A local San Diego brokerage, ARG has announced they are the first broker in San Diego to pull out of listing syndication.

I am not going to go into great detail on this site which is consumer orientated.  If you want to know more please visit an excellent article by Lily Leung with the San Diego Union Tribune.  She has also posted some consumer reaction to the announcement here.

Fred Glick makes several important points in the video below about ARG’s announcement which focus on Zillow, Trulia, and Realtor.com.

First, that the underlying message is to call the listing agent, no one else will know more about the property or represent you better.  Sounds like dual agency to me.

Second, that the seller should be concerned and not allow his or her listing to be syndicated on Zillow Trulia, or Realtor.com, the three largest consumer real estate sites on the Internet.

http://www.youtube.com/watch?v=WMQm3ZvVRl4

What are your thoughts?

Part Two: Who does your REALTOR® Represent?

Yesterday I started a series of 9 posts regarding what to look for in a REALTOR®.  The #1 trait in my opinion is Honesty while the 2nd is Fiduciary Duty and Single Agent Agency.

In essence picking out someone to be your advocate in the transaction and to watch out over your interests on probably the largest financial decision of your life.

Why is a clear position of agency so important?  Can’t someone serve two masters with out conflicting goals?  After all it is legal in California and practiced widely.

Let’s step out of the real estate arena for a moment and consider the following scenario from another profession which does not allow conflicting agency.

You have hired an attorney to represent your interests in a patent infringement case.  Years ago you invented a clever gadget that was brought to market and has become a significant source of income for you and your family.  Things are going great until a huge established Company comes along and markets a very similar item but with the added advantage of name recognition and a large advertising budget.

You hire an Attorney to represent your interests with the expectation of getting the major company to halt production.

Would you hire the opposing sides Attorney because it would be easier and cheaper? Of course NOT – both sides have conflicting interests.  You would want your own advocate to fight for your rights and look after your best interests.

I have written a great deal on real estate agency and invite you to visit that category should you wish to learn more.

Photo courtesy of Flickr

Disclosure Regarding Real Estate Agency Relationships Revised.

Updated July 2011.

One of the first forms that you should see when working with a real estate agent is a Disclosure Regarding Real Estate Agency Relationship produced by the California Association of REALTORS® (CAR).  This form has been revised in November 2009 making the process of proper delivery easier to understand.

The Disclosure Regarding Real Estate Agency Relationships basically outlines the 3 types of agency relationships that you can have with a real estate agent in California.  This agency relationship is then confirmed in the listing agreement or purchase contract when a property is listed for sale or an offer is written to purchase real estate.  You will want to know what obligations the agent you are working with has to you and other parties in the transaction.

Most notable among the forms being released is a revised Disclosure Regarding Real Estate Agency Relationships (Form AD). The revised AD form aims at ending the confusion surrounding the form by allowing a buyer’s agent to use just one form for both the seller and buyer to sign. REALTORS® may now handle the delivery of the AD form in either of two ways:

Alternative A: Agents may continue the existing practice of generating three AD forms in a typical transaction. The first AD form is generally signed by the listing agent and seller before entering into a listing agreement. Absent dual agency, the second AD form is generally signed by a buyer’s agent and buyer before writing an offer. The third AD form is generally signed by the buyer’s agent and seller. An AD form signed by the buyer’s agent and seller does not create an agency relationship between the buyer’s agent and seller because the AD form is merely an information sheet. The actual confirmation of agency is stated separately in paragraph 27C of the C.A.R. Residential Purchase Agreement (RPA).

Alternative B: The procedure for Alternative B is stated in the explanation box at the bottom of the newly revised AD (revised 11/09). Agents will still prepare the first and second AD forms stated in Alternative A. The buyer’s agent, however, may now deliver to the seller the second AD form signed by the buyer’s agent and buyer. The seller may sign acknowledgement of receipt of that AD form on the signature line in the explanation box. No third AD form is needed under Alternative B.

Hopefully this will help real estate agents that don’t understand the importance of Agency Disclosure.  My guess is problems will continue to exist with Agency Disclosures and Agency Confirmation delivered much later in the transaction.  I recently wrote an article on how many lawsuits are a result of disclosure not being done early enough in the relationship.

Visit our real estate agency category for more information.

Photo courtesy Flicker

According to the article Beware Legal Danger Zones published in the September 2009 edition of REALTOR® magazine, real estate agency issues continue to lead in the biggest source of lawsuits.  These include breach of fiduciary duty, dual agency, agency disclosure, and buyer representation.  The article goes on to state that they expect these issue to be more prevalent in the courts in the next two years.

