The California Supreme Court heard oral arguments this month in Horiike v. Coldwell Banker, a case that is being closely followed by the real estate industry. The case could have ramifications in California, a state which allows dual agency in real estate transactions.
"At its core, the Horiike case is an issue of a buyer not reading all of the information that was presented to him, but Horiike is trying to turn a normal disclosure case into an agency case," said Pat "Ziggy" Zicarelli, president of the California Association of Realtors.
Dual agency applies to an agent who represents both the buyer and the seller in a real estate transaction. It also involves transactions in which two agents are working for the same broker and one agent represents the seller and the other agent represents the buyer. California law allows brokers to represent both parties with their informed consent.
The home buyer, Hiroshi Horiike, purchased a mansion in Malibu, Calif. and worked with a Beverly Hills, Coldwell Banker real estate agent. The property was listed by a Coldwell Banker agent in another office. Horiike claims he was misled about the property's square footage. The flyer stated the home had approximately 15,000 square feet of living property, but after the sale Horiike claims he learned the home actually had about 10,000 square feet.
The issue is complicated because most square footage measurements do not include outdoor living areas in square footage, but the City of Malibu includes some outdoor living areas in determining square footage. These facts were fully disclosed by the agent, but apparently the buyer never read the information.
Horiike sued the seller's agent, Chris Cortazzo, stating Cortazzo and Coldwell Banker breached their fiduciary duty and failed to advise him to hire a third party to verify the actual square footage. He did not sue the Beverly Hills agent with whom he was working.
In the 2012 jury trial, the jury fully exonerated the seller's agent and Coldwell Banker on the buyer's claims for negligent misrepresentation, intentional misrepresentation and concealment. An appellate court overturned the trial court ruling. Coldwell Banker appealed to the California Supreme Court.
"When an agent lists a property, it is important to maximize the exposure by marketing the property to all real estate companies including the one that the agent is a part of," explained Karen Trolan, president of the Silicon Valley Association of Realtors. "If brokerage dual agency is prohibited, buyers will be restricted in the properties they can explore, and sellers will have a limited pool of buyers. Buyers and sellers should be able to choose which real estate agent represents them in a sale or purchase," Trolan said.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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