by Broderick
Perkins
LAS VEGAS -- Fewer
than 10 percent of Massachusetts' real estate agents fully comply with
agency disclosure law, according to a study by the state's real estate
regulatory agency, the Board of Registration of Real Estate.
Likewise, John Pinto, a real estate broker and expert witness in San
Jose, CA says nearly all real estate agents violate California's
disclosure laws by not fully disclosing to consumers who they represent
-- the buyer, the seller or both.
And the Washington,D.C.-based Consumer Federation of America says
because many consumers aren't even aware they have a right to know by
whom and how they are represented, they are under represented to the
tune of $10 billion a year in higher home costs.
"This issue is a big one and that's making sure consumers have a right
to know up front they can get somebody on their side in the home buying
transaction," said Leo Berard charter president of the National
Association of Exclusive Buyers Agents (NAEBA).
NAEBA is an independent alliance of exclusive buyer's agents founded in
1995 to educate the public about exclusive buyer agency and related
consumer rights.
During its annual convention, the association today challenged the
traditional real estate industry to live up to its responsibilities to
consumers and more adequately disclose agency relationships in real
estate transactions.
Most agents do little more than tack an agency disclosure form onto the
pile of paper work consumers sift through during the home buying
transaction, according to Pinto.
Pinto and others suggest a face-to-face disclosure, in addition to
what's required in writing.
"The emphasis of the message should not be the lip service. You are
supposed to go over agency disclosure as soon as practical, like the
first time you sit down with a client," says Pinto.
What's the difference?
Generally, consumers who engage the services of a listing broker to
sell property,become the broker's client. Sometimes called the "listing
agent" or the "seller's agent," that broker represents the seller and
owes him or her certain fiduciary responsibilities, including undivided
loyalty, confidentiality and accountability. In negotiating the best
price, the seller's agent must put the client's interests first.
Likewise a buyer's agent works exclusively for the buyer. When it comes
to negotiating prices and terms, the buyer's interests come first. "If
you have a choice and there is an exclusive buyer's agent available,
that's the way to go," said Berard, who along with his wife owns Buyers
Brokers of Cape Cod, MA.
In many cases, however, a buyer and a seller negotiate about a property
held by the same broker in a relationship often called "dual agency".
This scenario includes the buyer and the seller working with different
agents, but the listing is held by the same broker under whom both
agents work.
In virtually every state, the dual agency relationship must have the
consent of both the buyer and seller and it must be disclosed in
writing.
The broker theoretically owes both the seller and buyer a duty to deal
with them fairly and honestly. The dual agency has it's insider-track
pluses, but critics say the role comes with a built-in conflict of
interest because it's logistically impossible to represent both a buyer
and seller equally.
Stiffer disclosures sought
Ten years ago, studies showed most consumers believed the agent who
drove them around house shopping was working for them. That prompted
today's disclosure laws, but Berard and others say the laws don't go
far enough.
"NAEBA intends to enlist the support of organized consumer groups
throughout the United States," said Merrill Ottwein, the association's
outgoing president.
NAEBA also said it plans to call upon state legislatures and regulatory
agencies to strengthen laws requiring more detailed disclosure of
agency relationships.
"But I don't want to put it all on the real estate industry. Some
consumers have their own problems. There is a reluctance among
consumers to any type of commitment and they prefer to be free agents.
Not only should the agent be committed to representing the buyer, the
buyer needs to be committed to the agent. It's like a lot of people who
want all the benefits of a marriage without the commitment," said Pinto.