On agency matters, breach of fiduciary duty is one of the biggest sources of disputes. The main problem, according to the Legal Scan, is that many practitioners are unclear about the breadth of responsibility owed to clients. “It is easy to underestimate or fail to appreciate the level of duty that is required,” one survey respondent wrote.

The report also cited problems with disclosure of agency relationship. Practitioners are supposed to disclose agency relationships at their first substantive contact with customers, but the disclosure is “often overlooked and not sufficiently explained to prospects,” one respondent said.

If you want to learn more regarding this important topic please visit our Agency category.

Image source: REALTOR® magazine.

Buyer Non-Agency

Updated July 2011.

Anyone that is a regular reader of this blog knows that I feel strongly about single agent dual real estate agency, and you can find lots of material in our Agency Category regarding the perils of dual agency.

One of the biggest arguments that agents use to advocate the use of dual agency, is it will save my seller money.  Some listing agents may have a listing clause that reduces the amount of commission due if the Agent represents both the homeowner and purchaser in a resulting transaction. Usually, this is a gimmick given to the Seller to appease a request for a reduction in commission.  The vast majority of real estate transactions are not single agency – dual agency, therefore does not entitle the seller any commission discount.

In dual agency, the Listing Agent has duties to get the highest and best price for their Seller, but is now also trying to represent the purchaser to get them the best deal.  Kind of like having an attorney represent both spouses in a complicated divorce.

I  think that having an single agent represent the homeowner, and another represent the purchaser is in the best interests of all parties.  However, sometimes a savvy Client comes along and does not wish representation. In those cases my suggestion is for them to use a Buyer Non Agency Agreement.  This is a standard California Association of REALTORS® (CAR) form also known as BNA.

Since I don’t practice single agent dual ageny, this would be the only way that I would complete a transaction for my Seller if purchaser agent was not involved – and I would only consent to this at the insistence of the purchaser, and the agreement of the homeowner.

The form is pretty clear in paragraph 2 of who represents who:

2. NO REPRESENTATION OF BUYER BY LISTING BROKER: Buyer understands and agrees to the following:

Listing Broker does NOT represent Buyer and Listing Broker will NOT be Buyer’s agent during any negotiation or transaction that results between Buyer and Seller regarding the Property. All acts of Listing Broker, even those that assist Buyer in entering into a transaction or performing or completing any of Buyer’s contractual or legal obligations, are for the benefit of Seller exclusively. Any information that Buyer reveals to Listing Broker may be conveyed to Seller.

B. Listing Broker does NOT represent Buyer and Listing Broker will NOT be Buyer’s agent even though Listing Broker may provide Buyer forms describing agency relationships as required by law or otherwise.

The form goes on to say the following:

4. REPRESENTATION OF SELLER BY LISTING BROKER: Listing Broker will act as the agent of Seller exclusively during any negotiation or transaction regarding the Property.

If explained properly, many purchasers will decide they don’t want to go at it alone.  They don’t really have the expertise to prepare the purchase agreement to protect their interests.  Having a your own Agent that can advise them how to structure the purchase agreement is a wise investment.

Coming up soon, we will look at the Seller Non-Agency agreement used for the purchaser that has agent representation and the Seller that does not.

A recent post at the Los Angeles Times titled Real Estate agents; They aren’t all the same, real estate agency was not disclosed early in the process more times than not.

According to the Assn. of Realtors’ 2008 Profile of Home Buyers and Sellers, less than one-third of all buyers are told whom their agents represent at their first meeting. One in four others are told, but not until they make an offer on a house, and the rest are told “some other time” — if at all.

When you consider that the issue of agent representation can have a major effect on the price a buyer pays, that’s just unacceptable. Indeed, National Assn. of Realtors general counsel Laurie Janik has been quoted as saying that her members need to take their agency-disclosure requirements more seriously.

The article goes on to say the importance of a clear understanding of real estate agency relationships.

“Clear, consistent and transparent real estate agency disclosure will help consumers better understand that there are many types of real estate agents, each of whom have responsibilities to different parties,” Sullivan said. “Consumers need to have all the facts in hand in order to make informed decisions.”

Consider the following:

Most would-be buyers weren’t aware of that. Sometimes, lookers became so friendly with the agent who was helping them find a house that, in the course of their conversations, they disclosed important information the seller could use against them.

