By ETHAN ZINDLER
STAFF WRITER
Buyer beware or need not care?
As of July 1, a single real estate firm can represent both the purchaser and the seller of a home, so long as those on both sides of the deal have been informed in advance that the agency could double up.
Critics of the measure, which include consumer watchdog groups and some smaller firms around the state, say the new rule is bound to be exploited by agents who put their need to close deals ahead of their clients' interest in buying or selling only for the best possible price.
In particular, they say, the new system raises the likelihood of collusion between real estate professionals working under the same roof who can share otherwise confidential information about how high or low a client will go to buy or sell a house. Then there's the chance of inadvertent leaking of information if, say, one side's agent happens by the fax machine just as the other's client is faxing over bank statements.
But supporters of the new law, including the Massachusetts Association of REALTORS® and several of the larger local firms, say it expands options for both buyers and sellers. Often the best possible partner in a transaction happens to be represented by another agent at the same firm. Why preclude either side from negotiating with the full universe of possible purchasers or sellers?
When it passed earlier this year as part of the 2006 budget package, the new rule attracted little attention among the general public. But it sparked heated debate and revealed deep divisions within the state's real estate sector.
'You just can't serve two masters. That's what it boils down to,' said Leo Berard, who co-founded Buyer Brokers of Cape Cod in Yarmouthport 16 years ago and is an outspoken critic of the new policy.
He said he worries the rule undermines the credibility of agents as a whole
'I think it's a step back for us as an industry because it's taking us away from others who are the true fiduciaries,' he said. 'But it's the consumer harm that really bothers me.'
Berard and others who opposed the rule often invoke the example of a divorce. No law firm would ever allow one partner to represent the husband in a break up while another partner had the wife as a client.
Spokesmen for the Cape Cod & Islands Association of REALTORS®, which supports the new law, did not return calls seeking comment last week. But Marilyn Moran, sales manager for Cotton Real Estate in Hyannis, said the divorce example is too simplistic.
'I think it's a faulty analogy, frankly,' she said.
She offered the example of the dual roles that attorneys can play in real estate transactions.
'Many times the lawyer will be representing the bank as well as representing one of the purchasers to the sale,' she said.
Moran said the new rule opens new options for home sellers, in particular. The key is disclosure.
'I say, 'Now, look I'm going to list your house and Cotton has 38 agents and there's a strong possibility that one of my agents is going to have a buyer,'' she said. .
Jamie Regan, owner and president of CENTURY 21 Regan Realtors Inc. in Mashpee, concurred.
'You have to really take some time to explain to the clients where you stand, where your firm stands in the matter,' he said.
Eliminating sub-agents
Regan and Moran said another advantage of the new rule is it allows the industry to move away from 'sub-agent' arrangements in which a firm that posted a property as available on the National Association of REALTORS®' Multiple Listings Service would then allow an agent from another firm to aid in selling the property.
Regan said it wasn't uncommon for sub-agents to embellish the descriptions of the homes they were selling despite having little first-hand knowledge of them. Putting out incorrect information about a home exposed both the sub-agent and the listing agent to liability.
'Looking at that over 25 years, I'm surprised we didn't have more issues come up,' he said. 'It's a relief to the bigger firms that they don't have to do that anymore.'
Moran said that Cotton stopped working with sub-agents in January.
But Fred Meyer, owner of University Real Estate in Cambridge, said the two issues are not connected. Meyer served as director of the Massachusetts Association of REALTORS® in 2000 and was on the board until recently.
'There was a great deal of debate and when the MAR snuck this through the Legislature with no public hearing attaching it to the state budget ... I really thought that was an inappropriate tactic for such a major issue,' he said. 'I resigned from the board of the MAR when I found out about it.'
Being selective
Being Selective
Meyer said the new rule may actually open real estate agencies up to further lawsuits, in part because it conflicts with Massachusetts common law, which places the burden squarely on any fiduciary to explain any conflict of interest he or she may face.
The new rule mandates that agencies that might serve both buyer and seller on a single transaction inform clients up front of that possibility with a written consent form. But Meyer said such paperwork could ultimately be insufficient in the eyes of the court should an aggrieved buyer or seller sue an agent after a deal goes down.
Even with a signed form, real estate agents may have trouble proving in court that a client knew what he or she was getting into.
Meyer said he doesn't expect much litigation in the short run while prices are hot. But if there's a downturn, look out.
'Sooner or a later they're going to get caught up in lawsuits,' he said of agencies that choose to represent both sides on a deal. 'Practicing it is far more dangerous than the MAR or most agents understand.'
The new law specifically precludes agents from sharing key information about a client with a fellow agent under the same roof, but it lacks specifics about what exactly that information might consist of. It also says nothing about agents using the same fax machines, computers, or phones, all places where confidential information could inadvertently get exchanged.
One of state's leading consumer groups is recommending that home buyers be very selective about finding an agent to represent them.
'There still are traditional, undivided sellers' agencies and buyers' agencies, where the whole company represents just you,' said Eric Bourassa, a spokesman for the Massachusetts Public Interest Research Group via a written statement. 'With more and more large national brands wanting to represent both sides, a consumer may have to call around to find a fully loyal local agency firm, but that's well worth hunting for.'
Those home sellers who opt for an agency that could deal the home to another in-house agent should bargain hard, Bourassa said. 'The potential conflict of interest should alert consumers to negotiate a lower fee.'
(Published: July 12, 2005)
Copyright © Cape Cod Times. All rights reserved.
This site provides information about Mashpee, New Seabury, and Popponesset Real Estate for sale or for rent on Cape Cod, also properties for sale or rent in Bourne, Falmouth, Woods Hole, Sandwich, Cotuit, Marstons Mills, Osterville, Centerville, Hyannis, Hyannisport, Barnstable and all areas of Cape Cod, and the South Shore of Massachusetts. This includes specialty properties such as waterfront homes, golf condo's, golf front properties, new homes, new construction, condominiums, oceanfront homes, 1st time home buyer properties, land for sale, lots for sale, vacation homes, summer homes, cape cod rentals, summer rentals, cottages, waterview, waterfront, steps to beach, luxury homes, and second homes for the discriminating buyer.
By entering this site the viewer is acknowledging that the information, opinions, calculation forms, and links are provided the viewer free of charge. The information provided on this site has not been verified, is not guaranteed, and is subject to change. Therefore the viewer is acknowledging that although every attempt has been made to provide accurate information, the viewer will not hold CENTURY 21 Regan Realtors, Inc., it's employees or associates liable for any misinformation.
© 2007 Century 21 Real Estate LLC. CENTURY 21® is a registered trademark licensed to Century 21 Real Estate LLC. Equal Housing Opportunity. Each office is independently Owned and Operated.
