REALTOR® Organizations Increasing Consumer Confusion on Real Estate Representation

Recent actions by the staff of state and local REALTOR® organizations are leaving members of the National Association of Exclusive Buyer Agents (NAEBA), nearly all of whom are also members of their local REALTOR® organizations, concerned about consumer protection in real estate. Like many trade organizations, the National Association of REALTORS’® goal is to improve business for its members. Its mission is even “to help its members become more profitable and successful,” but on several occasions this year, the state and local REALTOR® organizations appear to be putting those profits above ethical and fair dealings with home buyers and sellers. In Florida, numerous NAEBA members contacted staff of the Florida REALTORS® asking for a change to the existing Exclusive Buyer Brokerage Agreement. One letter stated, “The purpose of my letter is to ask FAR to include the Single Agency Disclosure with all the fiduciary duties required by Florida Statutes 475.278 to the existing FAR Exclusive Buyer Broker Agreement. This would remove any possibility of misrepresentation to the consumer buying public and meet the requirement made by the Statute for written disclosure by Single Agents offering ‘exclusive’ buyer broker services.” NAEBA President Dawn Rae also submitted a letter. The only response received was a phone call from Donna Ryan, Senior Counsel and Manager of Member Legal Communications for the Florida REALTORS®, to the members who sent letters stating she had made a recommendation for changes. She would not respond to NAEBA or the NAEBA President (who is a member of Florida REALTORS®) at all nor would she give any response in writing. In the nearly six months since the request was made, the change has not been made nor even discussed further. In California, there is a case, Horiike v. Coldwell Banker, being considered by the California Supreme Court concerning dual agency. Per California law, dual agency occurs when one real estate brokerage is representing both the buyer and the seller in the same transaction. The plaintiff is alleging that the listing agent had a fiduciary duty to him even though he was the buyer because he was a client of the listing agent’s firm. The appellate court agreed. Dual agency is fraught with conflict of interest, leaving neither the buyer nor the seller with true, full representation as NAEBA pointed out in its Amicus Curiae brief submitted to the California Supreme Court. Many real estate agents practice dual agency, however, because it is quite lucrative. Instead of splitting the commission, the agent or brokerage keeps all of it. In keeping with the mission of making its members more profitable regardless of consumer protection, an April, 2016 article from Bob Hunt, Director of the California Association of REALTORS®, even states that “DUAL AGENCY CAN BE A GOOD THING.” In Massachusetts and Colorado, state organizations are now allowing REALTORS® to falsely advertise their services. For years, the accepted definition of Exclusive Buyer Representation has been, “The practice of representing only buyers and never sellers in a transaction. The company never lists a seller’s property and thus never has a seller as a client.” This definition has been published in numerous publications from the National Association of REALTORS® including Agency: Choices, Challenges & Opportunities, the Real Estate Buyer Agency Council (REBAC), and other organizations. Consumers doing a search of the term on the Internet will find numerous references to that same definition and will rightly assume that someone advertising as an Exclusive Buyer Agent would meet that definition, yet when Exclusive Buyer Agents in those states complained about an agent in their market who was advertising Exclusive Buyer Representation even though they worked in a company that represents sellers, the REALTOR organizations told the agents that since there is no copyright on the term, the other agents can use it. That is going to lead to even more confusion for a consumer who thinks he is working with one type of agent based on definitions even published by the REALTOR® organizations, but ends up working with another. In fact, a consumer working with one of these “Exclusive Buyer Agents” could even be asked to consent to dual agency. According to NAEBA President Dawn Rae, “Given this current climate of confusion, it is even more important that home buyers remember ‘caveat emptor,’ let the buyer beware. Choosing a REALTOR® isn’t enough. Buying a home is one of the largest financial investments a person will make. Buyers should interview agents to ensure that the agent will remain on their side and truly represent them throughout the transaction… regardless of which home they buy.”