The real estate vocabulary of brokers and salesmen has grown in recent months and years to accommodate the new and perplexing subject of "agency disclosure. "
"Subagent," "buyer broker," "disclosed dual agency," "facilitator" - these are just a few of the terms that licensees are struggling to define and understand as they try to comply with the dictates of their trade associations and state licensing authorities.
In its simplest form, "agency disclosure" would require real estate agents (brokers and salesmen) to disclose to buyers and sellers (and perhaps even landlords and tenants) ~vhether they will be representing and promoting the best interests of the seller, the buyer, or perhaps even both the buyer and the seller.
Why is this important?
According to a 1983 study conducted by the Federal Trade Commission, 71% of all real estate purchasers surveyed believed that they had been represented by the real estate agents with whom they had been working, when in fact, the agents had represented the sellers! According to the FTC, this confusion can prove detrimental to purchasers because, as agents for the sellers, these brokers and salesmen are required to report to the sellers any information they receive which the sellers would find beneficial.
For example, while under the mistaken impression that the real estate agent is "working for them," purchasers may confide to the agent a willingness to pay $150,000 for property listed by the agent, even though their initial offer is for only $140,000. The agent's responsibility to report this information to t e seller is, of course, to the detriment of the purchaser. It is argued that, had the purchaser been aware that this special relationship existed between the agent and the seller, the purchaser would never have divulged this "confidential" and potentially harmful information to the agent.
From this rather simplistic beginning, the issue of agency disclosure appears to have expanded to incorporate and focus attention on a number of other related subjects. These include buyer representation, dual representation (where an individual broker or brokerage firm undertakes to represent buyers and sellers in the same transaction) ' and even to alternative working relationships where brokers act as limited agents or non-agents commonly referred to as "facilitators."
Through the enactment of laws, the adoption of rules, and the creation of forms, real estate regulatory agencies in a number of states have attempted to identify and describe these various working relationships and to advise real estate agents and consumers of the agents' relative duties and responsibilities under each relationship. However, according to the Consumer Federation of America, the laws and rules in only a few of these states have actually resulted in any effective and meaningful disclosure of information to consumers.
In response to the many questions raised concerning agency disclosure, the Real Estate Commission staff has appeared before numerous meetings of brokers and salesmen. The Commission has also formed a task force to study the relevant issues and make recommendations to the Commission for its consideration.
Serving on the Commission's Agency Task Force are real estate brokers Kaye Hancock (Greensboro), Scott Rooth (Cashiers), Chet Snow, Jr. (Charlotte), and Ed Willer (Raleigh); buyer broker specialist JoAnne Schimmel (Durham); Patrick K. Hetrick, Dean of the Campbell University School of Law; and consumer member Cynthia K. Meekins, former Administrative Assistant to the Governor's Special Assistant for Minority Affairs.
The Task Force is scheduled to complete its study and file its report and recommendations with the Real Estate Commission in August.
Stay tuned to future issues of your Real Estate Bulletin for any actions proposed or taken by the Commission regarding agency disclosure.