Real estate agency rules need overhaul
Letter to the Editor
By Inman News, Monday, March 16, 2009.Re: 'Reforming real estate' (Feb. 27)
Dear Editor:
I am a former trial attorney (of some 20-plus years) now working as a real estate agent in the Kansas City area. I have recently taken the real estate exam and am also doing quite a bit of continuing education, as I am a new agent and the market is slow.
My major issue is that the local real estate community very, very loosely defines "agency relationships" to the benefit of the agent and not the consumer. This needs to be revised to be consistent with state laws across the country.
Whether or not you have a written contract representing someone as a selling agent or buyer's agent, if you make representations to individuals there is under the law an "implied" agency relationship.
If you hold an open house, whether or not you are the listing agent, you have under the law, in my opinion, an implied agency for the seller. If you advertise in a newspaper that you are holding a house open, whether or not you are the listing agent or a member of the team for the listing agent, you have an implied agency for the seller.
Likewise, whether or not you have a buyer's agency agreement, if you show someone a home, you have an implied agency. To suggest otherwise, as I hear in classrooms, is attempting to "wiggle out" of responsibility.
Just as in the practice of law, where you cannot represent both sides in a divorce or both sides in a dispute without violating someone's rights, the same is true in selling a home.
The U.S. Supreme Court has ruled twice in the last two years in products cases that guidelines set up by industries do not protect the industries from lawsuits -- these narrow and formalistic interpretations of "agency" will not protect agents in lawsuits.
The trade groups need to revise their rules to reflect the reality of real estate as I see it practiced and as I hear agents say they practice.
Gwen G. Caranchini
Real estate agent
Prudential Kansas City Realty
Kansas City, Mo.
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Submitted by Bruce Hahn on March 16, 2009 - 4:42am.
American Homeowners Grassroots Alliance
This wise and experienced attorney is absolutely right. You cannot simultaneously represent both sides in real estate transactions. The issue of agency is at the heart of many consumer lawsuits which contribute in part to the low consumer opinion of the profession.
If the trade groups need to revise their rules Congress should revise them to protect consumers.
Bruce Hahn
American Homeowners Grassroots Alliance
Submitted by Rob Aubrey on March 16, 2009 - 4:43am.
Gwen you are so right on agency. I think more is needed on the education of the membership and maybe some tweaks on rules.
If an agent holds a home open that is not their listing the buyer believes they represent the seller, I know the seller thinks they are working for the seller.
Again the education of the membership would solve most issues. Once they get their license it seems they forget all the rules. I think owners and brokers need to play a more active role in making sure the members are more educated and the boards are the tools.
What do you get when you cross a Realtor with an attorney, someone that messes up their own deals. LOL Couldn't resist a lawyer joke.
Submitted by Robert A. Hulme on March 16, 2009 - 4:49am.
Agency relationships are very misunderstood and have been taken advantage of for many years. There must be a distinct difference between Buyer and Seller agency in order for the process to work properly. Limited agency clearly undermines the Buyer's right to fair representation.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Mortgage Xpress
www.UtahCountyRealtor.us
www.ProvoRealEstate.ws
801-885-2586
Submitted by Larry Whited Sr. on March 16, 2009 - 5:01am.
This goes beyond trade group rules. This is a states rights issue.
Each state regulatory body, which are heavily influenced by realtors, define agency for their state.
I do not think Dual agency will go away until the federal movement mandates it.
Larry A. Whited, Sr., CRB, CRS, GRI
President & Founder
www.maxUnet.com & www.WebMLS.net
P.O. Box 757
West Chester Ohio 45071
Direct - (513) 543-2727 Fax - (513) 297-7497
Submitted by Jay Thompson on March 16, 2009 - 5:50am.
Lots of folks seem to step up and say dual agency is wrong. Yet very few ever seem willing to do anything about it -- like not practice it (where it's legal) or advocate to have it abolished.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Joseph Bridges on March 16, 2009 - 6:00am.
Jay it is funny how many say dual agency is wrong and do nothing. I don't like it and myself I don't perform dual agency and my sellers know that ahead of time. I refer them to another agent in my office or team. The client knows ahead of time that they are not obligated to that person and if they don't like them I can find someone else for them.
