Dual-agency disclosure makes no sense
Letter to the Editor
By Inman News, Monday, February 22, 2010.Re: 'N.C. Realtors fight dual-agency disclosure' (Feb. 18)
Dear Editor:
Here again there is an issue about Realtors' commissions. If an agent represents both buyer and seller -- dual agency -- he therefore is paid the total commission, since there is no split.
Many times the commission paid is at a reduced rate, since there is only one agent involved, but regardless, how does this have anything to do with the buyer making the offer?
If all the proper disclosures are presented, and all parties recognize the agent's role, how is the amount of commissions paid the buyers a concern?
It is time we as people take responsibility for our own actions, instead of implying the agent could influence the buyer in this transaction.
When buyers like a home, they view it, probably several times, research it, and research the neighborhood and the schools. Eventually they make an offer, and negotiate it -- usually with some concessions. Then they inspect it, have title and property searches done, all the while comparing it to other homes they have seen, and eventually close on it.
How does what the Realtor gets paid have anything to do with the buyer selecting this home?
After all these steps, for the buyer to go through with the deal confirms they really want the home. Just because there was only one agent involved, the buyers are making their own decision, not the Realtor. The idea of disclosing the compensation the sellers have agreed to pay to list and sell the home, prior to a buyer making an offer still, makes no sense.
Joe Heffernan
Agent
RE/MAX Unlimited Northwest
Lake Zurich, Ill.
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Submitted by Joseph Sheehan on February 22, 2010 - 4:41am.
I don't think that the disclosure of compensation in dual agency is the issue.
Many agents, myself included, feel that it is not possible to offer unbiased advice to both the seller and buyer when they represent both sides of the transaction. The end effect is the agent shouldn't provide advice to either party.
The value proposition I offer to my clients is my advice and expertise. I cannot be a trusted advisor if I can't give trusted advice.
This is not a judgement of whether dual agency is right or wrong. I think my reluctance to participate in dual agency is value added to my clients and I present it as such.
Submitted by Bruce Hahn on February 22, 2010 - 5:11am.
American Homeowners Grassroots Alliance
The reason the amount of commissions paid the buyers agent is a concern to home buyers is that those commission rates and amounts vary, and the advice of some agents may be influenced by their compensation. One simple way to address this risk is to require the disclosure of those rates, so they can make their own judgment. A better solution that is also simple would be to repeal state laws allowing dual agency, which is the cause of a large share of consumer lawsuits against real estate agents and brokers, and contributes to the low public esteem of the profession. Requiring the disclosure of the share of buyers' money that ends up in their agent's hands may be opposed by some real estate professionals, but it would help to reverse the profession's negative public perceptions. That disclosure will help both consumers and agents who want to see the profession's image improved.
Submitted by Sherry Haylett on February 22, 2010 - 5:28am.
If you are an agent working with the buyer and the seller then that usually means twice the work also. Even if you are a seller agent there are still inspections, working with the lender, follow up with the buyer and the seller. So why wouldnt you get paid a full commission?
Submitted by Paul Howard on February 22, 2010 - 5:59am.
Bruce Hahn said: "The reason the amount of commissions paid the buyers agent is a concern to home buyers is that those commission rates and amounts vary, and the advice of some agents may be influenced by their compensation."
I suspect Bruce Hahn and I want the same thing - to empower consumers and allow them to make better choices.
However, merely disclosing commission amounts will not do that because buyers generally are not a party to commission decisions. Rebates (allowed in some states) will further inhibit it - indeed rebates will make the uninformed buyer go to the inexperienced and/or desperate agent offering a rebate. Current industry practices make it impossible for a buyer to improve their decision making by having knowledge of commissions amounts. They still have no choice.
A fundamental change to eliminate the industry 'tradition' and MLS facilitated practice of seller's and their agents entering into commission agreements to "offer" the buyer's agent a commission 'split' would go a long way toward eliminating the conflicts.
If buyers want control (and they should) they should insist on negotiating the brokerage fee, their agent's company receives, directly with their agent.
Then, they should condition their offers on the seller's agreement to pay it.
They can even address the concern that the agent may get paid more if the house is priced higher. It is all in the commission structure.
The rest of it is the same smoke and mirrors that have been used to obscure the issue for 50 years.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by John Rakoci on February 22, 2010 - 6:24am.