For example, if the would-be buyer wrote an offer for “x” but divulged that he could go as high as “y,” the agent had a duty to disclose that material fact to the seller. And knowing that the other side was willing to pay more, the seller could play hardball by sticking to his price or countering with a price he now knew the buyer would pay.

If you want to learn more about Real Estate Agency Relationships please visit our Agency Category.

Simple Truths

• Homes are bought on emotion, and then later justified with intellect.
• You will fall in love with a home you see, then emotion will rule and you’ll buy it.
• The agent next to you in that moment should only have your interests in mind.

These are a series of posts that I have done on discussion of real estate dual agency.  While I somewhat feel I have been beating a dead, smelly horse, and organized real estate is not likely to changes it evil ways, hopefully these and other posts from thinking REALTORS will give you another perspective and if you want your own agency.

Don’t fool yourself, there are some powerful pillars of organized real estate dedicated to the status quo. This will not change from within the industry.  The establishment likes it the way it is.

Disclaimer:  I have been practicing real estate over 20 years and have been personally involved in ‘dual agency’ relationships.  The single agent dual agent transactions (only a few) made me the most uneasy, and wanting a long hot shower afterwards. Of course working with large brokers, two agent dual agency is almost a given with the Consent to Dual Agency Relationship form which is shipped in semi-truck size cargo boxes, from large steamer ships unloaded by forklifts.

While I consider myself to be on the extreme of real estate agency, much discussion has been focused on a single real estate agent representing both the buyer and seller.  Many feel that one agent representing the Seller, and another representing the Buyer, but both working for the same Broker is less onerous.  While I agree somewhat, you can’t be a little bit pregnant – in California, this is still defined as Dual Agency.

There is a real tendency  to downplay Buyer Agency, and that by having it things won’t get done so easily, bad agents will mess up the deal, the Seller won’t get there way.  These are really all just code for don’t rock the boat; like Rodney King so bravely said, “Can’t we all just get along?

Here is a recent comment by Daniel Beirne on “Inmen regarding Romancing The Hogger.”

In fact, most real estate sales result in negotiations that have very different established rules of practice. In a successful negotiation, a negotiator is at least mindful of the other side’s goals and at best they try to meet the needs of the other side in order to achieve a better outcome for their client.

Why should we remove a better outcome for our clients from the equation?

In a dual-agency transaction just like a “fully represented” transaction, there is a simple truth. The seller wants to move out and receive a fair value for their property and the buyer wants to move in and pay a fair value for the property.

In most cases this is not a conflict of interest, but there is a high degree of interest and value to having an agent or representative that respects both parties’ basic desires. That person is a dual agent.

A dual agent can steer away from clauses in contracts and in actions that are geared to get the upper hand. Who needs an upper hand when both parties have the same interests?

Banning all dual agency is a myopic approach to all transactions when all transactions are not alike.

Realtors should instead learn their profession, and they should focus on learning professional negotiation rules and practices before throwing away a service to the consumer like dual agency.

Bringing a loaded gun to mediation is not a help. Bringing an open mind and a problem-solving attitude is what the public needs and what Realtors should provide.

Really, single agency and loaded guns? You really couldn’t make this stuff up.

Again, I think this is code for let the Seller get there way and don’t even think about causing any trouble.  The art of selling real estate is win-win – but it should be with each parties interests fully represented.

A few of the really really big and famous real estate bloggers have been posting on Agency recently.  There were some rather strong worded posts on Inmen News and the comments continue to ping my e-mail box.

Jay Thompson of Phoenix Real Estate Guy answers the question, “why do real estate agents practice dual agency?” on a recent post.  Jay can be a bit direct, and you don’t have to put much thought to what he is thinking – you gotta love him for that.

Beats the hell out of me.

Could it be for the windfall payday it can produce?

I won’t say this is why all the agents who practice dual agency do it, but it’s important for the home buyer and seller to be aware of.

When a home is listed for sale, there is a commission that is negotiated. That commission is split (usually evenly, though it doesn’t have to be) between the listing (sellers) agent and the buyers agent. Well, technically it’s split between the listing and buyers brokerages, which then farms it out to the agents. But for simplicity sake, we’ll say it’s split between agents.

Let’s say, for example only, the commission is a total of 6% of the sales price and evenly split. So when the transaction closes, the seller’s agent gets a check for 3% of the sales price, and the buyer’s agent gets a check for 3% of the sales price.

In a dual agency situation, the sellers agent is also the buyers agent. So guess what? That person gets the entire 6% commission.

It’s called “double siding” or “double ending” or “double dipping” the transaction.

