Friday, June 6, 2008

Designated Agency, Can They Share My Info?

This is a longer question , so I thought I would answer it along the way in purple font. I have added bold emphasis to her question for easier reading.

Frank,
I was recently the victim of some very bad business practices and was hoping for some of your expertise on it. Don't worry, not looking for legal advice or filing a suit against anyone but I haven't been able to find the information I am seeking, just tidbits here and there.
[BACKGROUND STORY]
I was trying to buy a home through the company that listed it,

> You might not have known better, but I frequently rant and rave about NOT doing this. Here is a mini post on why you should NOT CALL THE LISTING AGENT (soon this will be a longer blog post). Now I can also link to your example as evidence.

The company designated and signed with me a representative separate from the sellers agent [listing agent]. They of course worked together in the same office along with the broker owner, but don't the confidentiality rules still apply?

I corrected above. A little pet peeve of mine. In Virginia a "Seller's agent" is actually the buyer's agent. The terminology is confusing so I exclusively use :"Listing agent" and "buyer's agent."

One problem with above hand off is the "referral fee" system in real estate. The listing agent most likely received anywhere from 25%-$50% referral fee from the agent that they "assigned/gave " the deal to. Can you say, "wink wink, make sure this deal goes through so a) I get the listing side plus 1/3rd the buy side commission and b) make this happen and I will give you more future deals." It is just one step up (better) vs Dual Agency.

Yes confidentiality applies. But this is called Designated Agency in Virginia (different in each state). Which means both agents work under 1 supervising broker. This isn't ideal, but sometimes is inevitable. This is MUCH better than the "Dual Agency" system (illegal in some states) where 1 agent does both sides of the deal. Regardless of either. Yes your info should be confidential while you are a client (the rules get tricky AFTER you no longer are a client). If the supervising broker knows some insider scoop, they are not supposed to share it with the other side. Also the agents shouldn't share it with each other. IE: "I think they will pay $10,000 more."


What is the difference between a buyers agent and a buyers representative?

I don't know that there is a difference. I could be wrong. (I won't BS you if I'm not sure)
Either way, they are supposed to be representing you and doing what is in YOUR best interest.

That being said, there is the law and there is reality. (I am not a lawyer) Whether your agent says side comments like "Sure she is qualified" vs "She is very qualified" vs the most appropriate: "Read the lender letter, beyond that I can not add additional information," gets down to the nitty gritty nuances of what is confidential.

In Virginia there is a paragraph where you have to check off whether the Buyer Agent is allowed to reveal financial information on the buyer. My clients check NO, but many check yes (which can be fine too) and yes means "I want to buy the house, feel free to give information to the seller, so that the will be more comfortable and more willing to sell to me." Heck in DC it is customary to fill out a full financial report and even faxing copies of your bank statements or a screen shot of your bank's assets online.

What were the broker/owners legal duties/responsibilities in this situation?

Make sure we don't confuse broker and agent. In Virginia think of an agent as a brown belt and a broker as a black belt, or the "boss." The broker, unless otherwise authorized, should be available to help both agents (one on each side) but they are not supposed to reveal any confidential information. Instead trying to only answer procedural questions.

Wouldn't they still have to uphold the Realtor oath to treat all
parties fairly, honesty?

Yes of course.

I ask this because during the time we were under contract with our accepted offer our requests for water and septic inspections were ignored.

Yes and no. It depends if your initial contract called for those inspections up front. If it did not, and your agent messed up and left it off, then technically after being under contract you might have lost your rights to ask for these other inspections (or contingencies). (some state laws might kick in and require you to have certain inspections regardless of what the contract says).

If you had in the contract that you were supposed to be given these inspections, and you weren't, that is very bad. If something went bad with those systems, and you have in writing that you asked for them to be tested, you might be able to make the agent/broker pay for the problems.

No inspections were shown on the day of closing (other than lead based paint) they were requested again on the day of closing and we were told that they did not have to provide them.

Now if they did the inspection, but weren't required to, and they found information that was bad, AND if the initial contract did NOT call for them, the listing agent and seller do not have to request that an inspection be done (unless state law says so, like the lead based paint disclosure in VA)., then that opens another can of worms that only a lawyer can address.

The home had a spring fed water system and private septic tank. To the best of my knowledge in the state of Virginia (and most other states) the seller is obligated to provide those inspections if the home is not connected to city water/sewer.

Oh, I didn't realize you were in Va. Ok, I hear you. I barely ever do septic. If that is true, then you might be allowed to walk all the way up to the closing date (or until they produced the inspection). Also some lenders would require this as well.

I ask about the confidentiality because during the process of trying to acquire a mortgage for the property

Don't tell me you used their "in house" lender?

(which we were unable to do because of the water system) our credit, which was good enough at the time, was hit so many times that it ended up showing too many inquiry's.

