1.1 "Don't Quit Your Day Job"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
Reality in Realty: Part 2
Is You Is, Or Is You ain't, My Agent?by Ray Wilson September 20, 1999
© 1999 Ray Wilson
Part 1 examined dual "agency" (it "isn't") and whether an individual agent can represent both buyers and sellers. Here, Part 2 reveals which licensees do what, for whom and to whom. Part 3 will place the job descriptions of "agents" in the setting of the firm or would-be "agency." Part 4 will show how real estate companies fish for both sellers and buyers with artificial lures like "transaction brokerage" and "designated agency" -- and identify the states which grant the fishing licenses.
We did see that dual agency is not always inappropriate. When both sides of a transaction have fully compatible (rather than adverse) interests -- as often happens in a transfer of property in a family -- a "dual agent" might act as facilitator for both sides. "Adverse" interests would be those requiring negotiation or constant vigilance for one-sided options, advantage, or protection. An ethical dual agent never does anything to give one side advantage over the other.
On the other hand, a true agent does exactly those things meant to give advantage to one side, that of the agent's client (without being fraudulent). The classic "adverse" interest is the matter of a price to be negotiated. One wants high; one wants low; one's gain is the other's loss. Less obvious, but of far more dramatic importance to the buyer, is the adverse interest of each in the buyer's property search. The buyer agent's job is to maximize the buyer's options. The seller agent's job is to reel in a buyer before that buyer finds a better deal elsewhere. Thus, a licensee making "agent" promises to both buyers and sellers has a problem we can call the "search & seizure (S&S) conflict." He/she ain't no agent and should also have a problem sleeping nights.
The S&S conflict demonstrates two things basic to knowing who is and who ain't your agent, anybody's agent, or nobody's agent. First of all, agency does not arise out of transactions, but out of promises licensee's make or imply to principals (buyers and sellers) from the moment they put up a sign or hand out a business card! An IRED viewer wrote in response to my last column:
The comment is on-target regarding what is important, because a transaction should begin with the right house! But the idea that "agency" doesn't begin until the transaction is a misconception promoted by professionals who:Agency is there, but to many people it is not the vital part. The first part is househunting....
This decoy was especially effective as "transaction brokerage" or "designated agency" statutes were slipped under the noses of about half the country's state legislatures -- that is until the slippers blundered into Massachusetts where the slipees (the legislators) knew the difference between a duck and a chunk of wood. Both of these anti-consumer ploys (to be detailed in my next column) rely on the invention that agency doesn't matter until a transaction is imminent. Quack, quack...
The second revelation from the S&S conflict is that of the total difference in mind set as well as in duties between a buyer's agent and a seller's agent! Think for a moment about sales agents and purchasing agents in any large business organization. Would they ever be in the same department?? Of course not! Although "Universal Widget's" salespeople and purchasing agents should both understand market and sales dynamics -- their respective duties and basic mentality say they simply do not belong together! They do not belong together in the same real estate office, and I have to wonder why they are licensed under the same laws and tested with the same tests.
As an illustration of the wide divergence in mentality, consider an actual telephone conversation between a seller's and buyer's agent as I sat in the latter's office. Very angry and frustrated because the buyer's agent had called for a second water quality test, the seller's agent protested, "Don't you realize this could kill the deal?"
He had no clue that the buyer agent's job was to kill the deal if the property didn't meet the buyer's standard! And if you think this might just be an inexperienced seller's agent, then consider this -- he was President of his state association of Realtors®.
What launched this four-part series on agency (which may yet go to more) was another commentator's published opinion that "...one real estate agent [can] represent both parties in a transaction." Part 1 should have made it clear that an agent can't do it and remain an "agent" -- but suppose the statement had been merely
Suppose agency doesn't matter in a particular transaction -- that there are no adverse interests, nothing to negotiate or investigate. It does happen, like in exchanges between family members and close friends (or when you know the other side is losing big time on the deal). As noted above, a dual "agent" might work there as a facilitator of the forms and processes, but it still comes down to what is meant by the word, "represent"."One licensee can represent both parties in a transaction."
The words "agency" (or "agent") and "represent" (or "representative") rather clearly have a lot to do with the question of who does what. Significantly, these words are in the professional designations licensees use to describe themselves to the public -- i.e, those initials after their names like "CEBA" and "ABR".
CEBA means "Certified Exclusive Buyer Agent" and is awarded by an organization named -- appropriately enough -- the National Association of Exclusive Buyer Agents (NAEBA). By both NAEBA's definition and the long-standing definition of the National Association of Realtors® (NAR), an "exclusive buyer's agent" (EBA) is one who not only works exclusively for buyers, but in an agency which neither lists nor makes any kind of agency commitment to sellers. There are not a lot of EBAs, people willing to give up the security of listings to devote full agency to buyers -- less than a thousand in NAEBA.
ABR means "Accredited Buyer Representative". The word "agent" isn't used although the name of its awarding organization -- the Real Estate Buyer Agency Council (REBAC) -- alludes to buyer agency. That is partly explained by the fact that REBAC acquired its name when it was very small and limited largely to exclusive buyer agents -- no longer true -- and certainly not since it was purchased by NAR in 1997 for the purpose of putting "ABR" after the names of more than 10,000 Realtors® (members of NAR), most of whom are in listing firms and cannot meet the exclusive (to buyers) criterion of the "CEBA".
If "represent" doesn't mean or imply agency service, then ABR is certainly an appropriate designation in such firms. However, if that is so, why would a buyer or seller hire one at a full agency commission or fee? If, on the other hand, "represent" does mean agency, then the ABR has an absolute obligation from the very first moment of contact with any buyer or seller to clearly disclose just whom is being represented. You should never have to ask, "Is you is, or is you ain't, my agent?" An ABR or anyone who claims to represent both is the agent of neither, at least in terms of services which can actually be delivered -- though some recent state laws now allow nonagency providers to masquerade as agents (Which states? Answer in Part 4).
In Part 1 we looked at dual "agency" (it "isn't") and whether an individual agent can represent both buyers and sellers. Here (Part 2), we got into which individuals do what, for whom and to whom.
Next -- Part 3: The Dating Game -- looks at the job description of "agents" in the setting of the firm or would-be "agency"