Tom Coler of Buyer's Broker of Southwest Florida Discusses How Transactional Brokerage Leaves Consumers as Clueless as Ever
FOR IMMEDIATE RELEASE / PRURGENT
The more things change, the more they stay the same. Twenty-five years after an attempt to protect home buyers with disclosures about whose side their real estate agent was working on, the Florida real estate industry is worse than it has ever been. The "presumption of transactional brokerage," which is now the law in Florida, has left the consumer as clueless as ever.
Presumption of transactional brokerage "presumes" all Florida real estate clients know their agent is merely a facilitator and is not working for them. But clients don't always know that, creating a situation fraught with legal peril.
How we got to this precarious place is a case study in the enduring power of greed. Traditionally, real estate agents represented the seller. Even the agent helping a client house hunt was considered a "subagent" of the listing agent and was legally bound to secure the highest price and best terms for the seller.
Unfortunately, that fact was not clear to the buyer. A 1983 study by the Federal Trade Commission found that 82 percent of buyers surveyed believed their conversation with an agent was confidential, and 57 percent thought the agent represented them.
By the early 1990s, 80 percent of state legislatures had passed laws requiring real estate brokers and agents to disclose, in writing, whom they represented -- buyers or sellers. However, brokers circumvented the spirit of disclosure with the practice of "disclosed dual agency." Dual agency was as blatant as when the same agent acted as both the buyer's agent and the seller's agent in the same transaction, or as subtle as when any agent who claimed to represent buyers was working for a firm that also listed properties (and therefore favored those properties). By "disclosing" they were double agents, they argued that they had fulfilled their legal responsibility. Consumers got the worse of both worlds, accountability without loyalty, while brokers continued to collect both sides of the commission.
A series of costly class action lawsuits highlighted the problems with dual agency. Both buyers and sellers sued over the inherent problems that arise when the same firm represents both sides of the transaction. Buyers claimed they should have paid less; sellers claimed they should have received more. Many customers said they felt rushed to close. The lawsuits were successful; the buyers and sellers prevailed.
In Florida, a real estate licensee may no longer operate as a dual agent, disclosed or undisclosed. Florida is one of two dozen other states to have a "presumption of transactional brokerage" clause. The listing agent no longer has a fiduciary responsibility to get the highest price and the best terms for the seller in exchange for the 6 percent real estate commission. Neither does the transactional broker have a responsibility to get the lowest price and the best terms for the buyer. At least in the old days the listing agent represented the seller!
What's worse, in 2008, Florida dropped the requirement that agents disclose their transaction broker relationship to the customer. It is now just "presumed." That is problematic. If buyers and sellers believe they have a true agent, and have received no disclosure that the agent isn't their agent, and the agent does provide fiduciary duties, then an "implied agency" situation exists. That opens up the possibility for the customer -- buyer or seller -- to claim a breach of fiduciary duties. Furthermore, because agents cross the line from transaction brokerage to fiduciary agent, many in-house deals are in fact undisclosed dual agency. The practice of providing fiduciary duties to both a buyer and a seller in the in-house deal without disclosing it as dual agency is in fact undisclosed dual agency and an act of fraud. I believe more lawsuits are inevitable. We just haven't learned the lessons of our past.
Fortunately, buyers do have a choice. Consumer advocates, the U.S. Department of Housing and Urban Development, and countless media organizations such as CNN Money, New York Times, Kiplinger and U.S. News & World Report recommend that buyers hire an "exclusive buyer agent" who will exclusively represent their interests and is legally bound to negotiate the lowest price and best terms for the client. For more information, visit the National Association of Exclusive Buyer Agents website at naeba.org.
The Buyer’s Broker of Southwest Florida, serving Southwest Florida from south of Tampa Bay to Marco Island, is dedicated to representing only buyers. Buyer's Broker does not list homes for sale and never represents sellers. This exclusive buyer representation avoids conflicts and ensures that the interests of buyers are protected at all times, from house-hunting and negotiation, to inspection, financing and closing. The Buyer's Broker always seeks the lowest price and best term for its buyer clients, offering 100% loyalty 100% of the time.