Agents Falling Short on Disclosure
Joel Stern of Silver Spring, Maryland, filed a lawsuit against Weichert Realtors, reportedly one of the largest independent brokerage firms in the country, for failing to properly disclose that they represented the seller in connection with his recent aborted home purchase. Stern believes he was induced to sign a contract to buy the house at an excessive price because the agent that Stern thought represented him as a buyer's agent was in fact functioning as an agent for the seller. Click on this link to the article for all of the sordid details.
Recent data released by the National Association of Realtors indicates that real estate agents are failing to disclose whom they represent in transactions at an alarming rate, even where state laws (such as Michigan's agency disclosure law) require them to do so in writing at their first substantive meeting with a potential client.
According to the author of this article, Kenneth Harney of the Washington Post, "You as a buyer or seller need to be alert. Demand a formal disclosure of representation before beginning any substantive discussions with an agent. Do not assume that you are working with a buyer's agent whose sole loyalty is to you."
Harney further cautions, "If it's not in writing, it doesn't exist. In the absence of a signed buyer-agent agreement or other disclosure to the contrary, your agent is almost certainly working for the seller and will squeeze the highest price possible out of you on the seller's behalf."
Related Posts: Agent Disclosure Worse Than Ever
Agency Disclosure Laws Largely Ignored
Recent data released by the National Association of Realtors indicates that real estate agents are failing to disclose whom they represent in transactions at an alarming rate, even where state laws (such as Michigan's agency disclosure law) require them to do so in writing at their first substantive meeting with a potential client.
According to the author of this article, Kenneth Harney of the Washington Post, "You as a buyer or seller need to be alert. Demand a formal disclosure of representation before beginning any substantive discussions with an agent. Do not assume that you are working with a buyer's agent whose sole loyalty is to you."
Harney further cautions, "If it's not in writing, it doesn't exist. In the absence of a signed buyer-agent agreement or other disclosure to the contrary, your agent is almost certainly working for the seller and will squeeze the highest price possible out of you on the seller's behalf."
Related Posts: Agent Disclosure Worse Than Ever
Agency Disclosure Laws Largely Ignored
posted by Stefan J. Scholl, J.D. - Exclusive Buyer Agent at 9/23/2006 08:56:00 AM
7 Comments:
we are seeing more and more issues up here in massachusetts on this subject. it will be interested to see how this is enforced.
A lot of real estate agents call themselves "buyer's agents." These so-called "buyer agents" work for companies that list property for sale - and they themselves may list property 95% of their time - and only works with buyers 5% or less of the time. The problem is - those agents are "designated" to work with you, and buyers really aren't their priority (or their broker's) or their expertise. Every other agent in their office is adversarial to you. Law firms don't allow your adversary to use another attorney at the same firm as your attorney (due to the very real possibility that information may be compromised) - but they allow it in Real Estate - (thanks to the traditional firms lobbying activities - so they can keep their double-dipping business model going - though it isn't in the best interest of the consumer. Unfortunately - they may also not disclose the fact that your "designated agent" can get into dual agency situations with you. It is supposed to be disclosed upon first contact. But that rarely happens. The disclosure rate here in the Chicago Illinois area is less than 20%. Rick Hauser, Broker/Owner - Relocation Advisors Group
When I speak to home buyers they almost never have been told about agency and what happens if they are interested in a listing from that agents office.
Designated agency just makes the whole conflict more difficult to understand.
We some web videos that make the issue easier to understand on our site. http://hbaaa.com
It's pretty disturbing that agents aren't disclosing even in the states where it is required.
Buyers have told me that they didn't receive a disclosure until they were writing up an offer.
This reminds me of a story a few years ago that came to my attention. The consumer called me and was incredulous about what nearly happened to him. He was being represented by a large firm in our market in the purchase of his next house. To further complicate his situation, the house he was selling himself as a “for sale by owner”; that same real estate firm was also representing the buyer of his house. Believe it or not, again that same firm was also representing the Seller on the house he was buying. What the firm did not disclose to him was that the seller of the house he was buying was in a process of a foreclosure and/or bankruptcy. His "so called" buyer agent and the real estate firm were pushing him to close on the house he was selling and living in with out any assurance that he would be able to close on the house he was buying. Fortunately his attorney uncovered the issue with the seller of the property that he has buying and insisted on waiting to close on his current house until he was able to close without risk on the property he was buying. He knew his agent and the firm were willing to put him at great risk, he knew it wasn’t right and he wanted to talk to someone who would not represent clients with adverse interests in the same transactions.
It may seem harmless, but appears to be an inadvertent type of fraud, and I don't like it. Seems to be an alarming trend, agents not being truthful & upfront, not to mention the mortgage fraud business. Ralph Roberts is quoted in the Swanepoel Trends Report by saying that more and more people are being sent to jail on charges of bank fraud and conspiracy to commit mortgage fraud. I am concerned that this will get worse before it gets better. What do you think?
Lucy,
I certainly don't think that failure to disclose your agency relationship with a consumer, as mandated by law, is harmless. I do think this will continue to be a serious problem until the National Association of Realtors does something about it.
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