Question

Sandra is a broker who has a listing agreement with Tally and a buyer representation agreement with Sam. Both have consented to intermediary should the situation present itself. Tally needs to sell her home, which is listed for $750,000. Sam wants to buy some investment property for his company's (ICOR, LLC) portfolio. He wants to purchase a residential property in the range of $650,000 to 750,000. Sandra did a CMA for Tally that indicates the house should be priced at $690,000, but Tally lists it at $750,000 because she's put a lot of money into remodeling and landscaping. Sam knows about the CMA and asks Sandra for a copy. Sandra wants to get this listing sold quickly, and if it closes as an in-house sale, Sandra reaps more than if it sold to a buyer represented by another broker, although she knows that Tally needs to net as much as possible from the sale. Sandra provides the CMA to Sam without telling Tally. Sam makes an offer on the house for $700,000, and Sandra tells Tally she should accept because it is the CMA price, and the house has been on the market for a whole week with no offers. The sale closes and funds, and Tally sues Sandra and Sam when she finds out about the CMA. Does Sandra have a defense, and if so, what is the BEST reason why or why not?

Answer 1

Sandra's actions in not disclosing to Tally that she shared the CMA with Sam, and recommending an offer at the CMA price despite Tally's higher listing price, could represent a breach of fiduciary duty and lack of transparency required from a broker in a dual-agency role.

Step-by-step explanation:

Sandra, as a broker, has fiduciary duties to both her seller, Tally, and her buyer, Sam. This creates a dual-agency situation where she is supposed to act in the best interest of both parties. However, by providing the Comparative Market Analysis (CMA) to Sam without Tally's knowledge, Sandra may have breached her duty to Tally. The fact that Sandra recommended Tally accept an offer that is at the CMA-recommended price, despite Tally wishing for a higher sale price, can be construed as Sandra not fulfilling her obligation to seek the highest possible price for her client, which is part of a broker's responsibility to their client.

Tally could argue that Sandra prioritized her own interest of closing an in-house sale and gaining a higher commission over Tally's interest of netting as much as possible from the sale. Furthermore, Sandra's failure to disclose to Tally that she had shared the CMA with Sam could be a violation of the transparency required in an intermediary relationship. Therefore, Sandra may have a difficult time finding a strong defense, as her actions do not align with the best practices and ethical requirements of real estate professionals.