Bruce Hahn, founder of the American Homeowners Grassroots Alliance (AHGA,) plans to lobby Congress through the new Antitrust Modernization Commission to look into the erosion of the laws of agency that have taken place in many states which condone dual agency, transactional agency or designated agency.

Taking advantage of the AMC's request for public comment, Hahn has drafted a letter to the 12-member Commission recommending that "the Commission study whether current industry electronic commerce practices served the best interests of home buyers and sellers. New legislation may be needed to assure that home listings are widely disseminated in manner that is user-friendly to potential buyers and to assure that organizations representing real estate brokers and agents who have fiduciary responsibilities to buyers and sellers reflect those responsibilities in their collective actions."

AHGA also asked the Commission to "study causes of the erosion of the laws of real estate agency. In recent years, representatives of real estate organizations have set out at the state level to create laws legalizing “dual agency,” that would allow a broker to simultaneously represent both home buyers and sellers. Among the fiduciary responsibilities of a real estate broker and agent is to help negotiate for the best price and terms for their clients. When the broker/agent simultaneously represents a buyer and a seller of the same property getting the best price and terms for both clients is mutually exclusive. AHGA urged the commission to examine this issue and to recommend a federal law pre-empting state “dual agency” laws should it conclude that consumers are being denied full benefit of real estate broker and agent fiduciary responsibilities."

The Alliance also noted that "tie-in arrangements between real estate trade associations and multiple listing service (MLS) organizations appear to undermine real estate agency and that a “bright line” prohibition of this practice would be timely.

The Alliance also notes "that there appears to be insufficient competition in title insurance reissue market. As multiple factors, including consumer demand, are driving increased overlap between real estate lending and real estate marketing, antitrust laws should be adjusted to both protect consumer interests and encourage greater competition. For example real estate agents or brokers who arrange home financing should be subject to all Truth-In-Lending-Act (TILA) requirements. Similarly, while antitrust laws should facilitate the ability of banks to enter the real estate sales market, at the same time all consumer protections and other appropriate laws and regulations should apply to new entrants into the field of real estate marketing."

In other words, Hahn and his group is against just about everything organized real estate stands for.

The AHGA is run by Hahn, his wife, and another member, but Hahn says he wants it to be the AARP for homeowners. He claims to represent the interests of 70 million homeowners, but the grassroots organization only has about 5,000 paying members so far, he says.

Whether that's enough to overcome the Capitol Hill-influence of the one-million member NAR remains to be seen, but meanwhile the real estate industry has a constructive opportunity to consider why potential customers want to organize against it.

"We are not anti-Realtor," corrects Hahn. "My wife and I have bought and sold numerous investment properties and every time we used a Realtor. Our objection is to dual agency."

Hahn explains that he is concerned about recent legislation in many states to remove the brokers from fiduciary responsibilities, enabling them to appoint or allow agents to represent both sides of a transaction. Standard contracts introduce the possibility that the listing agent may also bring the buyer and that the level of representation may change, but it isn't explained adequately enough to consumers for them to understand that if that happens, their agent is no longer representing their interests.

"There is a fiduciary duty to help sellers, but today agents can help buyers as well," says Hahn, "to help your client get the best terms in any sale, but if your firm represents both ends of the transaction, and I want you to help me get the lowest price from the seller, dual agency says you have to say 'I can't do that.' You can't disclose any information about the other side, so the value of the service is thereby lessened."

He explains, "While the listing agent represents the seller, the listing agent can give information about the house to the buyer. If they are representing the seller, they should help get the best price and terms from that buyer."

But transactional agency, disclosed dual agency, designated agency, and dual agency are all forms of dual representation that tempt agents to grab the buyer for themselves, which is a conflict of interest with the seller, he says. In other words, as soon as the agent starts to pursue the buyer to make him or her a client, the agent has already abdicated his fiduciary responsibility to the seller, which means the seller never had a fiduciary in the first place.

And that's something that isn't explained in any listing contract Hahn has ever seen.

"It's a weasel clause in the standard contract that allows a real estate broker to abrogate their fiduciary duties," says Hahn. "I don't think federal governments should allow that to happen."

The real estate industry has plenty of reasons why transactional brokerage is preferable to agency. Many homes change hands without adversarial positions being taken, and brokers and agents like to reduce the liabilities of fiduciary representation. But Hahn maintains that dual agency practices are also harming the integrity of the real estate industry.

"Why would an organization that represented sellers want to cause a law to pass that reduced their responsibility of their members to their collective clients?" asks Hahn of state associations which have been instrumental in proposing transactional brokerage laws for state legislators to adopt. "These dual agency clauses are in there, but people don't understand the ramifications. It must be a powerful temptation to the agent. In comes the buyer, and if he doesn't have someone representing him, the agent thinks, 'If I sign this guy up, then I'm off the hook for many responsibilities, and if the buyer doesn't purchase this property, I will have him as a client for other properties.' So there are many powerful incentives for the real estate agent to act against the interests of the person who gave him the listing."

Hahn agrees that there are times when dual agency can work, when buyer and seller simply need a facilitator, but he says dual agency shouldn't be a standard part of any contract. "You could add it to the contract as an addendum if a situation comes up," suggests Hahn, "but most people do not think about the consequences, and the temptation it creates for agents to put their self-interest ahead of the seller. As a standard practice, that should be prohibited."