Bay State Realtors will catch their first glimpse of the new regulations governing their business as well as disclosure forms they must present to buyers and sellers during real estate transactions this month.
The new regulations and forms were crafted by the Board of Registration of Real Estate Brokers and Salespersons after the so-called agency law was passed by state legislators last summer and presented to the Secretary of State’s Office last month.
The board, which had a public hearing in late January to get input from Realtors, created a one-page disclosure form that must be signed by sellers and buyers and includes definitions of the different types of relationships that consumers can have with a real estate broker or agent. It also generated consumer consent forms for the practices of designated agency and dual agency. Designated agency is a practice that enables a firm’s broker-owner to designate one or more agents to represent the buyer and another agent to represent the seller in the same transaction. In dual agency, the brokerage firm or agent can represent both seller and buyer in a transaction, but has to be neutral with regard to any conflicting interest of the buyer and seller. The practice of designated agency will be newly codified in the Bay State.
Some in the real estate industry who saw the forms last week were pleased with the results.
Henry DiGiacomo, chief executive officer of the Cape Cod & Islands Association of Realtors, said the agency disclosure form “does a very effective job of disclosing to consumers the agency options that are available to them and will be easy for real estate agents to use in their business.”
Under the new agency law that takes effect in July, a real estate firm also will be able to function as a facilitator in a real estate transaction, working with buyers and sellers to assist with a home purchase and sale but having no fiduciary responsibility to either party. In addition, the new law requires companies to get written permission from home sellers to allow agents besides the listing agent to work as subagents of sellers, and it permits designated agency to take place.
A key sticking point for some real estate professionals was ensuring that agents obtain informed consent from consumers on the type of agency relationships they forge with them. Members of Real Estate Agents for Real Agency, or REAFRA, a statewide coalition created last year to oppose the agency legislation, say real estate agents should be required to certify that they have secured informed consent from consumers, particularly in cases of designated agency, which they maintain is fraught with conflict-of-interest and liability issues.
They also urged regulators to adopt a more comprehensive disclosure form that in addition to outlining the role of the agent in the transaction identifies and explains the responsibilities of the real estate firm.
The forms and regulations that were created do not include any requirement that real estate agents certify that they have secured informed consent from consumers.
“It could have been much better, but it could have been worse,” said Fred Meyer, a Cambridge broker who is co-chairman of REAFRA, referring to the forms. “The new forms give the bare bones of the telling what designated agency is but they make virtually no attempt to say what it means to the consumer.”
The consent form for designated agency “could give a false reassurance to real estate agents and it could be terribly dangerous,” Meyer said.
Confidential Matter
REAFRA members argue that the agency disclosure is not consumer-friendly, and that the brokerage practices that are available are not clearly identified or defined so that the average consumer can understand them.
In addition, they maintain that procedures to get informed consent disclosures on the potential conflicts of interests in cases of designated and dual agency “are virtually non-existent.”
REAFRA is finishing a consumer brochure on agency that it plans to post on its Web site, www.realagency.org, which also will feature information on the group’s recommendations for practicing designated agency.
James H. Crocker, a Realtor and developer on Cape Cod, said there is still some concern about the way the facilitator relationship is described. The facilitator “has no duty to keep information received from a seller or buyer confidential” unless otherwise agreed, according to the description included in the disclosure form.
“We’re concerned about the lack of confidentiality,” said Crocker, who serves as president of the Cape Cod & Islands Association of Realtors. “If a buyer or seller unwittingly tells you something and then doesn’t ask you to keep it confidential, [the facilitator] may feel the need to share that information, which may enhance the [opposing side’s] bargaining position.”
Crocker said members of the Cape Realtor association also have expressed concern because, according to the form, facilitators can become an exclusive agent of the buyer or seller if both the buyer and seller agree to it. If a facilitator changes the relationship to represent either side in a transaction, he or she may feel obligated to share all information, even if he initially agreed to keep some things confidential, explained Crocker.
The Massachusetts Association of Realtors, the industry’s trade association, had a training session last Friday for certified instructors who will be educating real estate brokers and agents on the new agency regulations. MAR also will provide separate training classes for each of the state’s 17 local Realtor associations.
