A Santa Rosa couple’s lawsuit against one of Northern California’s largest real estate brokerages is drawing fresh attention to a practice that, while legal in California, consumer advocates warn is becoming more common nationwide — and potentially harmful to home buyers.
Claudia Ochoa and César González, first-time buyers with full-time jobs and three young children, thought it was unusual when they were told they’d have to drop their real estate agent before making an offer on a newly built home on Santa Rosa’s west side. The brokerage behind the sale, W Real Estate, insisted the couple instead work with one of its own agents — the same company representing the builder.
Unfamiliar with the home-buying process and eager to secure a house near their children’s school, Ochoa and González went along with it, assuming the arrangement was simply another quirk of California’s famously complicated real estate transactions.
Two years later, they say it was more than unusual — they allege it was illegal.
The couple is among the plaintiffs in a lawsuit filed against W Real Estate and its owner, Randy Waller, accusing the firm of steering new buyers into so-called dual-agency deals, where the same agent or brokerage represents both the buyer and the seller. The practice is banned outright in more than half a dozen states. California allows it, but only if both parties fully understand and voluntarily consent to the arrangement. The lawsuit, filed in Sonoma County, argues that buyers like Ochoa and González were never given a real choice.
Consumer advocates say dual-agency sales may be becoming more widespread nationally amid a wave of consolidation among real estate brokerages. Even where legal, they argue, the practice sits in an ethical gray zone.
“You can’t try to get the highest price for the seller and the lowest price for the buyer at the same time — it’s an inherent conflict of interest,” said Wayne Bell, a former commissioner of the California Department of Real Estate. Critics argue an agent trying to serve both sides inevitably shortchanges one of them.
According to the lawsuit, filed earlier this year, hundreds of buyers across at least five new developments were affected by similar arrangements. Without independent representation, the suit claims, buyers were less likely to receive concessions such as credits or upgrades from sellers. Some buyers also allege their W Real Estate agents — who were supposed to be looking out for their interests — failed to disclose construction defects that are now the subject of a separate lawsuit.
Four legal experts not involved in the case, interviewed by CalMatters, agreed that if the allegations are accurate, they raise serious ethical and possibly legal concerns.
“Consent obtained under duress, or as a non-negotiable condition of a contract, fails to meet the legal standard of informed and voluntary consent required for dual agency,” Bell said. As described, he added, the arrangement would be “coerced, involuntary and unlawful — or at minimum unethical under real estate standards.”
Waller referred questions to his attorneys, Doug Pettit and Sara Bloch. “W Real Estate cannot comment on specific details, as the company has been sued by an attorney and his clients and the case is pending,” Pettit said in a written statement, adding that the firm disputes the allegations in both the dual-agency lawsuit and a related construction defect case. “The work the agents did for the buyers benefited their interests, and all buyers were free to consult with other agents if they wished.”
Pettit also said the arrangement benefited developers who prefer working with agents already familiar with a project. A jury trial is scheduled for next May.
‘Stop being involved’
Details of the alleged dual-agency arrangement emerged through legal agreements and email exchanges obtained during litigation and shared with CalMatters.
“W Real Estate will represent both the buyer and seller in all transactions,” one brokerage agreement between the firm and City 44 developer Dan Morgan states. Another document specifies that a buyer’s outside agent would receive a 2.5% referral fee for bringing in a client — and then step away from representing them.
“An outside agent would not act as the buyer’s agent,” agent Nalishma Carvelho wrote to a prospective buyer who asked whether they could use their previous real estate agent. “Randy Waller and I are the buyer’s and seller’s agents in this community.” In another email, Carvelho described the setup as part of a “standard contract” that was “pretty common” in Sonoma County. She did not respond to multiple requests for comment.
Stephen Flynn, the attorney who filed the dual-agency lawsuit, said arrangements like this are rare — and, in his view, unlawful. While agents working new developments often pay referral fees to outside agents who bring in buyers, requiring those agents to abandon their clients entirely is something he said he hasn’t encountered in 20 years of real estate law. “That’s a level of brazenness that I find rather astonishing,” he said.