No wonder the profession gets a bad reputation. Dual agency means not being able to represent either side fully. Twice the work, NO- little more than one side on follow up items is all. If you are a bird agency (cheep-cheap) the is reason to want the entire low commission. However, if working on a 6% commission you were happy with 3% when listing so why not 4% when working with both sides? Is it any wonder some look at their agent and see greed?
Submitted by Boyd Campbell on February 22, 2010 - 6:37am.
At some point perhaps we need to address this whole issue of agency and consider the vast majority of real estate practitioners lack the skill set necessary to adequately represent anyone in a real estate transaction. At best, we can be very efficient facilitators as we assists a buyer and/or seller. Deciphering all the information necessary to process a transaction in today's complex environment is probably as much as most agents can handle, no disrespect intended. We as an industry have allowed and embraced the public to incorporate negotiable into our world, unlike most other professionals who have a comparable level of responsibility. When was the last time you negotiated fees with your Doctor, Lawyer or Accountant! Why has the public be able to challenge us? Because, as many of us who are quite capable of truly being an AGENT, the vast majority in our industry are uncertain as to how and/or incapable of truly representing another, I repeat. We need to embrace new business models that allow for different levels of competence and/or contribution to a transaction dictate compensation. I choose not represent a buyer and seller in the same transaction because I have not figured out how to do it with out prejudice and compensation has nothing to do with it.
Submitted by Marian Bennett on February 22, 2010 - 3:21pm.
Dual Agency in its current language needs to be understood by buyers and sellers. I suspect some agents do not explain this disclosure (see accompanying NAR Code of Ethic 1-12(3)) with enough clarity, but I’d like to be wrong on that. I, too, have never represented both parties in a transaction because I’m in the same boat as Boyd. I’d love to get paid for both sides of a transaction, I just haven’t figured out how to represent both principals adequately. It seems like it’s an innate conflict of our fiduciary duty to listen to and then advise our sellers, and then take on a new buyer prospect who is asking us for unbiased guidance in the purchase of the same property. Currently I receive referrals from listing agents who meet a prospective buyer on one of their listings, and I have done the same. This is an interesting topic and I will be interested to read how others handle this.
Marian
http://mariansbennett.com
http://twitter.com/mochamaniac
http://homescopes.com
Submitted by Paul Howard on February 22, 2010 - 4:07pm.
Marian, Some of us have handled it by opening Exclusive Buyer Offices. Many of us are members of the National Association of Exclusive Buyer Agents.
The "list to last" mindset is so 20th century.
Think about it - for info go to:
http://www.naeba.org
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Tyler Webb on February 23, 2010 - 12:36pm.
The answer to your question "...how is the amount of commissions paid the buyers a concern?" is found in your opening paragraph where you query as follows:
"If an agent represents both buyer and seller . . .".
It is elementary that any party being "represented" is entitled to know who is paying and how much is being paid for that representation.
That was simple.
Submitted by Bruce Hahn on February 26, 2010 - 10:27am.
American Homeowners Grassroots Alliance
Re: how is the amount of commissions paid the buyers a concern?
If I am a buyer and am working with an agent who has agreed to rebate to me a certain percentage of his/her compensation, I need to know the total amount of his/her compensation in advance in order to compute the effective net amount of my offer. Please don't tell me that the the effective net amount of my offer is not a matter of my concern.
Submitted by Rob Aubrey on February 28, 2010 - 5:28am.
Dual agency is a slippery slope for sure. I personally inform a buyer of my listings that I will not do a dual agency.
I use an unrepresented buyer disclosure. I also inform the buyer that they have every right to have their own agent.
As for my compensation from my client the seller, that is a contract between us. Because the buyer is not my client that contract is not their business.
I have had buyers that wanted me to write a clause in a purchase contract that addressed my compensation. I explain that I am not a part of the agreement between the buyer and the seller and I consider it a non-valid offer.
I tell buyers make what ever price offer they want, I will present it to my seller. If my client and I want to modify our agreement that is between us.
Submitted by Valasie August on March 2, 2010 - 2:42pm.
I teach mandated CE in Virginia and a shocking number of the agents in my class don't fully understand their responsibilities regarding buyer agency let alone dual agency. And when I get to dual agency it is even more disturbing to hear what agents have been taught or have come to believe about this type of representation. If a buyer or seller was fully educated on dual agency, I don't believe they would ever choose to have a form of compromised representation.
We have an obligation to place the consumer in the center of the transaction rather than ourselves and if we did so we would evaluate dual agency entirely differently as an industry.
Valasie (Val) August
Managing Broker
Long and Foster Real Estate, Inc