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September 20, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Houlihan Lawrence accused of improper use of dual agency

When a house is bought and sold, questions are at the heart of the deal.

Do the sellers need to move quickly because of a divorce, lost job or transfer to a new town? Are the buyers so in love with the property that they are willing to outbid others?

In short, what motivates each side, and how can real estate agents use that information to negotiate the best deal?

Real estate agents play a vital role in the stressful process, but their loyalty is compromised, according to a recent lawsuit, when they represent both sides.

Pamela N. Goldstein claims that she was an unwitting victim of dual agency, as the practice is known, and was pressured last year into paying $37,100 more than the initial asking price for a house in Greenburgh.

She filed a lawsuit in Westchester Supreme Court on July 14 alleging that Houlihan Lawrence Inc., the most successful real estate firm in the northern suburbs, lured thousands of homebuyers and sellers into dual-agency deals.

“Houlihan Lawrence has reaped huge profits with this scam,” the complaint states, “pocketing hundreds of millions of dollars in unearned sales commissions.”

Houlihan issued a statement denying her allegations, saying, “Houlihan Lawrence has been dutifully serving our clients for 130 years and is confident in our business practices. We will continue to represent our buyer and seller clients with integrity.”

Dual agency is not illegal in New York, but agents must fully disclose the risks to clients and get their informed written consent.

Dual agency is meant to be used infrequently, according to the complaint submitted by lead attorney William Ohlemeyer of Armonk-based Boies Schiller Flexner LP.

He cites a statement by Maureen Glasheen, former general counsel for the New York Department of State: “If dual agency is disclosed properly, there isn’t anyone in their right mind who would agree to it.”

Houlihan is based in Rye Brook and has 30 offices and more than 1,300 agents in Westchester, Putnam and Dutchess counties. In 2016, it booked nearly $3.7 billion in sales in Westchester alone, nearly three times more than its closest competitor.

The complaint claims that Houlihan’s success can be attributed, in part, to “ill-gotten gains on undisclosed, nonconsensual dual-agency deals.”

Brokers are required to give customers a form that lists agency-client relationships – such as seller’s agent, buyer’s agent and dual agent – and to explain the types of relationships. Clients who opt for dual agency must give consent after being fully informed of the risks.

Houlihan agents allegedly duped clients into signing pre-filled forms but did not explain the relationships. Buyers got the forms only after they became interested in a particular property, the complaint states, and were already mentally, emotionally and even legally committed.

In spring 2017, Goldstein saw a Houlihan listing for a four-bedroom colonial at 6 Wellington Terrace in Greenburgh for $599,900.

She called Gino Bello, the listing agent, and received a reply from Daniel Cezimbra. She viewed the home with him and confided that she needed to find a home quickly because she already had a signed contract on her house in Hartsdale.

Cezimbra allegedly pressured her to keep bidding higher because multiple offers had been made on the house. Three days after she saw the house, she bid $635,000, contingent on an inspection.

Then, as she was in the midst of a bidding war, Houlihan submitted the required agency form. Cezimbra was checked off as the buyer’s agent. The “dual agent” line was not checked, but a section for “advance informed consent to dual agency” was, and spaces for the buyer’s and seller’s agent names were blank.

Goldstein claims Cezimbra never explained dual agency and did not disclose that he was a member of Houlihan’s Gino Bello Homes team, that the team represented the seller, that he was Bello’s brother-in-law, and that he had agreed to split the buy-side sales commission with Bello.

The pressure allegedly continued even after a bidding deadline had passed. Cezimbra urged Goldstein to raise her offer to $637,000. She caved, the complaint states, and made the offer.

Then Cezimbra, who is not named as a defendant in the lawsuit, allegedly warned her that the seller could go with another offer if the inspection were not done in three days. The inspection report identified numerous problems, and Goldstein sought to have them fixed before the closing. Cezimbra, the complaint states, said the sellers would go with another offer unless she bought the house as-is.

She relented when Cezimbra agreed to pay for the inspection.

Goldstein is asking the court to certify the case as a class action on behalf of thousands of other buyers and sellers as far back as 2011 in instances when Houlihan represented both sides.

She is demanding that their sales commissions be returned.