Designated Agency Legislation Terribly Flawed – Part Seven


I just came upon some awesome historical presentations about how flawed the designated agency legislation was when it was proposed and passed in the late 1990’s.  These come from a not-for-profit consumer organization that is no longer in existence but shows just how convoluted this legislation was then and still is today.  The organization was known as Real Estate Agents for Real Agency (REAFRA).  It consisted of both buyer and seller agents who were concerned about how large real estate companies in Massachusetts were able to dominate the actions of their association and legislators to do their bidding to their benefit.  The legislation that passed still benefits only large real estate companies in Massachusetts and continues to harm small real estate companies as well as real estate consumers.  I will continue to post numerous articles and postings from their original website as these issues brought up nearly twenty years ago are still at the heart of the problems consumers are facing today.  This is part Seven of Nine.  Tom Wemett

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MORE PROBLEMS – MAR’s AGENCY PROPOSAL

Designated Dual Agency, Non-Agency, and New Vicarious Liability Disclosures Create Confusion and Complications for REALTORs

To practice designated dual agency legally and ethically each agent in an office will need a firewall, a “Chinese wall” of protection around him or herself from every other agent in the office and also from the principal of the firm. It will require sophisticated and expensive legal advice to create the necessary labyrinth of procedures, disclosures, contracts, and consent agreements to safely establish this practice. These multiple and duplicative forms will create a “can of worms” and a lot of aggravation, rather than simplification or clarification.

Individual agents will need their own secure offices or conference facilities, phones, files, fax, email, etc. The individual agent will undoubtedly take on more liability as the sole representative of their client. One can imagine the confusion, headaches and real liability concerns that will arise. The average agent today will need extensive training to attain the level of competence that will be required to credibly and safely offer these kinds of services. When you add the possibility of non-agency facilitation to this mix it becomes even more confusing. You have multiple representations and non-representations to clarify and keep straight for REALTORs who have found consistent seller agency challenging. Vicarious liability disclosure is already required for REALTORs and unnecessary to legislate.

Designated Dual Agency & Non-Agency Leads to Lower Fees

Homeowners will be disadvantaged in a system where only one agent will represent the homeowner’s interest and the rest of the firm will represent the buyers’ interests, trying to get the lowest possible price and most favorable terms for THEM. This simply does not give home sellers the full-office and firm-wide services that they are accustomed to and for which they are paying large commission amounts today. When sellers realize that the entire real estate office no longer represents them, they will begin to look for offices that offer discounted brokerage or they will go FSBO. We all will lose!

Designated Dual Agency Divides the Real Estate Office

Designated dual agency divides an office, with potentially just one individual listing agent designated to represent the seller, and all the rest of the agents in the office designated to represent buyers under various buyer-agency agreements. Buyers and sellers, who may be friends of their REALTOR, could get “appointed” to a REALTOR who they’ve never met or who may never have done a deal before. It is awkward and unnatural, especially in a small office. Also, to expect seller agents and buyer agents who share office space and friendships to keep all information compartmentalized and secret from each other is simply not realistic. Internal competition and negotiations can be very damaging to office moral over time and office policies that promote in-house sales may have to cease. This may explain why many offices in Maine and Connecticut, where designated agency is allowed, are not using it. (Reported by both states’ REALTOR Board’s Attorneys)

Designated Dual Agency & Non-Agency Cheapens REALTOR Image

Designated dual agency cheapens the real estate brokerage profession, by letting brokers follow much less stringent conflict-of-interest rules than have been required, always, for all law offices, all real estate offices, and, recently, for all investment-bankers and stock brokers. Instead of “all licensee’s represent the seller, unless otherwise disclosed”, all REALTORs represent whomever they want, even if they both work for the same DR/Broker who is advising both of them? “You can’t serve two masters” is the cornerstone of agency. Dual agency makes REALTORs look more like a “used car salesman” with the latest sales gimmick.

Designated Dual Agency Disadvantages Small Firms

Finally, the proposed designated dual agency proposal favors the large corporate-run companies and discriminates against the many small, locally owned and family-run one- and two-person brokerage offices. Designated dual agency requires, by definition, at least three people in a local office: the office manager to do the designating, at least one person to represent the seller, and at least one person to represent the buyer. Sole proprietorships and two-person partnerships therefore could not take advantage of what our REALTOR organization is describing as an “opportunity”. In fact it puts the small companies and 100% offices at a competitive disadvantage. Also, most small and midsize firms will not be able to afford the cumbersome structures and the legal advise and the training needed to establish this kind of practice.

 

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