Visit the blog at: http://www.InternetRealEstateSuccess.com
Real Estate Resources at: http://www.OnlineRealEstateSuccess.com
Submitted by John F Sullivan on March 16, 2009 - 7:12am.
Mr. Caranchini’s statements reinforce the need for elimination of the hodgepodge of loosely enforced agency disclosure statements to be replaced by a federally mandated standardized agency disclosure statement. This disclosure would describe all forms of representation available to the consumer, including Exclusive Buyer Agency.
John F. Sullivan
Associate Broker
Buyer's Edge Co., Inc.
Bethesda, MD
www.dcareabuyeragent.com
Submitted by Paul Howard on March 16, 2009 - 9:10am.
Gwen gets it - but not everyone does.
Joseph Bridges said: " I don't like it and myself I don't perform dual agency and my sellers know that ahead of time. I refer them to another agent in my office or team."
This highlights a MAJOR problem in this industry. The agents themselves don't know the law.
I checked Joseph Bridges name in ARELLO and it appears he is licensed in California which has 3 forms of agency, BUYER, SELLER, DUAL. The agency is at an OFFICE level. SO, refering them to another agent in the same office does NOT eliminate dual agency. Maybe a California broker will weigh in on this.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by William Metzker on March 16, 2009 - 9:11am.
The first step is for Realtors to clean up our own act. The National Association of Securities Dealers (NASD)for years has regulated its membership of stockbrokers. Following the S & L debacle in the late '80s-early'90s, appraisers themselves strengthened USPAP rules.
Yes, state and federal statutes may be needed, but elimination of dual agency is something Realtors can do for themselves. It's probably an issue NAR should consider taking leadership of.
Submitted by John Rygiol on March 16, 2009 - 9:37am.
Joseph Bridges
What you suggest does not work in California and I am glad that is the case. Agency travels with the brokerage office. If you have the listing, the whole office is the agent of the Seller.
If you hand off the buyer to someone else on your team or another agent in the office, you are entering into dual agency.
I have been an Exclusive Buyer Broker since 1986 and feel that Dual Agency is something that needs to be eliminated in our industry.
The states that try to get around it by foisting designated agency on the public are just using smoke and mirrors.
John J. Rygiol
Buyer's Broker
Seal Beach, CA 90740
Submitted by Adele Hrovat on March 16, 2009 - 2:20pm.
Gwen,
Welcome to the “real” world of the real estate industry. Your perspective is insightful, refreshing and accurate albeit an old story and has pushed my hot button. Neither the industry nor the government will ever stop the practice of dual agency because it is the avenue that allows real estate brokerages to “double dip” both sides of the commission. It also fits comfortably for brokerages to be “full service” if that means one brokerage being able to represent both buyers and sellers.
As with most abuses in business, government or politics just simply “follow the money” to determine whether a specific practice/law is being bent for reasons of profit. There has been a concentrated effort by large traditional brokerages and, the national real estate association that they control, over the past 30 years to protect the ability to double dip. Being full service for consumers is really the guise to protect earning both very profitable commission sides for traditional brokerages.
Agency has been given new names like dual and designated just to achieve that end. In some cases states have changed laws to even eliminate agency by renaming an agent a facilitator. Have you noticed that we are more often referred to by our own industry as “salesman” rather than “agents”? Whatever agency is renamed or called its still agency and a rose by any other name is still a rose.
As for anyone policing agency relationships, it’s not going to happen. Brokers won’t do it (see their bottom line). State real estate divisions can’t do it because they don’t have the manpower. The NAR won’t do it because the large traditional brokerages control them and are the reason for their existence. State governments have changed legislation to allow renaming agency because they were strongly influenced by large brokerages and local and national real estate associations with a lot of power and money. NAR has done many good things for the industry but compromising agency is not one of them.
As for any change coming via the congress, don’t hold your breath. The majority of Congress still is influenced by how their own nest is feathered rather than the consumers nest as can be seen on a daily basis just by watching the news.
