What Does a Duty of "Honest and Fair Dealing and Good Faith" Mean?
Those words should ring a bell for CA real estate licensees. They’re copied verbatim from the Disclosure Regarding Real Estate Agency Relationships that buyers, sellers and agents must sign prior to entering into a listing or purchase contract.
"Honest, Fair Dealing and Good Faith" are some of the legally required responsibilities a CA agent has to the principal they're NOT representing. Those duties are a lower standard of care than the “fiduciary” duties we have to our clients. The buyer's agent is responsible to the seller for being Honest, Dealing Fairly and acting in Good Faith”; and the listing agent has those responsibilities, and others, to the buyers. At least in CA.
Isn't writing and presenting multiple offers for a buyer who intends to purchase only one property without disclosing the buyer's intentions to the seller, bad faith and dishonest? To me it is. And it therefore violates CA Agency Law. Perhaps other states define agents' duties differently.
I'll go one step farther. The abbreviated definition of "fraud" (from TheFreeDictionary) is:
"A false representation of a matter of fact...even by concealment of what should have been disclosed...and is intended to deceive another so that the individual will act upon it to her or his legal injury."
I'm not an attorney, but I understand English and that definition encompasses the practice I'm writing about--writing and presenting multiple offers for a buyer who intends to purchase only one without disclosing that fact to the seller. The "legal injury" is the damage to the seller who cannot accept any other offers, even more favorable offers, while the purchase contract that the buyer intends to cancel is still in effect.
Finally, there’s the issue of teaching buyers it’s okay for real estate agents to conceal the truth to get their offer accepted. The end justifies the means if the buyer gets the benefit of getting the deal they want. And we wonder why our industry has a sleazy reputation.
A statement written into the purchase contract, something like the following, solves the problem: "The buyer is making multiple offers but intends to purchase only one property." That's honest and fair dealing as required by CA Agency Law.
No seller will accept that? Maybe; but that's why its omission constitutes a violation of CA Agency Law and is probably a fraud.
Lloyd Binen
Broker/Realtor/DRE 00572654
Certified Realty Services
19200 Shubert Drive
Saratoga, CA 95070
Certified Residential Specialist (CRS); Graduate, Realtor's Institute (GRI)
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