Still think transactional brokerage works for consumers? It doesn't according to the Palo Alto buyer who paid $1 million over listing price for his home last year. The purchase made news in April 1999, but may continue to merit ink. The buyer, Jerome Debs, is taking a Coldwell Banker brokerage to court for failing to act in his interests when the company was representing him as the buyer. The suit is significant because it raises questions about the clarity and boundaries of agency relationships.

Debs, according to a recent report, had offered $2.8 million for the four-bedroom, 3,700 square foot home, which had listed for $2.2 million, during a bidding war. He later learned that the sellers had accepted his $2.8 million bid, but were convinced by a Coldwell Banker agent to consider a competing bid, forcing him to up his price to $3.2 million. The problem with that is that he was also being represented by Coldwell Banker - and had a signed agreement to prove it.

Asking for damages to the tune of the $400,000 he felt he overpaid, as well as the $96,000 commission that the Coldwell firm received for the transaction, Debs filed suit in October of 1999 accusing the firm of "breaching its fiduciary duties, citing a standard contract in which Coldwell Banker promised to "act as agent for the Buyer only" and to provide "utmost care, integrity, honesty and loyalty."

The suit also seeks an injunction to prevent Coldwell Banker from representing competing buyers without their consent. The company argued that the lawsuit was "frivolous" and that the complaint was "totally contrary to the marketplace realities that have existed in California for decades."

Judge William Martin of the Santa Clara County Superior Court didn't buy it. He ruled in the plaintiff's behalf.

"A real estate broker owes his or her client ... undivided service and loyalty. ... This duty is breached where a broker represents two different clients with competing interests unless he or she discloses such competing interests," wrote Judge Martin.

Although the outcome of the case will most likely be court-ordered mediation, the ruling is possibly going to affect disclosures and brokerage practices around the nation.

What do you think? Does Debs have a case or should the Coldwell brokerage settle and skedaddle? Are "market realities enough of a reason to pit two buyers being represented by the same firm against each other?

Also See:

Published: February 15, 2000

Use of this article without permission is a violation of federal copyright laws.

Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.