Buyers Agency, the Best Kept Secret—Part 2
The Discount Companies
A new way of listing has emerged lately, with certain so-called “discount” companies offering to list homes on the MLS (and usually including exposure on REALTOR.com) for an up-front flat fee. Unlike other companies, they do not wait for the house to sell to get paid. They usually ask the seller to handle the showings and pay a lower fee than is typical to any buyer´s agent who brings them a buyer. Many Sellers are not aware that some agents will not show such listings, both because the fee is lower and because the companies do not spend the time and energy to get the deals negotiated to closing. The jury is still out on whether this system serves a niche market and will survive.
While real estate sales practices over the years developed along the lines of making the listings more informative and more available to the public, another area of real estate became murkier-whose interests the agents represented during the process. Outside the real estate world, agency law was quite clear-an agent owed duties of loyalty, obedience, protection from harm, confidentiality, full disclosure and accountability of funds. Other occupations operated under this system without problems. But in real estate, agents were trying to get deals done under the system they had– the lines of responsibility and loyalty were blurred even where all parties had the best intentions. It was not until the late 1980´s that the commonly-understood concept of agency was applied to the sale of real estate in Pennsylvania. And it was not until 1998 that agents in Pennsylvania had to disclose to the buyers and sellers whose interests they were representing in a transaction.
This was a delayed response to an obvious problem. A study in 1973 by the Federal Trade Commission found that 71% of buyers thought the agent showing them properties was “their” agent and 73% of them had told that agent confidential information such as the highest price they were wiling to pay. This was long before buyer agency became an accepted practice at a time when almost all agents were legally required to represent the best interests of the seller.
Acceptance Of Buyer Agency Generally
Despite the obvious benefit to the buyer/consumer, the concept of a fiduciary-customer relationship in real estate grew slowly. In part, this may be a reflection of the commonly-held belief that the listing agent (and the company he or she works for) really knows the market and this particular house and is the best person to deal with, especially in an emotionally-charged purchase such as a home, where people do not behave as when buying a car. Perhaps there is a tendency to set aside the tenets of purchasing that guide in other areas because the consumer feels at some disadvantage in judging the market and in negotiating.