain specific language concerning unbiased valuation of properties which cannot be influenced by race, religion, marital status, pregnancy, and 13 other categories.

SB 392 Homeowner associations must "communicate with homeowners via email if that is the homeowner's preferred method of communication (for notices that are required to be delivered individually under the Davis-Sterling Act)." (California Association of Realtors). This is a time saver and a money saver for associations which may be spending hundreds of dollars annually on mailing costs for multi-page documents that are required by law to be sent to HOA members. The annual budget report, annual policy statements and notices regarding assessments or delinquencies, among others, are notices that must be delivered "individually," and thus, the homeowner may now require that they receive these notices via email.

SB 9 governing lot splits in otherwise single SFR zoned areas, is lengthy and should require in depth study by the interested party:

"This law requires a city or county to ministerially approve either or both of the following, (subject to exceptions and conditions):  a) A housing development of no more than two units in a single-family zone ("duplex").  b) The subdivision of a parcel zoned for residential use, into two approximately equal parcels ("lot split")." (California Association of Realtors).

Existing law governing zoning of units and/or Accessory Dwelling Units may help the end user achieve his/her housing dream, and in spite of media coverage on how SB9 will chop up neighborhoods, there are many requirements to be consulted with, so long term affect may ultimately be seen as one more tool for increasing housing, rather than a huge overwhelming impact on neighborhoods.

 Further laws concern redaction and disclosure (if known by the Realtor) of restrictive covenants AB 1466;  SB 60 governing short term rentals; Revocable transfer on death deeds (avoiding probate) SB 315;

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

The "Bureau of Real Estate" is slated to return to the "Department of Real Estate" when Gov. Brown signs

Several years ago when Gov. Jerry Brown took office, efforts to streamline state operations the Department of Real Estate was renamed the Bureau of Real Estate and moved to function as part of the Department of Consumer of Affairs, as of 2012.

Instead of being known under the acronym of DRE, it became CalBRE--more letters and, I thought, more awkward sounding.  But what really determines things in the government is how much money is involved.  The Bureau--former Department--is funded by solely by the fees paid by real estate licensees, and is not part of the State's budget system. However, part of the money going to the Bureau was being allocated to the Department of Consumer Affairs.  The Bureau, still found on the internet as http://www.dre.ca.gov, oversees a variety of functions which are found on its website.

A bill has now passed the Legislature and will hopefully be signed very soon by Gov. Brown, which will finalize the return of this agency to being a Department, and thereby saving the current Bureau of Real Estate about $3.5 million which can be utilized to make the agency function at its property level.

This site is where current news, education and enforcement about California real estate laws can be found, and should you want to check someone's real estate license, this is where to do it.

We are looking forward to the upcoming change.