Kerrin Shettle, a veteran Petaluma agent who signed one such agreement on behalf of a prospective buyer, said she also found the rule strange. She recalled calling W Real Estate shortly afterward to ask about the property. “You shouldn’t be calling us,” she remembers being told, though she can’t recall which agent said it two years later. “You’re not involved, so we need you to stop being involved.”
Flynn said cutting out independent agents like Shettle ultimately benefited the seller at buyers’ expense. In a separate W Real Estate-managed project where dual agency wasn’t required, buyers who had their own agents were four times more likely to receive concessions such as waived closing costs or appliance upgrades, according to sales data the brokerage turned over during pretrial discovery. Among buyers who did receive credits, those represented by independent agents received nearly six times more on average — $3,252 compared with $554.
Flynn acknowledged those amounts are relatively small compared to California home prices. But he said they demonstrate that his clients weren’t getting the representation they believed they were paying for.
Other costs
Lacking independent representation carried consequences beyond price, some buyers say.
Danny Matranga, a personal trainer and gym owner, had spent nearly a decade saving for a home. With interest rates near historic lows in early 2022, he and his fiancée fell in love with a model home at City 44 and put down a deposit.
Then they waited. Construction fell behind schedule for months. Carvelho, the W Real Estate agent officially representing him in the deal, was difficult to reach and offered only sporadic updates, he said.
“This person is my real estate agent, but it doesn’t feel like it at all,” Matranga recalled thinking. “If I had hired these agents, I would have fired them immediately.”
The situation grew bad enough that his loan officer intervened on his behalf, emailing Carvelho to ask why Matranga was being required to purchase solar panels at an additional cost and why he hadn’t been given a firm closing date.
It took three more months before Matranga finally closed. By then, mortgage rates had nearly doubled. He said he now pays more than $1,000 extra per month compared to what he had originally budgeted.
What did they know?
Still, he and his fiancée were thrilled to finally join the ranks of California homeowners — until they moved in.
A neighbor joked that the entire development was built with “clips and chewing gum.” Another neighbor who shares a wall with Matranga sent him a photo of mold growing in cracks around a window frame. That winter, Matranga said he watched a water bubble form on his ceiling. Later, he found pooled water beneath his laminate flooring.
He also learned that shortly after his purchase, a City 44 construction superintendent had quit in frustration, texting one of Matranga’s neighbors that buyers were being sold “crappy houses.” Court records show those text messages were also shared with developer Morgan and with W Real Estate’s Waller.
“When homeowners have raised concerns, we are following the legal process to evaluate those claims and address any valid issues,” Morgan wrote in a statement, adding that his experience working with W Real Estate had been positive, though the brokerage would be better positioned to discuss its own practices.
Matranga said he now wonders how much W Real Estate’s team knew about construction problems at the same time they claimed to represent his interests in the sale. “I don’t want to say ‘impossible,’ but it seems extremely unlikely that they didn’t know,” he said.
Pettit, the brokerage’s attorney, flatly denied the allegation: “W Real Estate had no knowledge of any construction defects on any project that its agents concealed from buyers.”
Is dual agency always a bad deal?
Having one person represent both buyer and seller can streamline a transaction — cutting down on back-and-forth communication since negotiations flow through a single point of contact rather than two. Because one agent collects commission from both sides, there’s also potential for a savvy consumer to negotiate a lower total commission, said Bennie Waller, a real estate professor at the University of Alabama (no relation to Randy Waller).
Dual agency is also common when a home changes hands between familiar parties, such as family members. In many states that prohibit dual agency outright, these sales can be handled instead by a specialized “transaction agent” who facilitates the deal without representing either side.
But the arrangement carries an obvious downside: even a well-intentioned agent may struggle to fully advocate for both a buyer and a seller at the same time.
In California, dual agency applies whether the same individual agent represents both parties or different agents from the same brokerage handle each side — an arrangement sometimes called a “designated” or “dual” transaction. In the Sonoma County case, most of the disputed deals fell into this second category, though at least two prospective City 44 buyers signed agreements in which a single agent represented both sides directly.
