A proposed bill sponsored by the Michigan Association of Realtors has been endorsed by the Family and Civil Law committee of the Michigan House of Representatives. Trouble is, the legislators may not understand what House Bill 5719 is all about, claims a detractor who was present.

Renee Knight, chair of RealDefenders, a grass-roots organization opposed to dual and designated agency, claims the bill was railroaded through the committee. As proof, she offers that she was given less than 18 hours to appear at the public hearing, and when she arrived, learned that five of the legislators sponsoring the bill also chair the committee. Asking for 20 minutes to make her case against designated agency, Knight was given five. She was further dismayed when one legislator, Michael Swatlski, was voted down after stating, "I think we need more hearings - this is controversial."

The committee voted to put the bill before the House. Later, W. Flory, an aide assigned to write an analysis of the bill, called Knight and asked her to explain the key points of the bill to him, causing her to wonder which committee members were also confused but steamed ahead anyway. Flory's analysis is below.

House Bill 5719 proposes to add designated agency to the mandatory agency disclosures given to real estate consumers before they offer any information which could later hurt them in the course of an agent's representation. Designated agency as defined by the bill as a type of agency in which the broker is free to appoint agents to represent both buyer and seller in a transaction while remaining a neutral facilitator and advisor to both agents. The passage of the bill would also eliminate the need for a second disclosure to consumers that the broker involved in their transaction is, in fact, a dual agent.

Knight's objection is that designated agency is a Catch-22 for consumers. She says it comes after the fact - after a consumer has already shared personal information and may believe that the agent is working on his/her sole behalf. But the agency relationship changes abruptly if the other side in the transaction turns out to be represented by another agent in the broker's company. Then, the consumer is forced into a lady or tiger choice - give up his/her agent or retain the agent and forfeit fiduciary support.

So why is the Michigan Association of REALTORS® sponsoring the bill? Because dual agency is a Catch-22 for Realtors. Designated-agency is a consumer-friendly alternative to dual agency, maintains MAR's president Carol Frick. In an earlier interview with Realty Times, she explained that the designated agency bill would benefit consumers by allowing them to choose the agent with whom they wish to work. It would also allow the broker exemption from direct agency responsibilities and possible conflicts of interest by repositioning him/herself as a transaction facilitator and "designating" fiduciary duties to his/her agents instead.

Knight and Frick can agree on only one point - the MAR does not yet have the legal language composed in a disclosure form that would accomplish this feat as yet.

And therein lies the controversy. Neither the supporters nor the detractors of the bill know what will happen if the bill is passed. Will consumers embrace the new choice? Will the new disclosure hold up if tested in court? Will broker liability increase or decrease? No one knows yet.

Frick, restated the points she made in her Realty Times interview at the hearing - that designated agency will clear up confusion caused by dual agency, and give consumers the right to use the agent of their choice. It will also eliminate the neutralization of agency agreements which are caused by the existing dual agency law.

What do you think? Is designated agency a better solution for consumers? For brokers? And how should designated agency be disclosed in writing in order to protect both?

Click here for the Flory's analysis of House Bill 5719

Published: May 11, 2000

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