Disclose, disclose, disclose may soon become a more important real estate catchphrase than location, location, location.

An Alaskan judge has awarded $200,000 to a buyer whose dual agent failed to provide proper disclosure of her agency status which resulted in the buyer overpaying for his home.

And that was only one misdeed in a long list of behaviors by Realtor Bonnie Mehner that the judge called "outrageous." But failure to disclose agency is a problem that could keep haunting Mehner long after she and her broker pay their civil fines. She could face industry sanctions as well.

Joe Columbus, Jr. and his agent Robert Holbrook and McAlpine Investments, Inc. sued Mehner and her broker Prudential Jack White when Columbus discovered that he overpaid for his new home. Columbus made a full-price offer of $585,000, because the listing agent, Mehner, had tricked him into using her services to buy the home from her instead of his own agent. She was successful because she failed to disclose what her role as a dual agent would mean to Columbus as the buyer.

From the findings of the court, Anchorage Realtor Bonnie Mehner:

• poached the buyer from her agent
• tricked him into believing that he could not secure the home without her help
• told the buyer that his initial offer was too low, and then failed to tell the seller of the buyer’s offer. The buyer's first offer was closer to comparables than what the buyer ultimately paid for the home
• told the buyer there were multiple offers on the home when there were not to encourage him to pay more for the home
• failed to show him existing comparables that would have illustrated that he was overpaying for the home
• admitted in court that she did not follow state law with regard to dual representation.

The court ruled in April that Mehner behaved unethically and violated state law by not informing the seller of Columbus' initial offer, misleading him about other offers on the house, failing to properly inform him about her dual agency status, and unfairly leading him to believe he could buy the house only if he made his offer through her, said an account of the story in the Anchorage Daily News when the ruling became public on Sunday, July 28th, 2002.

Columbus’ broker also benefited from the ruling. As a state-licensed agent, but not a member of the Anchorage Board of Realtors, agent Holbrook and the firm he represents McAlpine Investments, Inc., were able to collect half of the $35,040 commission paid to Mehner and her firm for the dual representation of both the buyer and seller in the transaction. If Holbrook had been a member, he would not have been able to collect commissions via a civil suit. Realtors are precluded in their codes of ethics from suing one another. They instead have to petition their boards in "procuring cause" hearings to collect disputed commissions.

Mehner was a 27-year veteran, an award-winning agent whose earnings topped $600,000 a year. However, between 30 and 60 percent of her earnings came from sales in which she performed as a dual agent, according to court records, and that's the real crux of the case - not the rogue behavior of one agent, but the implications for dual agents at large.

The real estate industry has so far been protective of the dual-dip transaction, because brokers and agents can work half as hard to get results - one transaction closed; two commission sides collected. This as evidenced by the development of alternative business models to dual agency such as transactional brokerage and designated agency.

But as cases such as Mehner's come to light, how will the industry and large brokers such as hers continue with the practice if it means the expense of consumer goodwill?

"Agents are going to have to do a better job in complying with their disclosure requirements and obligations to the consumer," says Charlie Sandberg, broker for ERA Real Estate Center, in Anchorage.

Sandberg is a national director of the National Association of Realtors and a member of the NAR’s professional standards committee. He also served as an expert witness for the plaintiff.

Sandberg believes this case will resonate with consumers.

"This is a big story," says Sandberg. "The point is that it is important that the consumer understand and agents understand who they work for and that the agent has the obligation to tell the consumer who they are working for and under what circumstances changes might take place.

"What we’ll see is consumer awareness over representation," continues Sandberg. "Buyers will want their issues represented, and you’ll see more buyers being represented to minimize conflicts of interest and that could pose some economic challenges for offices dependent on dual transactions, not to mention the liability issues and statutory liability."

Mehner's worst misstep could be one of timing. In an increasingly intolerant-of-miscreants political and economic environment, she could become the next "example."

Mehner could face a hearing and disciplinary actions from her board's professional standards committee. According to insiders, the Alaska Real Estate Commission is already looking into her case as well. While a variety of sanctions could apply, in the worst case, Mehner could lose her license to practice real estate.

Part II - Why Dual Agents Are Reluctant To Disclose Their Agency Status will run on Agent News tomorrow.