Claudia Ochoa and Cesar Gonzalez thought it was strange when they were told to drop their real estate agent partway through buying their first home.
Before the Santa Rosa couple could put in an offer on a newly built house on the city’s west side, they were informed that they would need to switch to a different agent — one who worked for W Real Estate, the same brokerage representing the home’s developer. For Ochoa and Gonzalez, both working full time while raising three young children, the request seemed like just another confusing wrinkle in California’s home-buying process. The house was close to their kids’ school, and switching agents appeared to be the only way to make an offer, so they went along with it.
Two years later, they believe what happened wasn’t simply unusual. They say it was against the law.
The couple are among the plaintiffs in a lawsuit filed against W Real Estate, one of the largest brokerages in Northern California, and its owner, Randy Waller. The suit alleges the company steered home buyers into so-called dual agency deals — arrangements in which the same agent or brokerage represents both the buyer and seller in a transaction.
Dual agency is outlawed in more than half a dozen states, though it remains legal in California provided both parties knowingly and willingly agree to it. The Sonoma County lawsuit contends that buyers like Ochoa and Gonzalez were never given a real choice.
Consumer advocates say dual agency deals are becoming more common nationwide as the real estate brokerage industry undergoes a wave of consolidation. Even when legal, they argue, the practice creates a troubling conflict of interest.
“You can’t try to get the highest price for the seller and also try to get the lowest price for the buyer — it’s an inherent conflict of interest,” said Wayne Bell, a former commissioner with the California Department of Real Estate. Critics say an agent attempting 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 residential developments found themselves in similar situations. The suit claims that without independent representation, buyers were less likely to receive price concessions or other credits from sellers. Some buyers also allege that their W Real Estate agents — who were technically supposed to represent their interests — failed to disclose signs of poor construction quality, which is now the subject of a separate defect lawsuit.
Four legal experts unaffiliated with the case, all consulted by CalMatters, said the allegations, if proven true, raise serious legal and ethical concerns.
“Consent under duress or as an unnegotiable precondition to a contract fails the legal requirement for the voluntary informed consent required for dual agency,” Bell said. The arrangement described in the complaint, he added, appears “forced, involuntary and not lawful.”
Waller declined to comment directly, referring questions to his attorneys, Doug Pettit and Sara Bloch. “W Real Estate can’t comment on any specifics since one attorney and his clients have sued the company and the matters are currently pending,” Pettit said in a written statement, adding that the company disputes the claims in both lawsuits. “The work the agents did for the buyers benefited their interests, and all buyers had the right to consult with different agents if they wanted.”
Pettit also noted that developers often prefer working with agents already familiar with a project. A jury trial is scheduled for next May.
“Stop being involved”
Court documents obtained during the litigation — including listing agreements and email exchanges — detail how the arrangement worked.
“W Real Estate shall represent both buyer and seller in all transactions,” one listing agreement between the brokerage and developer Dan Morgan states. Another document specifies that outside buyer’s agents would receive a 2.5 percent “referral fee” of the sale price in exchange for bringing in a client and then stepping away from the deal.
“An outside agent would not act as a buyer’s agent,” one W Real Estate agent, Nalishma Carvelho, wrote to a prospective buyer who had asked whether he could keep his previous Realtor. “Randy Waller and I are the agents for buyers and sellers in this community.” In another email, Carvelho described the setup as “pretty common” in Sonoma County. She did not respond to multiple requests for comment.
Stephen Flynn, the attorney representing the plaintiffs, said such requirements are anything but standard. While it’s common for listing agents on new developments to pay referral fees to outside Realtors, requiring those agents to then cut off representation entirely is something he’d never encountered in 20 years of real estate law. “That’s a level of brazenness that is quite astonishing to me,” he said.
Kerrin Shettle, a longtime Petaluma-based agent who briefly represented a buyer interested in one of the properties, said she was told much the same thing after making an inquiry call. “You shouldn’t be calling us,” she recalled being told. “You’re not involved, so we need you to stop being involved.”
Flynn argues that cutting out independent agents worked in the seller’s favor. At one W Real Estate development where dual agency wasn’t mandatory, he said sales data turned over during litigation showed that buyers who kept their own agents were about four times more likely to receive credits or concessions — and received nearly six times more money on average when they did: $3,252 compared with $554. While the amounts are modest by California housing standards, Flynn said they illustrate that his clients didn’t receive the representation they were promised.
Other costs
Beyond price, some buyers say the lack of independent representation created other headaches.
Danny Matranga, a personal trainer and gym owner, had spent nearly a decade saving for a home. When mortgage rates dipped to historic lows in early 2022, he and his fiancée put down a deposit on a model home at the City 44 development in Santa Rosa.
Then they waited. Construction dragged on for months beyond schedule, and Matranga said Carvelho — the agent technically representing him — was difficult to reach and offered only sporadic updates. “This person is my Realtor, but it sure doesn’t feel like it,” he recalled thinking. “If these people were Realtors that I had hired, I would have fired them immediately.”
Eventually, Matranga’s loan officer intervened, questioning why he was being required to purchase solar panels at additional cost and why no firm closing date had been provided. By the time escrow finally closed three months later, mortgage rates had nearly doubled, and Matranga says he now pays more than $1,000 a month above his original budget.
What did they know?
Despite the delays, Matranga and his fiancée were relieved to finally own a home — until problems began surfacing after move-in.
A neighbor joked that the development seemed built from “paper clips and bubble gum.” Another sent Matranga a photo of mushrooms sprouting from cracks near a window frame. He later discovered a bubble forming in his ceiling during a rainstorm, and pooled water beneath his laminate flooring.
He also learned that a construction superintendent at City 44 had quit abruptly, telling a neighbor in a text message that buyers were “being sold homes that are substandard.” Court records show those texts were shared with both developer Dan Morgan and W Real Estate’s Waller.
“Where homeowners have raised concerns, we are working through the legal process to evaluate those claims and address any valid issues,” Morgan said in a statement, adding that his own dealings with W Real Estate had been “entirely positive and straightforward.”
Matranga said he continues to wonder how much W Real Estate’s agents knew about construction problems while representing him in the purchase. “I don’t want to say ‘impossible,’ but it seems super improbable that they would have not been aware,” he said.
Pettit, the company’s attorney, denied the allegation. “W Real Estate was not aware of any construction defects at any developments that its agents hid from buyers,” he said.
Is dual agency always a bad deal?
Supporters of dual agency note that it can streamline transactions by reducing the back-and-forth between two separate representatives. Because only one agent collects commission from both sides, savvy buyers or sellers sometimes negotiate lower overall fees, said Bennie Waller, a real estate professor at the University of Alabama. The practice is also common in friendly or family-based sales.
But the arrangement carries an obvious risk: a single agent — even one acting in good faith — may struggle to serve two parties with competing interests. Under California law, dual agency applies not only when the same individual represents both sides, but also when two agents from the same brokerage are involved — a so-called “double-ended” transaction. Most of the deals cited in the Sonoma County lawsuit fell into this category, though at least two buyers reportedly worked with the very same agent representing the seller.
Wendy Gilch, a fellow at the Consumer Policy Center, said double-ended deals raise particular concern because the brokerage collects commission from both sides, creating incentive to close quickly rather than negotiate the best outcome for either client.
Advocates say such arrangements are becoming more common nationally amid rapid consolidation in the real estate industry. Compass, now the country’s largest brokerage after absorbing brands including Coldwell Banker, Century 21 and Christie’s International Real Estate, has drawn criticism for encouraging sellers to first list homes through its private listing network — visible only to other Compass agents. That practice has triggered congressional inquiries, state investigations and several lawsuits.
“Private listing is a way to basically create a mechanism for dual agency,” said Mischa Fisher, chief economist at Zillow, which has been locked in a public dispute with Compass over the practice.
Jonathan Miller, a real estate consultant and frequent Compass critic, said the goal of such strategies is to capture commissions from both sides of a sale “to help the stock price.” A Compass spokesperson, Devin Daly Huerta, pushed back on that characterization, saying the company’s private listings give sellers more flexibility, not an incentive toward double-ended deals. “All Compass listings are publicly available on our website or by contacting Compass,” she said. “Our goals are to sell more homes and fulfill our fiduciary duty to our clients.”
Experts weigh in on Sonoma case
Several experts said the alleged W Real Estate arrangement — mandating dual agency and paying off independent agents to withdraw — represents an extreme version of a broader industry problem.
“Oh gosh, this case is bad,” Gilch said after reviewing the complaint.
Bess Freedman, CEO of the New York brokerage Brown Harris Stevens and a vocal critic of private listing practices, agreed. “That sounds to me very un-kosher,” she said.
Anthony Ventura, a Bay Area real estate attorney not connected to the case, said the arrangement may not meet California’s legal standard requiring informed, voluntary consent. “The buyer has the right to pick their own agent or to not have an agent at all, so I don’t think you can condition someone’s right to make an offer on having you as their agent,” he said. “I’m pretty certain that that would not be legal.”
Even if buyers technically had the option to walk away, Ventura said the practice runs counter to how real estate transactions are generally expected to function. “There should be a free market where everything is negotiated,” he said. “The idea that an agent can come in and say ‘you can only make offers through me’ is just counter to that entire public policy.”
“We just trusted a lot of people”
Christopher Ortiz, the original agent for Ochoa and Gonzalez, said he’s encountered similar dual agency setups at new developments at least twice before in his decade as a Santa Rosa-area Realtor. “It was almost too good to be true,” he said of being paid a referral fee without further involvement. “I almost didn’t feel right about it.”
Even after officially stepping aside from the Ochoa-Gonzalez deal, Ortiz said he continued offering informal advice — explaining paperwork or answering occasional questions. “I was basically just being a communicator,” he said, a characterization the couple confirmed.
Since closing on their home, Ochoa and Gonzalez have often wondered what they lost by not having Ortiz formally in their corner throughout the process. Would they have negotiated a better price? Caught the construction issues that they say have since caused a leaky roof, persistent mold and repeated sewage backups in a downstairs bathroom? And what exactly did they receive in exchange for the $17,500 in commissions paid to their new, company-assigned agent?
“I’m certain that anyone who has a little bit of experience buying a house probably would have caught some funky things,” Ochoa said. “We just trusted a lot of the people involved in this process when in reality they were not in our corner.”
Original source: CalMatters
