Buying a Home in Salt Lake City, UT

head_left_image

Agency Disclosure - The Fleecing of Real Estate Consumers Continues

Buyers discover their agent works for the seller... seller about to find out his agent works for the buyer also!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:

Check One:

  • 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.

The fleecing of america - real estate agency disclosure

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!

Homebuyer Representation, Inc. - Exclusive Buyer Agents

Call us at (801) 969-8989 or contact us today via the link on this page for a free consultation.

©2012 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM

Salt Lake City, UT - Exclusive Buyer Agents (EBA)

All Rights Reserved

For more information, or if you are relocating to another state, visit GetYourOwnAgent.com

* 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?

Comment balloon 8 commentsBenjamin Clark • March 15 2012 02:33PM

Comments

I think 'fleecing' is an overdramatization here. I think that Mr. Feinroth is under the assumption that the buying public are essentially half-wits & cannot grasp an easy concept. I explain it just as you did - Who works for whom?  Easy enough to explain & just get it in writting.

NAR is always alot of fluff, little substance as usual inspite their constant chatter on educating consumers.

Posted by Lyn Sims, Schaumburg IL Real Estate (RE/MAX Suburban) over 6 years ago

Lyn - As you suggest, it is NOT complicated. Agency is a VERY simple concept to explain and to grasp... if it is explained to the consumer properly and in a timely fashion.

I chose the term "fleecing" precisely because the concept is NOT being disclosed to consumers properly and in a timely fashion. As a result, huge numbers of consumers think they are getting what they pay for (someone representing them on their side), and then end up getting much less. Multiply that by the tremendous number of transactions year after year and the losers are the consumers, both buyers and sellers.

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) over 6 years ago

Agency disclosures are the best kept secret in town.

The majority of real estate agents do not clearly understand agency and the difference in the duties they have or don't have with a client or a customer. While it is clear to some, it is muddy to most.  When agents are confused, they don't bother to bring it up with the consumer.  Most consumers do not understand agency until it is explained properly.

In 2011, NAR did a study that showed 73.33% of the Realtor® respondents ranked agency disclosure among their top three concerns citing it as an area marred by sloppy practices. 

 

Eve in Orlando

 

Posted by Mike & Eve Alexander, Exclusively Representing ONLY Orlando Home Buyers (Buyers Broker of Florida ) over 6 years ago

Eve - Sounds like something the largest real estate related trade group should want to be made more clear, not left alone.

Nearly 3/4 of their own members said it was a top 3 concern. Let's see if they do anything about it. Based on their lack of response for the past 6 years and on the recent attitude about it by their association in Maryland, I'm not holding my breath!

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) over 6 years ago

In spite of overwhelming evidence and written testimony from two consumer organizations, two consumers, one a member of the Maryland House of Delegates, samples of erroneously presented agency disclosure statement, and two nationaly sindicated columnists, the MD Senate Education, Health, and Environmental Matters Committee voted 10 to 1 to decline the bill from consideration by the full State Senate. "The Borg" won again. This time. It's not over yet!

Posted by John Sullivan over 6 years ago

You have some very valid points, often consumers expectations aren't met if you never talk about agency. "but I thought you worked for me!" should never come up, people need to understand up front who's who and what role they play.

Posted by Tanja Cisliek (Future Home Realty) over 6 years ago

Ben - I think you bring up some very important points. I had two very educated prospects call me this week. One who had called a listing agent to see a property and then wanted me to write the offer for them. The other went to an open house and signed in and then called because they didn't like the person at the Open House and wanted a buyer's agent. This happens all the time. Just saying "I can work for you" is not enough.

So many intelligent people have no idea how agency works. When I go to the agency classes in Maryland and the MAR's lawyer tells us exactly how agents should properly disclose, it is almost comical. Carrying disclosure forms around and re-working the disclosure each time you switch from showing a property that is or is not listed by your company.

Luckily I work for an exclusive buyer agency and I always represent the buyer so my buyers are clear who I am really working for no matter which home I am showing them.

Posted by Dana Hollish Hill, Lead Associate Broker (Hollish Hill Group, Keller William Capital Properties) over 6 years ago

Ben - I had two more prospects come to me with agency issues this week. Any idea how we can all work to get the word out to first time home buyers about the issue of walking into a sales office for a builder, or an open house and signing in or seeing a property by calling the listing agent? I feel like this conversation of agency needs a lot more attention and I think we need a sexy way of getting it out there. Seems like something NAEBA should be doing. Thoughts?

Posted by Dana Hollish Hill, Lead Associate Broker (Hollish Hill Group, Keller William Capital Properties) over 6 years ago

Participate