Wendy Gilch, a researcher at the Consumer Policy Center, said such arrangements raise serious ethical questions even when technically legal. Because a single brokerage stands to collect commissions from both sides of a deal, it has a strong incentive to close the transaction quickly — not necessarily to secure the best outcome for either client.
Consumer advocates like Gilch worry these kinds of deals are becoming increasingly common nationwide amid a decade-long wave of consolidation in the real estate industry. Compass, in particular, has emerged as the country’s largest brokerage, now owning smaller brands including Coldwell Banker, Century 21 and Christie’s International Real Estate.
When one company dominates a market, the odds increase that two of its own agents will end up representing both sides of the same sale. Critics say Compass has compounded this by encouraging sellers to first list homes on its private network, visible only to other Compass agents — a practice that has drawn congressional inquiries, state investigations and lawsuits.
“Private listings are essentially a way of creating a dual-agency mechanism,” said Mischa Fisher, chief economist at Zillow, which has spent more than a year sparring with Compass both in court and in public.
The ultimate goal of the strategy, said real estate consultant and frequent Compass critic Jonathan Miller, is to capture commissions from both sides of every deal and “make each transaction more lucrative to help the stock price.”
A Compass spokesperson, Devin Daly Huerta, said by email that the company’s goal isn’t to create conflicted deals but to give sellers flexibility in how they market their homes. Even listings not shown on Zillow or Redfin, she said, “are publicly available on our website or by contacting Compass directly,” adding that the company’s aim is “to sell more homes and fulfill our fiduciary responsibility to our clients.”
Experts weigh in on the Sonoma case
Gilch said the alleged W Real Estate arrangement — directly requiring buyers to accept dual agency and paying off independent buyer’s agents to step aside — represents an extreme version of a broader industry problem. “Oh my gosh, this case is bad,” she said after reviewing a copy of the complaint.
Bess Freedman, CEO of New York brokerage Brown Harris Stevens and a public critic of Compass’s private-listing strategy, agreed. “That sounds really bad to me,” she said.
Anthony Ventura, a veteran Bay Area real estate attorney not involved in the case, said the alleged arrangement likely fails to meet the legal requirement that both buyers and sellers understand and consent to dual-agency contracts.
“The buyer has a right to choose their own agent or no agent at all, so I don’t think you can condition someone’s right to make an offer on you being their agent,” he said. “I’m pretty confident that wouldn’t be legal.”
While one could argue buyers consented because they could have walked away from the deal, Ventura said the arrangement, at minimum, runs counter to the spirit of how real estate transactions are typically regulated in the U.S. “There should be a free market where everything is negotiated,” he said. “The idea that an agent can step in and say, ‘You can only make offers through me,’ is completely contrary to that public policy.”
‘We just trusted a lot of people’
Christopher Ortiz, Ochoa and González’s original agent, said that in his decade working in the Santa Rosa real estate market, he’s encountered dual-agency arrangements on new developments at least twice before. “It was as simple as bringing them in, and I got paid for it,” he said of those deals. “It seemed too good to be true. I almost didn’t feel right about it.”
In the case of Ochoa and González, Ortiz said he continued offering informal advice — explaining certain terms or jumping on an occasional phone call — even after he officially stopped representing them. “I was basically just acting as a go-between,” he said, a description the couple confirmed.
Since buying the home, Ochoa and González have spent a lot of time wondering what, if anything, they lost by not having Ortiz fully in their corner throughout the process. Would they have negotiated a lower price? Better appliance upgrades? Would Ortiz have caught the alleged defects that have since left them dealing with a roof leak, a persistent mold problem, and a downstairs bathroom that has flooded with sewage twice? And what exactly did they get in exchange for the $17,500 in commissions they paid their new agent?
“I’m sure anyone with a little experience buying a home probably would have caught some issues,” Ochoa said. “We just trusted a lot of the people involved in this process when, really, they weren’t on our side.”
Original source: CalMatters
