While the NAR lobbies to get transactional brokerage and its offspring - designated agency accepted as legal and defendable business practices protected by legislative statutes across the country, a growing concern among agents and brokers suggests that the NAR's efforts are tantamount to putting out the fire...with gasoline. Why is the industry addressing consumer concerns about agency representation with non-agency?

By addressing broker liability issues through the device of transactional brokerage and designated agency and by not taking on consumer concerns about the industry head-on, the NAR and its members may be inviting continued criticism.

State legislatures which are currently voting to replace dual agency with intermediary relationships such as transactional brokerage and designated agency are divided, a lack of consensus which may raise consumers alarms. While some states such as Florida, are not only embracing transactional brokerage, but doing away with agency disclosure as well, other states such as Massachusetts are voting the concept down, adding stern reprimands to the state association president. Although the NAR advises agency disclosure as part of its legislative agenda to state lobbyists and legislatures, clearly some associations, perhaps led by large traditional brokers, see an advantage in failing to enlighten consumers that single agency is available as an alternative choice to a non-agency relationship.

Colorado, among other states, allows transactional brokerage, but with the caveat that agents and brokers must explain and disclose agency relationships up front to their prospects.

Connecticut, set to vote on allowing designated agency last month, has quietly tabled the issue, putting it in legislative limbo. Like a hung jury which sets the defendant free but without being cleared of the charge, the tabled vote is legally dissatisfying. What it does accomplish is a "No" vote without alienating lobbyists on either side of the issue.

In a recent case in Oklahoma,the Supreme Court ruled that a buyer's agent could advertise that his service saves buyers money, it accused the Oklahoma Real Estate Commission of being unable to read or understand its own bylaws.

"Accordingly, we find that the order of the Oklahoma Real Estate Commission is clearly erroneous, contrary to its own rule, and without evidentiary support and must be set aside." The ruling went on to state, "Sellers' agents and dual agents do not and cannot by law give a buyer the same degree of loyalty as an agent who acts on behalf of a buyer. A buyer who relies on the seller's agent or on dual agency does not receive the same degree of legal protection as that afforded by an agent acting solely on behalf of the buyer."

These rulings across the country could indicate that the NAR and its traditional "double dip" brokers may be swimming against the tide of consumerism.

Attorney/brokerLeopold A. Rodriguez, Esq., says, "Over the years the common law of agency has been collected and defined by legal scholars in the Restatement of the Law of Agency. The NAR's attempts to modify this venerable body of law in its own image and likeness is, charitably, quixotic.

"Certainly risk management is an important function of a trade association. Unfortunately it has become the raison d'etre for NAR. Why? Because the double-dipping Emperor has no clothes and the NAR's suits of Agency do not fit.

"So the NAR has taken the emperor to a new tailor: Designated Agency. Will some state legislatures accept the concept? I have no doubt. But ultimately the Courts of Appeal will be presented with this concept.

"Certainly Transactional Brokerage will solve the risk management problem. After all, we don't need to be fiduciaries. We don't need to be professionals. Section 11800 of the California Vehicle Code provides: "It shall be unlawful for any person to act as a vehicle salesperson without having first procured a license of temporary permit ....." Not a word about agency. Why can't we be "house" salespersons? We would be able to "represent" the seller and multiple buyers on the same house at the same time, without legal impediments."

Gary Edwards, real estate technology consultant, warns that silencing the consumer with designated agency, et al, makes the real estate industry vulnerable. He says" The issue of consumer trust should have been effectively dealt with in 1983 (or earlier). Now it hangs like an Albatross around the neck of professional real estate as they fight the battle of their lives to remain relevant to the property transaction process.

"The strength of the Realtor is their personal first-touch relationship with consumers. That this relationship should be clouded by suspicion and mistrust is a problem. Meanwhile, the Interlopers (third-party Internet services that come between the Realtor and the consumer) are offering open transaction methods that noticeably put the consumer at the center of the transaction process - where consumers can make the kinds of informed decisions that serve to either second guess practitioners or, eliminate them.

"The issue of trust diminishes the professional's value at the very heart of their transaction role - personal advice and the personal delivery of transaction services."

Steele Propp, buyer's agent and NAR member, says, "The points recommended by the group (the NAR PAG) are largely good ones. Defining by statute duties of various agents or non-agents and taking away client vicarious liability ( even though NAR couldn't find one case of it actually happening back in 1996 when they were studying this) makes sense. But the attitude that it somehow only works if designated agency prevails is very short sighted.

"One could follow a majority of the recommendations and have my full support. But I would still oppose designated agency in it's proposed form. And mainly because it is not a true picture. That doesn't make the other recommendations less valuable, but the NAR always tries to present things as an all or nothing package."

"In my opinion, transactional brokerage will be as good as a death warrant for the industry as we know it. Consumers don't need neutral a majority of the time. And frankly I know that the lawyers would be the first to step in and gladly fill the void."

"I think agency is the key to our professionalism and profession. Ultimately we have to think of the good of the consumer. Designated agency is for the good of the company and not necessarily the consumer or even the individual agent/licensee. And in states where it occurs those companies need to be responsible for presenting a true picture to the consumer. "All you get is one person from our company. All our size, number of offices, etc. is meaningless to you. Know that one of our equally equipped, equally educated agents may very well be working against you in the future."

"Then if the consumer says OK, fine. When's the last time you saw an ad in Illinois (a designated agency state) that admitted that? Instead, companies there as elsewhere continue to advertise size of firm as a benefit. If companies chose a "Lone Ranger Policy" and truthfully convey it, fine. But they aren't.

The ultimate problem in all of this is that the industry has never bothered to learn agency in the first place. If we had maybe we wouldn't be treating the symptoms rather than the disease."

Also See:

Published: June 17, 1999

Use of this article without permission is a violation of federal copyright laws.