I have witnessed brokers and agents whooping and hollering and high fiving when they close a double-sided deal. Are they carrying on because both of their clients were fully served and represented? No, they are acting like they just scored a game winning touchdown because they just got a big fat paycheck.

It makes me want to puke.

Now another favorite read of mine and fellow San Diegan is Kris Berg over at San Diego Home Blog.  After reading her post I was almost convinced that maybe dual agency was not so bad after all, she has that kinda power.

Let’s take a quote from her recent blog as to why real estate agents do dual agency?  Kris argues that the two agent dual agency can be beneficial and can be all warm and fuzzy.  Not sure how the attorney’s would weigh in on this but I totally get what Kris is saying.

So, why would dual agency possible be acceptable, even beneficial, to both parties? There can be many reasons. Let’s start with defining the “agent.” I happen to work in tandem with my husband and business partner. Functionally, we do not operate as the two-headed agent. He has closed transactions where I have never met the client or seen the home and the other way around. In the event we both have an initial relationship with the client, it always evolves to the point where there is one primary point of contact, and the other is relegated to back-up mode. Who takes the lead is a natural evolution, sometimes dependent on schedules but more often on personalities.

So, we have the ability to act as dual agents because we are “dual” agents. This may sound like semantics, and it won’t work if you are working with agents who are ethically challenged, but ethics are central to our model and our being. The day I knowingly breach ethics, you have my permission to shoot me through the temple and call it a day. (I’m embellishing; report me to the Department of Real Estate and have my license revoked. It’s just as painful but a little less a felony.) Case in point – we actually had a listing this year where I was the lead on the listing, while Steve had a buyer client he had been working with for a year who wanted to make an offer. He did, with Steve, and two other buyers did, with their own agents. The home closed escrow two months ago, and Steve’s client is still out looking. It was one of my proudest moments.

If anyone makes it through to this point here is my conclusion and I promise I will bury the horse.

• Agency is important – but picking the right REALTOR® is critical.
• Make an informed decision up front what is important to you to fit your needs and goals.
• Two bad single agency agents don’t add up one really good ethical dual agent.

Will you get a better deal because the Seller is paying less commission?

• Maybe, but in real life that difference is between 1 & 2%
• A good Buyer’s Agent can out negociate that savings every day

Okay, now where did I put that shovel, and how in the world am I going to bury a horse in downtown San Diego?  Any ideas?

The National Association of Exclusive Buyers Agents is urging Congress to include real estate agency disclosure language in mortgage reform legislation, including the Anti-Predatory Lending act currently under consideration.

“Too many consumers have no idea that when they contact an agent listing a home, that agent must do everything possible to achieve the best outcome for the seller,” organization President John Sullivan says. “As a result, these consumers have no one involved from the beginning of the transaction who can advise them on negotiating techniques, price points or the acquisition of an appropriate loan.”

Another blog post by Zac Bissonnette posted on WalletPop discussed the hazards of dealing with dual agency. the post references a HBTV Show called the Property Shop.

Tatiana takes the listing on a duplex, even though she admits to believing that it’s overpriced by $100,000 at $459,000. A young couple comes in and wants to offer $409,000, and Tatiana takes the potential buyer on as a client, making her a dual-agent, representing both the seller and the buyer in the same transaction. Tatiana suggests that they start with an offer of $380,000 and then heads back to the sellers’ home to present it.

That’s where it gets interesting: The sellers rejects the $380,000 offer and then Tatiana tells them straight-up that her buyer is willing to go into the 4′s on the home.

Here’s the problem: As an agent of the buyer, she has a responsibility to keep confidential information they provide that might harm their negotiating position: If Tatiana is going to tell the seller that they’re willing to go into the 4′s, what is the point of making an offer in the 3′s?

Real estate agent and Diary of a Real Estate Rookie author Alison Rogers tells me that “Ethically, Tatiana should either say to the buyer ‘I’m an agent of the seller and anything you tell me is going to the seller, so watch what you say in front of me.’ Or, she should say ‘Here’s what you can tell me in confidence.’ But she can’t play both sides.’”

Rogers is also troubled that Londono, as an agent of the seller, advised the buyer to make a lower offer. “There are few cut and dry rules in representing sellers, but one is that getting a higher price is generally better.”

What does all this mean for prospective home buyers?

