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Who Represents Whom?
Defining how agents look out for buyers and sellers

By Sue Brickman
MIDDLESEX NEWS SERVICE

 Agency. The word connotes a business whereby one acts on the behalf of someone else, such as a governmental agency, an entertainment agency, a real estate agency. In some agencies, the agents can work for more than one person without compromising loyalty to another. It's often difficult, but possible.

 The question in the real estate industry is whether the same can be done there, in light of the acceptance of alternative ways of doing business, particularly buyer agency.

 The answer isn't quite clear.

 Traditional brokers who began wearing two hats-one to represent the seller, which is the traditional brokers role, one to represent the buyer, a buyer's agent or broker-have usually found that only one hat could accent their wardrobe. Two hats made a statement, certainly, that one broker could do it all, but that "fashionable" broker often discovered the styles clashed and he or she discarded one of the two chapeaus.

 Traditional agents represent sellers in real estate transactions. Buyer agents represent the buyers. Proponents of both types of agency say both buyer and seller deserve representation. Working both sides, say buyer agents, is practically impossible, especially if one wants to remain in the bounds of the law, his or her ethics and the ethical code of the Realtors association.

 But those practicing disclosed dual agency, whereby both parties, buyer and seller know well before hand of the possibility one firm may represent them both, don't see any problem with the situation, generally. While buyer agency has yet to become a household word in the real estate world, particularly in New England, the issues behind the concept of the alternative real estate practice are becoming increasingly evident.

 On the state level, Realtor associations are expanding educational seminars dealing with buyer agency and it's ramifications. On the national level, the National Association of Realtors is examining the whole concept of buyer agency, looking at it's evolvement, how it fits in with traditional agency and what it as an organization can do to broaden its acceptance without causing conflict, of interest, and within its membership.

 Things are changing, said Leo Berard, a founding member of the Massachusetts Association of Buyer Agents (MABA) and now president of the newly established National Association of Exclusive Buyer agents (NAEBA).

 Traditional Realtor organizations have begun to support buyer brokerage, on the one hand, as major corporations have begun using buyer agents to move their employees, said Berard, owner of The Buyers Broker on Cape Cod. "That's hitting the pocketbooks of relocation firms," he said, noting that Bull World Wide and Sprint are among the companies using buyer agents.

 Additionally, Massachusetts instituted a more complete consumer disclosure form to buyers and sellers in the last several years, and buyers and sellers are now much more aware of the difference between traditional agents and buyer agents, he said.

 The form also details disclosed dual agency, which, according to Tony Parker, president of DeWolfe Real Estate, a large firm which has both traditional and buyer agents, actually doesn't come up too often.

 "I think that when you have those things coming together, and the fourth factor of consumer advocates such as Ralph Nader and the AARP (American Association of Retired Persons) joining with the CFA (Consumer Federation of America) getting the word out (with a detailed pamphlet explaining the difference, it's much changed," Berard said. "And the demand for service is really growing."

 It's also growing across boundaries, within the ranks of traditional firms, Berard said, and that dual agency "is a disservice to the public.

 "Here, they have pledged to be an advocate, the fiduciary, the loyal agent to a party and all of a sudden because the buyer wants one of your listings, you back off from client services," he said.

 The agent told the buyer he or she would negotiate the best price, point out the positives and negatives of a property, and really counsel them, Berard said. "Then they back off and become what's called a facilitator and want a full commission. I think the public will recognize that as a discount service. I think the public is much more sophisticated and empowered.

 "I our firm, we pledge a whole list of client level services, including market analysis, negotiating help, pointing out the pros and cons of a property," he said. "We will even check out a Fisbo (For Sale By Owner), even going to neighbors where there are no listings (looking for sellers). And then, all of a sudden, you say you can't do all that because of an in-house deal? I think the public is savvy enough to know the difference between a true fiduciary and a facilitator. I think the public will say for those limited services, I don't want to pay the full fee. But I think we're a little ways away from that. The public is still a little confused or unaware of the choice, really."

