I've been following the efforts of a colleague in Maryland who believes exclusive buyer representation should be disclosed to consumers as an option on the state's agency disclosure form.
I read an article on the topic in the real estate section of the online Baltimore Sun. The Director of Regulatory Affairs for the Maryland Association of Realtors, Mark Feinroth, stated that the suggested changes would cause "a big change in agency law that's really unwarranted."
Agency -- who's representing whom -- "is already the most difficult concept to train licensees in, and it's a very difficult concept to explain to consumers," Feinroth said. "I think this will make it even harder to understand." (Baltimore Sun, Who's representing you?)
Hmm... Let's see:
- The company represents YOU, the Buyer, ONLY in the transaction
- The company represents, NOT YOU, but the Seller Only in the transaction.
- The company MAY* represent both of YOU, the Buyer AND the Seller, in the same transaction.
- The company DOES* represent both of YOU, the Buyer AND the Seller, in the same transaction.
- The company doesn't represent you OR the Seller. It's just "facilitating" the transaction.
Doesn't seem difficult or complicated... unless you leave out the option of exclusive representation. Under which scenario would you think a buyer would achieve a better outcome? Don't you think consumers should know they have that option? (No wonder consumers are confused as to who is representing them in the real estate transaction!)
It is a well known fact in the industry that timely disclosure of who represents who is not being made in the majority of real estate transactions. This in spite of the fact that most states (say that they) require agency disclosure. The truth is: there is little to no enforcement of this requirement.
Six years ago, Laurie Janik, legal counsel for The National Association of REALTORS, stated that she was "extremely disappointed" at the lack of disclosure to consumers all across the nation. Yet in the six years since that statement, The National Association of REALTORS (of which my brokerage is a member) has done nothing to support an increase in full and timely disclosure to consumers. In addition, it would appear that some of their state associations are fighting against it.
Almost half of consumers don't remember ever being told who was really representing them (if anybody was, in fact, representing them at all). And consumers often find out too late (if at all), that they don't have someone fully on their side... and that they could have gone out and found a brokerage that would offer them full and exclusive representation. Many consumers were told, "I'm on your side", but in reality they hired a firm with conflicted loyalties.
I sub-titiled this article "The Fleecing of Real Estate Consumers" because the phrase really captures what is going on. The efforts by the industry to keep the "wool" over consumers' eyes speaks volumes. Certainly a great deal of money is obtained by brokerages who fail to clearly explain to consumers the level of representation they will receive... allowing them to believe they will be fully represented, and charging them accordingly, and then giving them a substantially lower level of representation than the consumer believed they were paying for.
Ken Harney wrote an article on the failure of real estate agents to disclose agency representation to consumers in 2006. In it, he said,
Clarity on representation is important in any real estate sale or purchase because Realtors typically assume a position of trust: Buyers may confide their most private financial details, needs and bargaining strategies to an agent they believe represents them. If the agent actually represents the seller, that confidential information very likely will be passed along to the seller, for the seller's advantage.
Thousands of dollars -- and the success or failure of a transaction -- may be riding on proper disclosure of representation.
A clarification to the statement above: "If the agent actually represents the seller, that confidential information" SHOULD, and a buyer should expect that it WILL "be passed along to the seller, for the seller's advantage." Do you see why it's important to understand whether the agent you are working with and chatting with is really on your side or not?
The vast majority of consumers enter into agreements with brokerages thinking they are hiring someone who will represent them and their best interests throughout the transaction, only to find out later, when the negotiating starts, (or worse, after negotiating ends) that they didn't have someone fully on their side after all.
Non- and untimely disclosure is harmful, not only to buyers, but also to sellers. Many sellers think they are hiring a firm to represent them when they sign a listing agreement. It is only later, when an offer comes in that says that "their" broker will also be "representing" the Buyer, that they are shown that they "signed away" their right to full and exclusive representation on day 1.
Don't be fleeced! Help put a stop to these harmful business practices by demanding a clear disclosure of representation before you hire a real estate brokerage.
- Do you have excellent credit?
- Do you plan to purchase a $250,000-$750,000 home within 90 days?
- Do you have a good down payment, or are you paying cash for your next home?
If you want full and exclusive representation throughout your transaction, get someone on YOUR side!
Call us at (801) 969-8989 or contact us today via the link on this page for a free consultation.
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* I would add the words "attempt to" here, since how can a real estate broker really represent 2 parties with opposing interests in the same transaction?