Exclusive Buyer Brokerages shook up the real estate industry years ago when they offered consumers true exclusive agency. In order to compete with exclusive brokerages that only catered to buyers or in some cases, sellers, brokerages had to find a way to preserve the double dip and they did. They just lobbied to re-name agency. That’s why consumers are flooded with numerous agency disclosures to fit whatever situation is necessary to work one or both sides of the transaction. Many agents don’t even understand how or when to explain the disclosures. If they are charged with disclosing agency and don’t or can’t clearly explain it, then you can be sure consumers are not going to have a clear understanding of agency either.
The truth about agency relationships would never have even become an issue without lawsuits being settled for millions of dollars in favor of consumers. In addition the brave efforts of exclusive buyer brokerages opening in the 1980’s resulted in stronger consumer awareness which forced traditional brokerages to find a way to offer agency representation that could compete. If that conflicted with brokerages selling their own listings the solution was to re-name agency in order to keep the consumer in house and double dip.
As we are all sadly aware of in the current economic market, the bottom line is: greed is alive and well. It is only the dedication of those willing to play by the rules that can foster change and make a difference.
Adele Hrovat
Broker/Owner
The Buyer's Realty of Las Vegas
Submitted by Rick Hardman on March 16, 2009 - 3:12pm.
I would agree that anything that more clearly defines roles and where the lines are the better.
An example - not too related, but you will get the point.
My father in law was a contractor by trade. He is retired, but still has a company to help friends and family as needed. He helped build a home in which the friends he was helping lost everything and could not pay. He, being a man of integrity- attempted to resolve the dispute by offering a payment in settlement of the debt. he had no obligation too. It was not his home and he had not received funds for the work completed, but because he offered a hand in trying to help out subcontractors who were also out the money, the courts ruled that he must have obligation to them. HUH? So much for being a good samaritan.
arkansas real estate
Submitted by Benjamin Clark on March 16, 2009 - 7:43pm.
Gwen,
You said:
"My major issue is that the local real estate community very, very loosely defines "agency relationships" to the benefit of the agent and not the consumer. This needs to be revised to be consistent with state laws across the country."
When I first began my career in Real Estate, I observed agents as they asked consumers to agree to dual agency. Sellers are often asked to do so when they list the home. Buyers are often asked to do so when writing an offer.
When taking a listing they may have said something like:
Initialing here allows me to bring a Buyer for your home.
When writing a contract with a Buyer, they may have said something like:
Initialing here allows me to help you with the paperwork to buy this home.
No discussion whatsoever about what fiduciary duties a Seller or Buyer may be giving up when they initial or sign the documents.
Benjamin D. Clark
Certified Negotiation Expert
Principal Broker
Homebuyer Representation, Inc.
Salt Lake City, UT
www.activerain.com/eba
(801) 969-8989
President-Elect
National Association of Exclusive Buyer Agents
www.naeba.org
Submitted by Alec Hagerty on March 17, 2009 - 4:04pm.
This discussion is very timely. They say "When a Paradigm shifts, everything goes back to zero!" Well, the times we're in clearly indicate a major paradigm shift is, and has been underway! When I teach to Realtors, I suggest that they consider NOT putting their name on the listing sign. Instead have another agent "partners" name on the sign so that they can respond to buyers. That enables the listing agent to "work for" their consumer seller exclusively. Consumers want, among many other things; Advice & Advocacy ... two important services that a "dual agent" or "transaction broker" or faciliator (I've now described most states I think) MUST NOT provide! Yet, everyday agents do! When dual agency occurs, as it will whether or not an agent wants it to, in certain circumstances I recommend stepping aside, with the permission of the consumer and allowing another agent to step in. An agent who can provide for the consumer what the dual agent must not... advice and advocacy! Pay that agent by the hour, or pay any other way that the two can agree upon, but make sure the consumer can receive, at least those two services. We can raise ourselves up to the level of true professionals, without state statutes being changed... too many laws exist now! If you need convincing about the need to minimize or eliminate laws now on the books read "The Death of Common Sense" by Phillip K. Howard!
Agents must learn and remember this: "We (agents)are in charge of Process, "they" (consumers)are in charge of decisions!"
Alec Hagerty, ABR-M,C-CREC,CNE,CRB,DREI,e-PRO,GHS,SHS,SRES,
Broker/Speaker/Trainer/
www.KnowledgeSpongeSeminars.com