The Travesty Of Agency

Duel agency is a travesty! For more than a hundred years real estate brokers as we know them represented the seller! The agents represented the seller because he paid them, the selling agent was not a buyer's agent! The selling agent was a sub-agent of the listing agent.

Obviously there were major problems with this system. Major conflicts of interest.

The listing agent's fiduciary duty was too the seller and then as now most did a reasonable job, the commission based on a percentage of the final sale price encouraged the agent to get the highest price possible. Of course not being paid until and when the property sold, compromise many. But, it's a reasonable system and it's worked reasonably well for a long time!

The selling agent as a sub-agent of the listing agent also owed his fiduciary to the seller! This was a big problem! Unlike the listing agent who gets paid when the property sells regardless of which buyer finally buys it, the sub-agent only get's paid when his buyer gets the property.

Then there was the buyer, no one represented him! A the sub agents were legally bound to the seller, information, even public records could not be legally and ethically disclosed if it were detrimental to the seller's desire. The agents to a listed property were only required to treat the other parties "fairly" an ambagious requirement that the NAR has since dropped.

The logical consumer saw that he was not represented. If the agent whom he had assumed was his agent did advise him they were breaking the law, violating the very listing contract that had the seller paying them, and abandoning ethics they so proudly spouted! Good agents, yes very good people had a real problem trying to walk the line, helping the buyers that came to them for help, while under contract and being paid by the seller.

There was and is a solution! A true buyer's broker contracted with and paid by the buyer! A true fiduciary of the buyer! Listing the buyer! Such brokers were often employed in investment and commercial property and by assorted other specialist. Buyer's brokers were and are almost universally legal, I don't know of any state where a real estate broker can't operate as a true buyer's broker.

But, there were several problems applying this to SFR, single family residential practices. First and foremost Fanny Mae, Freddie Mac, and Ginny Mae, while naively we believed these agencies should have welcomed a true buyer's repressive, to protect their borrowers, they steadfastly refused to include or recognize any fees paid a buyer's broker as part of the acquisition cost! If a buyer pays his agent directly then it's out of his pocket in addition to his down payment and other closing cost!

In the eighties the savings and loan debacle heighten consumer awareness and brought the issue to a head. Consumers demanded equal representation!

There were two routes to fix the problem, Congress could have had those quasi governmental secondary markets recognize buyer's brokers fees, but they were busy forcing them in to social reform. The NAR, the National Association of REALTORS® didn't take a stand. The final solution was a patch work of state laws creating "Buyer's Agents" that has the sellers paying agents who's fiduciary is now supposedly with the other side. The laws of agency.

Such is the outrageous atrocity, the travesty, the fallacy of "duel agency!" There is no way any one agent/agency can exorcize his/their fiduciary duties to opposing parties! The so called "designated dual agency." where two agents from the same firm supposedly represent different parties to the same transaction is a lie! It's smoke and minors! Real estate salesmen, agents, even associate brokers work for the employing broker, the broker who owns all the contracts! Consumers don't and can't employ or contract with the individual agents.

There is no way any one or any one brokerage can exorcize his fiduciary duties to opposing parties! Buyers and sellers are opposing parties no matter how civil!

Recognizing the problem some states, most notably Florida, have created "transactional brokers" with no fiduciary to any one! If I didn't know some "transactional brokers" that I'd trust with any and every thing, I couldn't imagine why any one would employ a "transactional broker" they don't seem to have any statutory value. Like every where else in transactional states "The only protection the consumer has is the personal integrity of his agent!"

The good thing about the "transactional brokers" is their position is completely declared! I wish we could say the same of our fiduciary brokers many of whom use 20 page contracts not to aid the clients, but rather to disclaim their statutory and fiduciary oblations. Others including individual agents are claiming that any advice, any opinion they might express could be practicing law and there for illegal.

Such is agency! Rely on well chosen people not verify poorly though out law to protect you! Remember "trust, but verify!"

Bill

William J Archambault Jr

The Real Estate Investment Institute