Dual-agency is perfectly legal in some states, although specific rules vary. But even if it is legal and the agent recommends it, which you can be sure he will since a double commission is on the line, it’s still not something you should do. There is too much potential for sticky situations and conflicts of interest and no particular benefit to the buyer, in most cases. Rogers tells me that it’s “not generally in a buyer’s best interests” to use the same agent as the seller. “You’re walking into a negotiation and it’s better if you have someone to negotiate for you. Bring your own person to the table.”

Full Post Here

Another interesting post over at Inman – Dual Agency and the “hogs” that love it says:

A common argument by critics: “You wouldn’t want your lawyer to represent the other side in a legal dispute.”

Is dual agency ever a good thing for consumers? Are consumers still largely in the dark about dual agency and what it means? Will the practice of dual agency ever be wiped away completely from the real estate industry?

Full Post

Romancing the ‘hogger” written by Teresa Boardman which inspired the post above says:

When I went to real estate school I learned about the “hogger.” That is the sweet deal that our instructors told us would happen if we represented both the buyer and the seller. Stories were told about unrepresented buyers calling listing agents and those agents selling the listing to the buyer. It is also called dual agency.

While most ethical agents don’t view dual agency as a money making endeavor, the real problem lays in the ability of that agent to represent both the Seller’s and Buyer’s interest in a transaction.  In fact a dual agency picks up twice the potential liability .

The idea of agency is a consumer education challenge. Consumers do not understand real estate agents, real estate companies or agency. The whole Realtor and commission process is a mystery to most buyers. They just want to see the house, and they don’t care about who gets paid what or how.

There is an upside to being a dual agent in that it pays well but there is also a downside. The dual agent can not act in favor of or on behalf of one party or another.

Full Post

Finally I think that Jim Duncan of RealCentralVa.com said it best:

My belief remains: The only party who benefits from Single Agent Dual Agency is the Realtor. And even this is a short-term financial gain that sacrifices public perception of an industry already clinging to integrity.

Full Post

Want to learn more about California Real Estate Agency?  Please visit our Agency Category for more.

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Those of us that watch the real estate market, or work in Bank Owned Properties (REO) know that there are another wave of foreclosures coming.  While this is somewhat positive for those frustrated buyers in the lower price ranges in San Diego, it’s important to know what you’re getting into.

Real estate is all about local markets.  Real estate prices are affected by what your neighbors are doing.  Unfortunately in this market, many of your neighbors’ homes are going to short sales or bank owned, which can push your market value down.  Because these properties are distressed and the Sellers don’t want to keep them, they are priced to sell.

I am advising all of my Clients, and providing a list of pre-foreclosures, auction sales, and bank owned foreclosures when we are looking in a given zip code or community.  The reality is most areas have foreclosures, but some areas have more than others, which may continue to impact pricing.  With this knowledge, my Clients can structure an offer that makes sense for today’s market; the last thing you want to do is overpay.

If you are curious, you may visit my Foreclosure Radar page and search for yourself – this is another tool that I use to make my Clients effective in the market.

Listing agents or dual agents, because of their fiduciary duty to their seller, may be reluctant to provide this information for you.  Just a thought to keep in mind – there are some great opportunities in our market right now for those informed buyers.

It occurred to me the other day that one of the most important early decisions that you can make when considering purchasing or selling real estate is the selection of a REALTOR®.  It is no secret that real estate agents are not really held in high regard, and certainly much of it is well deserved.

So how can you meet and talk with an agent without feeling sold, pressured, or sorry for them?  Other than meeting them at their natural habitat (open house, real estate office, soup kitchen line) its kinda difficult, and far too important of a decision to leave to chance.  Which, by the way, is how many people end up with an agent.

One of the reasons that I write this blog is for people to get to know me and get an insight into my thinking (mmmm….rambling) mind.  Over a period of time, if you read blogs you will get a feel for that persons personality and how they work. When picking a REALTOR it is a good idea to find a personality that aligns with your own – you will be spending some time together and it might as well be fun and productive.  It doesn’t cost any more to use an experienced agent, in fact it can save you time and money.

So for those folks out there looking for a REALTOR I am happy to meet you at one of my many satellite offices (Starbucks – LOL) and have a cup of coffee and conversation with you.  I really love to meet new people, and particularly those that turn out to be good Clients.  At this initial meeting we get a feel for each other so that I can understand your goals and motivations and make sure we’re a good fit.

Of course, I also do phone interviews for those that don’t drink coffee or are just shy.  Call 858-352-8280 – if I am available I will pick up!  So lets meet for a Starbucks – just click here to e-mail me today!

I will leave you with this final thought….

http://www.youtube.com/watch?v=U3NgzQ9Pcsg