Usually, when there is talk of dual agency in real estate one has in mind a situation where both buyer and seller are represented by the same agent. The problem, presumably, is that it is difficult, if not impossible, for the same agent to represent parties that have competing interests. (Note: Dual agency is not illegal, but it does require disclosure and the consent of principals.) But buyers and sellers aren't the only ones in the marketplace who have competing interests. Consider the case of different buyers who want the same property. In some areas around the country today REO sales are eliciting multiple offers. Can the same agent represent different buyers in such situations?

A recent memo from the legal department of the National Association of Realtors® highlights a case (Rivkin v. Century 21 Teran Realty et al.) involving competing buyers. The case comes from federal court, but the crucial part involves a New York court's answer to a question put to it by the U.S. Court of Appeal for the Second Circuit.

The central facts involve an attempt by Oleg Rivkin to purchase a summer home on Ulster Heights Lake in Ulster County, New York. Rivkin placed an offer of $75,000 on a property that was listed for $100,000. In doing so, he engaged the services of Joshua Luborsky, an associate broker with Century 21 Teran Realty. Luborsky provided Rivkin with the state-mandated agency disclosure form which, among other things, states that a buyer's agent "acts solely on behalf of the buyer" and has a fiduciary duty of "undivided loyalty." At the time, Rivkin indicated to Luborsky that he would be willing to raise his offer to the full price. Luborsky advised that he should wait for a counter-offer from the seller.

Unbeknownst to either Luborsky or Rivkin another offer on the property was procured by Chloe Dresser, another associate broker (and part owner) of Teran. The offer brought by Dresser was for the full listing price.

To shorten a lengthy story, the full price offer brought by Dresser was accepted. Even though Rivkin subsequently submitted higher offers, ultimately going to $105,000, the sellers chose to stick with Dresser's buyers.

During the course of the negotiations both Rivkin and Luborsky became aware of the fact that the prevailing offer had been submitted through another agent associated with the Teran firm. When his $105,000 offer was turned down, Rivkin terminated his relationship with Luborsky and Teran. Shortly thereafter he brought a lawsuit that, among other things, alleged a breach of fiduciary duty for Luborsky and Teran's failure to disclose to him and obtain consent for the representation of a competing buyer by Teran's associate broker, Dresser.

The trial court dismissed Rivkin's suit, and he appealed. Finding no precedent case on point, the federal appellate court asked the New York Court of Appeals to answer the question, "Did any or all of Defendants-Appellees breach a fiduciary duty to Rivkin by failing to disclose, in any form, Defendants-Appellees' representation of a competing buyer for the property Rivkin sought to buy?'

The New York court said, "No." The basis of its answer was that the relevant section of New York law "talks in terms of an 'agent,' defined as 'a person who is licensed as a real estate broker or real estate sales associate … and is acting in a fiduciary capacity'." "The Legislature did not, for example, say 'any person, firm, limited liability company or corporation."

It is good that New York now has clarity on this issue, but you can bet that there could well be different answers in different states. In California, for example, while there is no precedent-setting case on the particular issue of representing competing buyers, it is quite likely that a case like this one would have turned out differently. California treats the brokerage as the agent, not the individual sales agent. That is why California brokerages, many of whom -- as in other states -- have multiple offices and hundreds of agents are well-advised to employ the forms available to them that obtain consent for the representation of competing buyers.

Published: July 3, 2008

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Bob Hunt is a director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .