If you have $2 million invested in stocks at a wealth management firm and your personal adviser leaves the company, your nest egg is still in safe hands — because you can follow your adviser.

So it makes sense that if you have a $2 million home you want to sell and your representative leaves his or her brokerage, your transaction should still be secure because you can follow your agent.

But in the real estate industry, that’s not legally the case.

In our business, the standard exclusive agreement is a contract between the brokerage and the individual client, with no mention of the agent. Therefore, if an agent dissociates, the client has no right to terminate the relationship with the brokerage.

For decades, however, the vast majority of brokerages have looked the other way, allowing clients to make the tough decision about whether to continue working with the existing brokerage or with the agent at his or her new firm.

But with agents demanding more quantifiable value from their brokerages, this industry norm is under attack as firms react to agent attrition by holding clients legally captive. I’ve talked to clients who have relayed the aggressive phone calls and letters threatening lawsuits if they choose to follow their agents to his or her new brokerage.

Not only does this outdated contract clause devalue agents — treating them like interchangeable door-openers, not the irreplaceable advisers they are — it calls into question our entire industry and the fundamental way we treat our clients.

The broker’s fiduciary duty must come first

If a home seller believes he or she would be best served by the agent with the most thorough understanding of his or her specific needs and property, then it is the brokerage’s fiduciary duty to act in the best financial interests of that client.

By not allowing clients to transfer their business, brokerages are violating their fiduciary responsibility.

A business built on a loophole is not our future

We work in this business seven days a week and have a second-nature understanding of its contractual minutia and vernacular, but most of our clients do not. Even though the paperwork details the largest financial transactions of their lives, most home sellers sign it without understanding all of its intricacies and without a lawyer’s review.

In fact, when we asked a third party to administer an independent survey on the topic, 78 percent of respondents said that they believed that if their agent moved to a different brokerage, they could follow them.

Legally speaking, they can’t. And brokerage leaders and seasoned agents know that.

I believe that the brokerage model exists to protect the consumer, adding clarity at every intersection. Relying on opaque contractual language is squarely at odds with this ethos.

An emotional bond has practical considerations

In that same survey, 89 percent of respondents said that they selected the agent directly, not via a brokerage, indicating that they believed the agent, not the brokerage, was the primary service provider. No surprise there — sellers seek out agents by name, which is why personal referrals are every agent’s currency.

Additionally, the process of replacing an agent midtransaction is impractical, if not impossible, and can have dire economic consequences. I’ve heard from clients who’ve been pushed by a brokerage to transition a trusted relationship within a few days, even hours.

Forcing clients through this selection process causes missed home showings, unattended listings, incongruous advertising strategies and additional weeks on the market.

Our internal statistics show this chaotic agent-client reshuffling can have a double-digit percentage impact on exposure levels, driving down the final property price. That means the client shoulders an undue burden for a disagreement between the agent and the brokerage.

A new contract puts client service at its core

However, starting this week, Compass is taking an industry-first step by introducing a key-person provision into our exclusive agreements, making our commitment to our clients strikingly clear.

If a Compass agent elects to leave the company, his or her clients are given the option to follow the agent or stay with our brokerage.

There’s a certain poetry about a legal document that rectifies the delicate agent-client relationship in bold black and white. Requiring just one sentence, we believe that this simple clause helps restore the trusted relationship that is expected of everyone involved — client, agent and brokerage.

We hope that our industry joins us in further empowering the agent-client relationship.

Robert Reffkin is the founder and CEO of Compass, a technology-driven real estate company in New York and Washington, D.C. Prior to Compass, Reffkin worked at Goldman Sachs as chief of staff to the president and COO. He has also worked at McKinsey and in the White House, experiences that continue to inform his perspective on brokerage, real estate technology and how to drive the industry further.

Email Robert Reffkin.


Inman Connect San Francisco is right around the corner — register now and save $200!

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×