An Anchorage judge has laid the gavel down on the head of a dual agent who failed to properly disclose her client and causing him to overpay for his home. Yet statistics across the country show that other agents are doing the same thing. Why aren't some double-dip agents providing proper disclosures?

Agent Bonnie Mehner could not be reached for comment, but she defended some of her actions in court with the following statement: "I'm afraid that I'm one of a thousand (real estate agents) who don't quite live up to the standard because it is not practical."

Practical for whom? Mehner or her customers?

Alaska state law clearly says that a licensee should "disclose in writing the licensee's agency relationship with the seller to each prospective buyer at the time that the licensee begins to provide specific assistance to locate or acquire real estate for the buyer, and obtain from each prospective buyer a signed acknowledgement that the buyer is aware of the agency relationship between the licensee and the seller."

When acting as a buyer's agent the licensee may "act as an agent for both a prospective seller and a prospective buyer of real estate only after the licensee informs both the seller and the buyer of the dual agency and obtains written consent to the dual agency from both principals."

When a change occurs, such as when Mehner went from being the seller's agent to a dual agent, "during a transaction that makes a prior written disclosure required by this section incomplete, misleading, or inaccurate, the licensee shall make a revised disclosure, in writing, to all parties to the transaction as soon as possible."

Mehner did not disclose her buyer (or her seller, for that matter) until after she had shown him several homes, two of which were her own listings. The buyer had presented a contract once through another agent which Mehner declined to show her seller, an action which got her in deeper hot water. But, it was only when the buyer, thinking he could not secure the house otherwise, presented a contract through her, did she disclose the nature of her dual agency.

For these actions and more, Mehner and her broker were fined over $200,000. In addition, Mehner may face statutory and professional standards sanctions. In the worst case, she could lose her license to practice real estate.

Risk of sanctions may appear remote to agents who feel that "everybody does it."

According to a previous Realty Times story by Broderick Perkins, fewer than 10 percent of Massachusetts' real estate agents fully comply with agency disclosure law, according to a study by the state's real estate regulatory agency, the Board of Registration of Real Estate.

"Likewise, John Pinto, a real estate broker and expert witness in San Jose, CA says nearly all real estate agents violate California's disclosure laws by not fully disclosing to consumers who they represent -- the buyer, the seller or both," writes Perkins. "And the Washington, D.C.-based Consumer Federation of America says because many consumers aren't even aware they have a right to know by whom and how they are represented, they are underrepresented to the tune of $10 billion a year in higher home costs."

In these agents defense, are disclosure laws not written clearly enough or is the concept of dual agency simply too risky to properly explain to consumers? According to AS 08.88.396. Disclosure of Agency to Prospective Buyers and Sellers, click here, agency disclosure should be given to a consumer "at the time the licensee begins to provide specific assistance to locate or acquire real estate...." If you are an agent who bends the rules to get both sides of a sale, that all depends on when "begins" begins and what "specific assistance" is.

Sandy Forrest, executive officer of the Anchorage Board of Realtors, says, "We do have a state law and an agency statute. The Anchorage Board has formed an agency task force to review this particular statute to decide if something needs to be changed. We’re still meeting with the committee to see if the statute needs to be rewritten. I did put in a request to NAR to get some information from them, so we are trying to see what other states are doing."

Says Charlie Sandberg, a director of the NAR and an expert witness in the Mehner trial, "When you read the definition of informed consent, you have to present all of the risks and give the consumer an understanding of the risks of a dual agency arrangement. Our obligation is to give the consumer a knowledge of what alternatives are open if they don’t want to enter into it (dual agency agreement) and one alternative is go get another agent.

"Losing income is a powerful issue," he continues. "When you make $600,000 a year as in Mehner's case, 30 to 60 percent of her income was dual agency income. She would have to statistically work twice as hard to make the same income. The other issue is that by nature real estate agents are marketing properties and get it purchased for their buyers and sold for their sellers. Their focus isn’t their legal issues under agency, they just want to do the best job for their people, and sometimes you lose sight of how to get from beginning to closing."

The real estate industry, so far, has been protective of the dual-dip transaction. This case asks the question - will the industry continue to protect dual agency at the expense of consumer goodwill? A lot depends on how much consumers latch onto cases like Mehner's and what the risk/reward is for brokers who condone practices such as Mehner's. Before she landed in court, Mehner was acknowledged as the top agent in her brokerage.

One observer noted that the industry may have benefitted with a temporary reprieve. The Mehner case was settled before punitive damages were awarded by the judge.

"There is no errors and omissions insurance payoff for fraud," says the observer.

Published: July 31, 2002

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