Usually when buying a place, your credit shouldn't be effected that much (or at all) if all the hits were from one source type (home loans). I can have somebody chime in about this later.

After telling our designated representative about the credit issue and our desire to wait a few months before trying again for a mortgage on that particular property, we received a phone call
from the sellers themselves offering us credit counseling advice.
Shouldn't our rep have kept the part about our credit to herself since we did not authorize the release of that information?

You might have authorized this in the contract without knowing it. Otherwise, you are right. That shouldn't have happened. But it would be a common mistake for the agent to say in passing "yeah, they have a credit issue and are tied up" but technically they shouldn't say anything. I don't think this has much to do with them being in the same brokerage.

I also ask about the fair and honest treatment of all parties because I came home to a message on my machine from the company that resulted in their firing. In the message the broker (who was returning my call) didn't not realize she had not hung up the phone but put it on speaker
instead.

Wow, this is getting good!

I have her, her husband (who is not even employed there) the sellers agent and our rep (who was still under contract with us) talking about my family and I, laughing at us calling us names and saying that if they had to come over to the house they would break our knees and throw us in the waterfall.

WTF! No way. Do you still have the audio? Email it to me. Or we can set up a call and I can record it and post it here for all to hear (removing names). Or give it to the press. As you can assume, this is very bad and could be grounds for serious removal of a license.

Would that constitute as a breach of contract?

That is a legal question, whether they breached your contract, but they seem to have no longer stuck to their Fiduciary Duty as your representative (google that).

From all the information I have been able to find this was a conversation they shouldn't have even partaken in, especially with outside parties who have no contractual dealings with us.
Wouldn't it prove that our Rep was not protecting nor promoting the best interests of their client?

Yes, it appears that way.

And being only our Rep wouldn't that still make us that agents client?

Yes. (but technically depends how your contract with your rep reads)

I very much thank you in advance for any of your knowledge on this matter, Samantha

No problem, hope I was somewhat helpful. Please post your reply in the comments section.

The parts in purple were :
Written by Frank Borges LL0sa - Broker FranklyRealty.com

2 comments:

Samantha said...
This comment has been removed by the author.
Samantha said...

Thank you so much for your thoughts Frank. I have checked the contract now that I have it in front of me again...
There is no box to check off allowing the sharing of information. It says very clearly that "dual representative may not disclose to either client or such client's designated representative any information that has been given to the dual representative by the other client within confidence and trust of the brokerage relationship..."

it also says in another paragraph explaining Designated Representatives that "Virginia law...The principle or supervising broker who is supervising the transaction will be considered a dual representative of both seller and buyer. Designated representatives may not disclose, except to their broker, personal or financial information received from the clients during the brokerage relationship..."

The inspections were not asked for by us in writing, it was made know on the contract paragraph 15. Well and Septic
(a) If the Property is served by an on-site well or other natural water source, Seller agrees to provide Purchaser with a certificate dated not more than 30 days prior to settlement...
(b) If the Property is served by a sewage disposal system, Seller agrees to to provide Purchaser with a certificate dated not more than 30 days prior to settlement...

So we SHOULD have been given these inspections and not even had to ask for them. We did ask for them repeatedly and were told that, "You didn't buy the house yet, your just renting it right now, we don't have to give you anything." Then later told, "You were shown them and satisfied", "You spoke personally with the water purification company and were satisfied"...We had no knowledge of being shown them or speaking with anyone. If we had been shown documentation we would have signed/initialed copies and not been asking for them.

Unfortunately they referred us to a lender, but swore they were not affiliated in any way, who immediately approved the purchase price with what we wanted to deposit ($38,000-40 including deposit, on a $245,000 home) and had no problem with the credit score showing. Funny this company neglected to inform that they were not an "as is" mortgage company. The appraisal was not ordered or done in time, they got it back the morning of the closing date (which they set not us) and denied the mortgage because of the spring fed water system and lack of comparable homes in the area (there were none, it was a very unique house and property).

Yes, I still have the audio on a digital recorder and the original message on our digital answering machine. You are more than welcome to a copy and I will try to provide you with one as soon as possible. I would love to be as public as I can with this and hopefully prevent this from happening to someone else but the press in this area (VERY Southwest Virginia) is uninterested in anything that is not in court. The company helped these homeowners (I found out later they have done business with many times before) siphon over $12,000 from our family and we have been unable to do anything about it.

I appreciate all of your knowledge and insight, I wanted to make sure I was reading and understanding all of this correctly before proceeding with my complaints to the NAR and DPOR.

You have been absolutely wonderful and timely with your responses. It is good to know that there are Realtors out there who are genuine, knowledgeable, honest and care about the satisfaction of their clients and the people they advise. Thank you so much for taking time out of your day for my family and our questions.