There is not nearly the unanimity of practice now that there once was, but here's how things are sorting out in most parts of the country. The unilateral offer of subagency is essentially a thing of the past. Increasingly, selling agents are now representing buyers as buyers' agents. In not all instances are they entering into a formal agreement but are simply using an agency disclosure form as the basis for the buyer's agency role. There's real doubt that this is legally sufficient for establishing a legitimate agency relationship, but, for the most part, that's how it's being done. By working as a buyer's broker, the selling agent owes the fiduciary duty to the client buyer and the duty of fair dealing and disclosure to the customer seller. This is evolving rapidly, so stay tuned.
Traditionally, licensees who work with buyers have not secured the same type of contractual agreement with them to represent them exclusively in house hunting that licensees who secure listings have. Buyers have been completely free to work with anyone whom they chose and change agents as often as they wish. You can see that if you were a buyer's broker you would like that to change.
Who pays the commission to the buyer's agent? In the vast majority of instances it "comes from the transaction," which simply means that it's done the way it always was-out of the commission the seller agrees to pay the listing broker. Why would a seller agree to pay a broker to represent the buyer?
Because in the long run that increases the chances that they will sell their property by giving it the widest exposure, and besides the listing broker is representing their best interests. And in actual practice, that is essentially what was being done under the old system.
What happens if you list a property and then find a buyer for it yourself? Can you still sell your own listing and satisfy the agency laws? In most instances, yes, if you enter into an agreement in which you disclose to both parties that you are acting as a "disclosed dual agent." You obviously could not put either party's interests first, since you would be representing both. In Oregon the term used is: "disclosed limited agent".
As you might suspect, when the old order (everyone representing the seller with the unilateral offer of subagency) broke down, there was (and still is) some degree of turmoil in the ranks of the real estate profession. The concept of buyer agency was initially not warmly embraced by many in the business, based upon what was perceived by some as unwarranted attacks on the business practices of traditional brokerages. Several national-level buyers' brokerage organizations were formed that recruit real estate agents to act exclusively as buyers' agents. One of the most informative sources of information regarding the emergence of the buyer's agent movement can be found on the Web site of the National Association of Exclusive Buyer Agents (NAEBA). This is a professional organization devoted to the exclusive buyer's agent movement-in other words, agents who do not represent sellers-only buyers. Check it out at www·naeba·org.
AGENCY: THE FUTURE
As lawmakers wrestle with this problem, one of the alternatives to the traditional concept of agency that has developed is that of "transaction broker" or "facilitator." The idea here is that agency as it exists in common law is not really appropriate for the real estate profession, since the goal of the real estate licensee is to bring parties together and negotiate a mutually satisfactory solution-not to represent one party in a formal agency relationship. There's resistance to the idea, some of it based on philosophical convictions, and some based on vested interests.
AGENCY: THE BOTTOM LINE
Now let's take a step back and focus on the essentials. How do you get paid in real estate? Although there is a strong "fee-for-service" movement that we'll discuss in Chapter 17, most real estate agents are paid when the transaction closes-and only if the transaction closes. The transaction will close when all parties are satisfied. You are not likely to reach that kind of an agreement if there is an adversarial relationship between the real estate licensees involved. How much do you get paid? You typically receive a percentage of the sales price. That's great for the listing agent, since interests are compatible. The more you get for the home the more you make. But how about the buyer's agent? The more his client (the buyer) pays, the more he makes. That's a little inconsistency that hasn't been fully sorted out yet. If you are working with a buyer as a buyer's agent, I believe it would be wise to address this openly and honestly and counsel her to come up with an offering price that is within her means and fair to all parties. As with all other matters, the final decision is hers.
Here are my recommendations:
1. As you participate in your licensing training, pay close attention to the subject of agency as it is practiced in your state and your local area. There will be coverage of the subject in your basic text material, but you will need to integrate that into what the rules are in your state.
2. Make absolutely certain that if your state does have mandatory agency disclosure that you understand completely the formal requirements and that you make the necessary agency disclosures when called for-typically at the first substantive contact with a potential client. This can become burdensome, since the technical requirements of many agency disclosure laws mean that the typical house hunter, for example, could end up signing several disclosure forms.
3. Try to convince everyone that unless the transaction is fair to everyone, it's fair to no one. Be aware that this is not an opinion shared by all. Those who are proponents of a more adversarial form of agency don't agree with me on this one. They maintain you represent your client in the best manner possible, strike the best deal, and it's up to the other side to watch out for their interests. If they make a bad deal, that's their problem.
4. Understand that in some circles in the profession the depth of feeling runs deep on this issue. Most of the troops in the field have rolled with the flow and continue to try to do business legally and ethically while continuing to earn a living, but passions among some are intense-particularly those with vested interests. Do a lot of listening, studying, and asking questions before you become too generous with your personal opinions.
5. Don't be disappointed if, after you've completed your licensing training, you have the nagging feeling that you don't fully understand the subject of agency completely. A member of my network is one of the leading national authorities on this subject. I occasionally call him when I need guidance. His reaction the last time I called was, "The more I learn about agency, the less I know." Another associate of mine, who teaches real estate licensing in an eastern state, said that when he's explaining agency, he can't help but be reminded of the old Abbott and Costello routine, "Who's on First?" As a matter of fact, he said one of his students suggested the similarity.