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 3
The Dating Gameby Ray Wilson September 29, 1999
© 1999 Ray Wilson
Part 1 examined dual "agency" (it "isn't") and whether an individual agent can represent both buyers and sellers. Part 2 revealed which licensees do what, for whom and to whom. Here, Part 3 places 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.
Most of us have seen the T.V. spot for a national franchise where a real estate professional smiles into the camera and says
My job is to bring people together!Why do I think an employing buyer or seller might see the job of agent as a bit more specific than social director? I wonder how that job description would fare with sellers against an agent who says,
My job is to sell your house at the best price in the shortest time!or with buyers against the agent who says
My job is to help you buy the right house at the best price in the shortest time!There is a difference between "your house" and "right house," "best" (highest) and "best" (lowest) and, of course, "sell" and "buy" as reflected in the title of that brilliant book, Bought, Not Sold. These are the job descriptions of seller's agent and buyer's agent; and we saw in the first two installments of this series that they differ in terms of both performance and mind set. Seller's agent takes an active role in actually selling -- i.e., "pitching -- this house since seller's decision to part with it is already made; buyer's agent can only help buy in an advisory capacity since the decision is yet to be made. Seller agent's job and mind set is to make the deal if he/she can; buyer agent's job might well be to advise against dealing. However, both job descriptions are identical in one aspect -- they both require agency!
We saw in Part 1 that negotiation takes place between adverse interests and that agency is the way buyers and sellers each get the knowledge and skills needed on their side of the table working FOR them. We also saw in Part 1 that an alternative to having agents working FOR them is to have a non-agent working WITH them -- i.e., as the above comments reflect, in the choice between an agency and a dating service.
Before it became "Fantasy Dating", Fantasy Realty, like virtually all real estate firms, was a true agency, expressly presenting itself to sellers as working FOR them with the seller's agent job description. With buyers they used words like "work WITH", so buyers "somehow" heard the buyer agent job description and got the misimpression that they too had agency working FOR them. A 1983 Federal Trade Commission investigation exposed the practice and forced laws requiring subagents of the seller to disclose themselves as such to buyers. Still, the quality of disclosure is pretty much in the control of the "discloser" -- if made at all -- and for a very long time, buyers did not generally get the message that their so-called "agent" was more like a double agent truly working for the other side! Reinforcing the convenient and profitable illusion was the fact that buyers actually had no alternative. In most places -- nearly all -- there were NO buyers agents... until....
It happened. Some rebellious agents with conscience, vision, and courage were fed up.... Exclusive buyer agents emerged, working FOR buyers and too ethical to run a reverse of the old two-way game on sellers (by accepting listings). Suddenly buyers had an alternative to being captive to agents of the seller. With growing awareness of that alternative both certain and irreversible, the subagency system of selling real estate was doomed.
For any informed buyer, the choice between an agent representing buyer interests and one representing seller interests is a clear "no brainer". The handwriting was on the wall for listing/seller agents -- no longer would they be able to present themselves as true agents under the Common Law and still reel in both sellers and buyers. For those still hungering for both, the law allowed for only two general strategies -- either operate openly (i.e. disclosed) as dual agents or change the law.
One strategy not available under the Common Law was for a firm to simply offer both buyer agency and seller agency. In Part 2, we saw in the "Search and Seizure (S&S) conflict" that dual agency exists the moment an agent has both a buyer and seller among his/her clients -- regardless of whether any transaction between them ever comes into play. And if any single one of those buyers or sellers does not know of any of those on the other side and agree to obligations made to each and every one of them -- then it is UNDISCLOSED dual agency and a violation of the law! Now here in Part 3, extend that to the entire firm! No matter how many or how few, if there are a hundred listings in a firm and one buyer taken on as an "agency" client -- then one hundred and one contracts are in conflict. The entire firm took on an obligation to those owners to sell those properties, to try to "seize" any and all buyers on their behalf.
One cannot get around that by saying that obligation extends to only the specific licensee who took the listing, or only the firm's sellers' agents but not its buyers' agents. The Common Law does not allow both buyers' agents and sellers' agent in the same firm. In fact, it allows only one person in the firm -- the "principal broker" -- to be the direct agent of any and all principals; all the other licensees act as this person's agent (and thus actually internal subagents of all the firm's clients). There is good reason for this, founded in the common experiences and common sense of many years and reflected in the Common Law. An organization is no mere collection of people, but a social unit of interrelationships and commitments on many levels. Members owe each other and they exert powerful influences over one another. As one example only, imagine a buyer's agent taking a buyer search to homes representing a lost commission to sellers' agents at the surrounding desks.
So, when buyer agency arrives in a Common Law state, traditional firms determined to keep working both sides of the street have two general choices:
The first of these is perfectly honorable, provided it is fully disclosed with no agency promises made or implied. It cannot survive in the long term as consumers realize they can get actual agency support from other firms. However, it is probably a good intermediate business strategy while the firm decides what it wants to be when it grows up -- exclusive seller agency, exclusive buyer agency, or provider of market related services for a fixed fee. In Massachusetts where the effort to scrap the Common Law ran into informed consumer-conscious legislators, the word "agency" is now conspicuously missing from the advertising of some traditional firms.
The second of the above choices is anything but honorable. In terms of the dating metaphor, it is the counterpart of two-timing and will be dealt with in Part 4 of this series: States of Confusion.