Consumer advocate Ralph Nader recently made the strong statement that real estate and housing is one of the least consumer protected areas in our country, citing figures compiled by the Consumer Federation of America (CFA) that consumers overpay as much as $10 billion a year due to inadequate representation in real estate transactions.

Consumer advocacy has changed the way many industries do business - opening the lines of communication between service providers and end users and improving service with consumer hotlines and next day/same day service. You even see it on the road when you follow trucks that query "How Am I Driving?" The real estate industry has also made major concessions to consumer demands in recent years - from upgrading agent licensure requirements to improve professional ethics and knowledge to opening the once closed doors of MLS listing information to the prying eyes of consumers. The biggest concession is the industry-wide shift from acting solely as the seller fiduciary to representing both parties in the transaction through buyer advocacy.

With the advent of MLS information being offered freely to the consumer via the Internet, some service providers are finding new ways to diminish the importance of the REALTOR^® or cut them out of the transaction altogether. Under the guise of how-to's and find-it-yourself Internet sites and books cautioning home buying and selling consumers to "beware of REALTORS^®," a significant number of people are being influenced to buy and sell homes without the benefit of REALTORS^®. Although NAR figures indicate that almost 20% of transactions took place nationwide without the benefit of a REALTOR^® involved in 1997, the organization positions the figure as an "acceptable loss," due to the fact that the percentage hasn't increased significantly over the last decade.

But what will the figures reveal when 1998 is dissected by the NAR statisticians? This year has broken records in both new and existing home sales. Homes have shot up in price in three out of four markets. Agents across the nation have reported seeing a significant rise in FSBO's as sellers try to take advantage of the national seller's market to make money on their homes. In markets such as California, Florida and Texas, homes in some areas are selling by word of mouth before they are listed in the MLS, or they are selling within a week or two of entering the marketplace, many times with multiple offers.

Driving a wedge between the REALTOR^® and the consumer are a number of preconceived notions that are difficult for REALTORS^® to disprove. One of the many reasons cited by buyers that they distrust REALTORS^® is that that they are never quite certain that they are being represented totally and honestly. Although REALTORS^® have a strict code of ethics to follow, too many deals take place at the water cooler where confidential information is exchanged that may favor one side of the transaction over the other.

The old fiduciary agreement between the agent and the seller is that the seller pays the commission and therefore the buyer's agent is actually the sub-agent for the seller's agent. Only no one bothered to tell the buyer. As recently as 1993, a Federal Trade Commission survey showed that buyers perceived that they were fairly represented, and this despite the fact that the REALTOR's^® fiduciary responsibility to the seller is to obtain the highest price possible for the home! But change was soon to come, spurred by consumer advocate groups such as the CFA, the growth of the Internet as an information provider and a shift in culture driven by the question-all-authority mindsets of the Baby Boomer, Generation X and Boomer Echo generations.

As buyers began to question whether they were truly being represented, REALTORS^® responded with the concept of buyer advocacy. The Real Estate Buyer Advocacy Council (REBAC) a subsidiary of the National Association of REALTORS^® is the organization's best shot at providing an industry affiliation for buyer's agents, educational programs to assist them in understanding ethics and fiduciary responsibilities in transactions and an official designation - the Accredited Buyers Representative(ABR) designation.

In some states, such as Texas and Ohio, dual agency is permitted. The same agent can represent the buyer and seller, or two agents from the same brokerage can represent each side of the transaction.

The advantages of dual agency and buyer advocacy for REALTORS^® are clear. They continue to receive commissions from both sides of the transactions, and can take advantage of inter-office or inter-company communications and networking to keep the sales "in-house." They can represent the buyer later on when the buyer is ready to sell, retaining what could become a life-long relationship rich in housing transactions and yielding numerous referrals.

All the buyer has to do is sign a waiver to show that he or she understands the potential for conflict of interest. But if the potential for conflict of interest exists, is the buyer truly being fairly represented?

Absolutely not, say the founders and members of the National Association of Exclusive Buyer Agents (NAEBA), a grass-roots organization that has grown exponentially since its inception in Dallas in 1995. NAEBA has a membership of over 400 brokers and REALTORS^®, 50% of whom are also REBAC members.

"First of all, let me make it clear that we are not at odds with NAR," emphasizes NAEBA president Merrill Ottwein, an exclusive buyer's broker/agent for over nine years. " What our organization offers is another viewpoint and that is exclusive buyer agency."

"The delivery of exclusive agency changes relationships. The REALTOR^® changes from being a salesperson to a consultant. The buyer changes from being a customer to a client," explains Ottwein.

NAEBA members rely on few of the tools of traditional agencies. They take no listings and never represent sellers. Even when satisfied buyers are ready to sell their homes, NAEBA members refer them to selling agents, to avoid any hint of conflict of interest. "It hurts when a buyer wants us to represent them in a transaction, but we have to just walk away. We don't even list our own properties," says Ottwein.

"REBAC does not do enough to promote a higher level of service for buyer agency," claims Kathleen Chiras, NAEBA association manger. " A person may be able to function as a buyer's agent until there is an in-house transaction, then the broker owner is able to make money on the selling and buying side, and the situation has to occur that the buyer agent has now turned into a transaction broker. Then you have to make an office policy to see how these transactions are going to go."

"Our organization is growing because exclusive buyer's brokers are an advocate for the buyer and they are uncomfortable with in-house transactions. Sure we have ethics that tell us how to behave, but if that client is in a situation where someone is going to make money on both sides of the deal, then there is a conflict of interest," states Chiras.

Other situations provide the potential for mixed agency. A buyer client may decide to sell his/her home, but the buyer's agent already knows all about him, his home and his situation. The buyer's agent can't represent him without compromising other buyer clients. The temptation to show the listings to other buyers would be too great. "There is no way to completely eliminate conflict of interest without eliminating seller agency," explains Chiras. "It is human nature to want to please your boss, and make twice the money instead of half the money, so there is pressure on agents to show their broker's listings. Or, you have the listing and I have the buyer, and you tell me at the water cooler that the sellers are going through a divorce, and you want to close that deal because your kid is going off to college."

"I truly believe REALTORS^® get into the business to be objective, but given the situation, the temptations are too great," she continues. "Let's just make an environment where we don't have to worry about the ethics, the environment does that for us. Rather than be tempted to show in-house listings only, I can look at the whole inventory, including FSBO's foreclosures, and Internet listings without worrying if I'm going to make a boss unhappy."

Many agents embrace the philosophy of exclusive buyer agency but the fears of giving up bread and butter listings are too great. "It hurts when a buyer wants to list a home with you and you just have to walk away," rejoins Ottwein. But the upside is that you get better at what you do best. You become more expert at due diligence and other aspects of buyer agency because that is what you do all the time.

First agents and buyers have to give up the notion that the seller pays the commission and therefore calls the shots. The commission comes out of the transaction for both advocates. The buyer pays the commission by meeting the sales price, and the seller pays the commission by selling the home. Can a buyers-only agency make it? Although the concept is in its infancy, one NAEBA brokerage in Houston has already grown to over 40 agents.

Chiras believes that without stricter regulations concerning advocacy, buyers will increasingly head to for Sale by Owner homes in the future. "We still believe that FSBO buyers (and sellers) ought to be represented."

"What we'd like to see are exclusive seller's agents as well as exclusive buyer's agents. It is a beginning trend, but for now it is uphill - there is still a strong interest in keeping the system the way it is."

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