 The possibility of disclosed dual agency. Parker said - dual agency is not a term anyone practicing disclosed dual agency uses - comes up perhaps in two percent of all cases, he said. But at the outset, all buyers and sellers are aware it could happen.

 "When we meet with any consumer, we need to describe under law what agency is, and the form (instituted within the past several years) does provide for an understanding of all three - traditional, buyer agency and disclosed dual agency.," he said.

 "By going through that form, we clearly set up a situation about what might happen (in disclosed dual agency) and what service would be provided in an instance when one of the listings is ours and we have a prior contract with a buyer," he said.

 DeWolfe doesn't choose to disclose dual agency, but has both buyer agents and seller agents, and disclosed dual agency sometimes does occur, Parker said. Buyer agents in that firm have been trained as buyer agents and are certified to represent buyers, he said.

 The problem with disclosed dual agency - both parties represented must agree that that form of agency suits them - is the issue of protection, Parker said. "We can't disclose to either party what we (our agents) know about the other party. We have to be very careful and protective of a party's interest. We have to be a lot ore professional," he said.

 Currently, Parker said, his firm and others are trying to get the legislature to approve a type of agency called Limited agency, which would do away with subagents and keep only traditional agents, buyer agents and disclosed dual agency, he said.

 The problem with subagents, he said, is they are working in effect for the listing or selling broker, even though they are showing a buyer properties. Their loyalty, despite working with the buyer, is still to the seller, Parker said, which, in effect, leaves the buyer without any representation at all. Disclosed dual agency, he said, is better than that.

 But what happens when negotiations come up? Buyer agents insist disclosed dual agents cannot truly advise their clients if both parties are being represented by agents in the same office, but Parker dismisses that assumption, however vaguely.

 "If the agent has worked and counseled with his client all along the way, he or she has already done the job of preparing for dealing with the information presented to them," i.e., an offer and counter-offer, Parker said.

 "The consumer has to make the decision (whether to agree to the price or not). The agent cannot do that for them," he said.

 "Certainly we try to provide information so that people can make the right decisions, but we cannot advocate against someone else. We present the offer which the client tells us to," he said.

 "We do have to be careful of our position, he added. "That doesn't mean we can't say here are all the reasons why it's a reasonable offer. That's true anywhere along the way."

 And if there is a case when one agent has a listing and is representing a buyer who wants that listing, "that agent is urged to get someone else in the office to represent one of the parties," Parker said. "That makes it a lot cleaner and each office needs o be prepared to deal with tat."

 State Realtor associations are dealing more formally with the issues, providing members with more information about buyer agency and how it works - or doesn't work - side-by-side with traditional agency.

 Agency of one type or another is clearly a broker's decision, but it's a decision which should not be made without a good deal of consideration, said Iva Liebert, broker/owner of Buyer brokers of Cape Cod.

 And the whole issue of agency, of representation, is perhaps the most critical component of that decision.

 "I moved away from dual agency because there were too many conflicts," said Liebert, also member of the MAR's agency task force.

 The upside to having both types of brokers in one office, Liebert said, is you never have to refer either one too another office, both sides of the transaction stay within one agency, so there is no split commission, and the traditional brokers in your office don't have to find another agency in which to work, nor do you lose brokers who wish to be solely buyer agents.

 "But I realized that many times I was getting into dual agency clients," she said. "I found that I was representing both ends." And when one represents both buyer and seller, conflicts can arise. In those cases, an agent is obligated to disclose dual agency to the clients.

 Dual agency, Liebert explained, happens when a broker's firm has a conflict of interest relative to its relationship with a buyer and seller who are working towards purchase or sale of the same house.

 Disclosed dual agency means the broker, by written or oral means, receives informed consent from both the buyer and the seller to proceed as the dual agent, she said.

 "The more I looked at it, the more I ceased to believe in dual agency," she said. "There was too much risk involved."

April 1995

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