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Real Estate News and Advice |
September 5, 2008 |
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REALTORŽ Posts Web Site to Deter Designated Agency Legislation
by Blanche Evans
It's not the fact that John Herman is a buyer' s agent. It's the fact that he believes consumers are entitled to true representation. And the bill before the Connecticut legislature provides anything but representation for consumers, says Herman, an exclusive buyer's agent in Farmington, Connecticut. In what he says is a bill skillfully written to confuse the legislature, designated agency will be put forward as the answer to a bill originally written to promote confidentiality. The result, fears Herman, is that Connecticut, as well as other state legislatures, will be confused into thinking that they are "protecting consumers with agency representation that they actually aren't getting." Under designated agency in some states, a listing broker can legally allow an agent within the office or the company to represent the buyer, or other side of the transaction, while telling both buyers and sellers that they are getting full representation under the law. "The definition of agent is that an agent must protect the client's interests," says Herman. "That is impossible under designated agency. At least with dual agency, the company could claim that it represented neither party," explains Herman. "But designated agency is promoted as full representation. Since when is the defendant represented by the prosecutor? Designated agency says, in effect, that the company is going to split in half and both sides are going to get full advocacy. How can they when both agents are paid out of the company's co-mingled funds?" "Now, one agency will simultaneously cross-advocate the opposing interests of buyers and sellers within a single real estate office or firm," says Herman. "I have to wonder how sellers who list these properties with these agencies would feel if they knew all this. The listing agreements certainly don't have any disclosure that someone in "our" company may acutally advocate against you." Herman is concerned enough to launch a new Web site called AgencyLaw.com, which he hopes will become a repository for all information and trends in legislation concerning agency law in the United States. He has also joined forces with the National Association of Exclusive Buyer's Agents (NAEBA) in an effort to promote the laws of agency and to bring clarification of proposed legislation. NAEBA, along with Ralph Nader's consumer advocate group, headquartered in Massachusetts, was recently successful in getting a similar proposed bill in Massachusetts shot down. Agent News has learned in an exclusive that NAEBA is sending a questionaire today by certified mail to all 36 Connecticut U.S. Senators asking how the "impossible is going to be voted as possible." The letters are an attempt to stop the senators from "voting without knowin what they are really voting for." The senators' replies, or lack thereof, will be posted on AgencyLaw.com. "My purpose is to protect the law of agency which is being attacked throughout the country," says Herman. "Some elements believe in putting the double-sided commission in its most marketable terms. They want one agency to promise the seller they are going to get the highest price and best terms for the house, and promise the buyer throught the device of designated agency that they will get the house for the lowest price and best terms. Now, something the law of agency promised to protect the consumer from is now being converted into acceptable practice and legally blessed by the legislature." "The Connecticut bill says the primary responsibility will be to serve the client, but it clearly protects the large listings agencies and may shift some liability to the individual agents," charges Herman. "The implication is that in a dispute the broker is removed from the actions of the designated agent. There may be unknown ramifications for agents as well as for consumers, says Herman. Theoretically, if a broker has a designated agent participating in a contract, and a problem comes up, the broker could distance the company from legal liability, leaving the agent to face legal and financial consequences alone. "Very few agents have thought about that," says Herman. According to Herman, the Connecticut Association of Realtors has a risk management section, but the bill, which will have a major effect on agents from compensation to liability, isn't even mentioned, though there is a legislative alert section on the site. "It is amazing to me how many agents don't even know this bill is being voted upon Wednesday," says Herman. "When I talk to other agents, they aren't pleased." Herman acknowledges that some agents are conflicted, especially if they take listings or serve both sides. Designated agency prevents losing buyers to other agencies. Says Herman, "I don't know that agents will react so much as the public. You get compensated by the same co-mingled source, and that source has an interest in getting both sides of the commission. The profit motive is in conflict with the best interests of the client." The Connecticut vote is on Wednesday. Related Article:
Published: May 11, 1999 Use of this article without permission is a violation of federal copyright laws. 
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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment.
