We all know the basic concept of supply and demand. When supply is low and demand is high, prices tend to go up. When this happens with houses, realtors refer to it as a “seller’s market,” but what if it’s really a “realtor’s market?”
That allegation is at the heart of a recently proposed class action lawsuit against Houlihan Lawrence, a large brokerage firm with 30 offices spread throughout the northern New York suburbs and Fairfield County, Connecticut.
The lawsuit was filed by Pamela Goldstein, an associate general counsel for a communications company who fell in love with a four-bedroom, white, colonial house located in White Plains, New York. The agent who showed her the house, Daniel Cezimbra, allegedly told her there were other offers on the house and that she had better act fast and bid above the $599,000 asking price.
Goldstein took his advice, and eventually bought the house for $637,000, but then she discovered something that made her question that interaction – and her agent’s motives.
It turns out that Houlihan Lawrence was also representing the person selling the house. This meant that, when Cezimbra was supposed to be negotiating on Goldstein’s behalf and representing her interests in the bidding war, he was going up against his boss – who also happens to be his brother-in-law. No matter how hard people work to be fair and unbiased, it has to be hard to do your best negotiating when the person across the table from you has the power to fire you.
But it’s not illegal. It’s called dual representation and it’s allowed under New York law as long as clients are informed about the potential conflict of interest.
According to Goldstein, she was not told about her agent’s potential conflict of interest until three days after she had already submitted her initial bid. Even then the form allegedly came with boxes indicating she had been informed of the potential conflict of interest already checked off for her.
If Houlihan Lawrence really does have a practice of taking the initiative in prechecking those boxes for its clients, it could suggest anything from the idea that they never actually discussed the issue with their clients, to the idea that they may have mentioned it in passing without giving it a chance to really sink in. Either way, checking the box for them doesn’t show the same level of understanding on behalf of the client as a form in which the client checked off those boxes themselves – an act that would prompt them to think about the issue before completing the rest of the form.
Once she did some digging, Goldstein found that, in 2017, 90% of Houlihan Lawrence’s biggest home sales in Westchester County were dual-agency sales, as were 48 out of their 75 sales in Bronxville.
Houlihan Lawrence denies it did anything illegal and reassured the public that it stands by its business practices. Cezimbra also released a statement, saying that he treated Goldstein fairly in the way he guided her through the process of the bidding war and that everything was disclosed to her. He added that, as an attorney, Goldstein was more sophisticated than your average buyer and was knowledgeable of both the market and all the disclosures involved.
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