Agency Disclosure Follow-up for Buyers Only on Martha’s Vineyard

In my recent Blog titled “For Buyers Only on Martha’s Vineyard” I spoke about Agency Disclosure. I want to revisit the subject and add some statistical numbers tabulated by the National Association of REALTORS® (NAR).

Making the decision to be an Exclusive Buyer Agent is one that many real estate practitioners feel limits their potential for maximum income, because you can only walk on one side of the street --- the BUYER’s side. There is no double dipping or switching hats to suit the occasion. Exclusive Buyer Agents have to have a passion for protecting the buying public.

According to a recent essay published in NAEBAhood News written by John Sullivan of Buyer’s Edge in Bethesda, MD, “The abrogation of the common law of agency promulgated by NAR and instituted individually by state legislatures throughout the country … resulted in eliminating the fiduciary duties of obedience, loyalty, confidentiality, and reasonable care.” On my website, I painstakingly put together information outlining the differences and explaining what are the duties of a Fiduciary to a Principal/Client?

Sadly, I have personally witnessed buyer confusion as a result of the foreclosures we are experiencing here on Martha’s Vineyard. A distressed home owner told me the other day that he blamed his agent and the lender for giving him a loan they had no business approving. He will most likely lose his home because he will not be allowed to work it out since he still has no documentation to verify his income. Lenders have much stricter requirements today, as they should have had all along, and those requirements seem to be changing on a daily basis. Sure, the buyer should have known better (caveat emptor), but when he had three so-called professionals who he believed were on his side, he trusted that he was doing the right thing. In most cases, the real estate agents, mortgage brokers and even the attorneys that participated in the purchase sale transactions had no compunction about what they were doing, even though in their hearts they knew it was unlikely the buyer could fulfill their obligation according to the terms of the loan(s).

Much of the confusion comes from the fact that consumers are not informed of the real estate agent’s role in the transaction. According to NAR’s own study, only 30% of homebuyers were presented with the Mandatory Agency Disclosure Form at the first face-to-face meeting to discuss a specific property. Only 28% received the disclosure form when the purchase contract was written, and 22% never received it at all. 20% of the homebuyers could not even remember a discussion about the fiduciary responsibility of the agent or the options available to them. First time homebuyers were the most neglected with only 23% receiving the agency disclosure at the first meeting to discuss property. Those numbers are pathetic. No wonder consumers don’t trust real estate agents.

Massachusetts implemented their Mandatory Agency Disclosure in 2005, but I believe the state has done very little to enforce the law or properly educate consumers, or practitioners.

NAR’s only option for what they call Exclusive Buyer Agency provides a mechanism stated as “with consent to dual agency”. To me that is an oxymoron and the word “Exclusive” should be removed from the NAR Right To Represent Buyer Agreement. Here is the wording some brokers are using. See if it makes you, as a consumer, comfortable and confident that you will receive the maximum care and guidance you want.

Consent to Dual Agency. The BUYER understands that BROKER also represents seller and that if BROKER shows BUYER a property listed by a seller-client a “dual agency” will be created. The BROKER may act as a dual agent who represents both prospective BUYER and SELLER with their informed written consent. A dual agent is authorized to assist the BUYER and SELLER in a transaction, but shall be neutral with regard to any conflicting interest of the BUYER and SELLER. Consequently, a dual agent will not have the ability to satisfy fully the duties of loyalty, full disclosure, reasonable care and obedience to lawful instruction, but shall still owe the duty of confidentiality of material information and the duty to account for funds. The BUYER understands that material information received from either client that is confidential may not be disclosed by a dual agent, except: (1) if disclosure is expressly authorized; (2) if such disclosure is required by law; (3) if such disclosure is intended to prevent illegal conduct; or (4) if such disclosure is necessary to prosecute a claim against a person represented or to defend a claim against the broker or salesperson. This duty of confidentiality shall continue after termination of the brokerage relationship. By signing the agreement, BUYER authorizes BROKER to act as a dual agent and consents to dual agency. If dual agency occurs in a transaction, a notice of dual agency will be given.

Exclusive Buyer Agency is a commitment members of the National Association of Exclusive Buyer Agents (NAEBA) make to consumers. This is a black and white cut and dry commitment; there are no gray areas and it takes passion and dedication to subscribe to this business model. For 100% representation 100% of the time, insist upon working with an Exclusive Buyer Agent when you are purchasing real estate of any kind.