The recent lawsuits by buyers in Alaska who claimed that their agents did not properly disclose their dual agency status suggest that failure could be a local issue, but other evidence shows improper disclosure is a national problem, and it's getting worse.

According to the National Association of Realtors Profile Of Home Buyers And Sellers in 2002 and 2000, agency disclosure is trending downward.

In 2002, the NAR found that 35 percent of all buyers were disclosed at first meeting, 26 percent when the contract for purchase was written, and 18 percent weren't disclosed at all. Twenty-one percent were unsure whether or not they had been disclosed.

In some areas, this is a decrease from the 2000 buyer/seller survey where 38 percent of homebuyers were disclosed at first meeting, 28 percent when the contract was written, and nineteen percent weren't disclosed at all. Twenty percent of buyers weren't sure whether they had been disclosed or not.

Laurie Janik, general counsel to the NAR, finds this downward trend "disappointing."

"Disclosed dual agency is probably the most difficult form of representation to perform properly," says Janik. "These statistics say that people are being sloppy. They need to take agency disclosure requirements seriously; it is a critical element of consumer protection. I don't think it is good for practitioners or consumers that the trend line is going down. We aren't going in the right direction - compliance is worsening."

While defending her undisclosed dual agency in court, recently, Alaska Realtor Bonnie Mehner (Colombus, Holbrook, McAlpine Investments VS Bonnie Mehner, Bonnie Mehner and Associates, Prudential Jack White Real Estate) told the judge that complying with the agency disclosure statute wasn't "practical."

According to the NAR Code of Ethics, Standard of Practice 1-5, both the buyer and seller must be fully informed and consent to any dual agency relationship. Alaska's statute "imposes a higher duty than does the Realtors' standard of practice because the statute requires that the agent make full disclosure before commencing to represent the principals in a dual agency capacity," wrote Judge Morgan Christen, Superior Court Judge, in his ruling.

The Alaska statute requires that dual agency be disclosed in writing at the first 'specific assistance,' and that the agent must get signed consent from both the buyer and seller before proceeding as a dual agent for both. In order to get informed consent, the agent must inform both the seller and buyer of the consequences of dual agency as well as their alternatives.

Mehner did none, according to court findings.

"Mehner testified that her standard practice and she believed to be standard practice in the industry, was to obtain a buyer's consent to a dual agency representation at the time she assists the buyer in preparation of an offer, not at the time she commences representation of a buyer in a dual agency capacity," wrote the judge.

Judge Christen found that "Mehner did not inform Columbus or Brown (the seller) of the dual agency situation, its consequences and alternatives prior to taking steps in furtherance of the dual agency she assumed to exist."

Are disclosure laws vague, easy to misinterpret by agents? Are they "impractical?"

Not according to Janik.

"Disclosure should take place with sellers prior to signing the listing agreement, and with the buyer prior to substantive discussions as to their needs. If someone calls on the phone and says 'I want to know about a property, but I don't want to tell who I am,' the agent can just give the facts. There is no need for disclosure because there is no harm to consumer. But if someone said, 'I want to view the property and I want you to show me others and here's what I can afford,' that's where the disclosure should be made."

What would Janik advise agents who aren't sure of the right time to disclose?

"I would refresh myself on my state law - when is the trigger pulled and what do I need to do?," says Janik. "If I were a broker, I would make sure every agent knows about disclosure. So, a periodic review is good. A case like this (Mehner) gets everyone's attention. This is material for the next sales meeting."

Published: October 8, 2002

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