MARY ANN QUINN
‘Stepping stone’ option

As more and more real estate companies are considering eliminating subagency – the practice of allowing agents who work for other firms to represent their home-seller clients – one local Realtor group has decided to make it easier for real estate agents to practice as facilitators.

The Eastern Middlesex Association of Realtors recently developed forms that its members can use so they can act as facilitators or transactional brokers during a real estate transaction, meaning they represent neither the buyer nor the seller and have no fiduciary responsibility to either, but simply put together the deal.

Mary Ann Quinn, president of EMAR, said the board decided to create the forms after noticing that some real estate companies in Middlesex County were no longer allowing subagency but were willing to work with buyer’s agents or non-agents who brought prospective buyers to see for-sale homes that the firms had listed.

“A number of agencies in this area do not practice buyer agency at all, and some companies have changed their business models and they’re no longer offering cooperation to subagents,” said Quinn, who manages Century 21 North Shore at The Depot in Reading. “I had some discussions with managers of these companies [that no longer offered subagency] and found out that the spirit of cooperation was there but they did not want the liability of paying a subagent.”

Quinn established a task force consisting of some franchise owners, managers and owners of small independent companies, and with the assistance of EMAR’s legal counsel, Chris Coleman, they created forms that members could use to offer transactional brokerage. The association started selling the forms about two weeks ago.

“When I announced that the forms were available, we were greeted by a round of applause,” said Quinn.

EMAR follows the lead of the Berkshire County Board of Realtors, which more than a year ago developed forms to enable its members to use transactional brokerage in their business.

The groups’ actions come at a time when small and large companies in Massachusetts, like GMAC Real Estate, have dropped subagency, and additional firms are considering doing so. Some companies fear the liability associated with having non-company agents act as subagents of their clients. Real estate brokers and home sellers can be held liable for any misrepresentations that a subagent makes about a property.

The Massachusetts Association of Realtors has approved a proposal intended to clarify agency relationships, and one component would require home sellers to give informed consent to allow subagency. Another component would specifically identify transaction brokerage/facilitation, or non-agency, as a real estate practice that agents and consumers could utilize. The association is looking into filing legislation to implement the proposed changes.

Quinn sees the facilitation forms as a “stepping stone” for companies that previously did not offer buyer agency and are not yet prepared to work as buyer agents, she said.

By offering transactional brokerage or facilitation, agents who were accustomed to working as subagents of sellers can continue to cooperate with agents working at firms that have eliminated the practice, until they can get the proper training and education to work as buyer agents if they choose to.

“The reason we created the forms was so our membership could keep doing business,” said Mark B. Hutchinson, a Realtor who led the EMAR task force that developed the facilitation forms.

Hutchinson said the task force looked at forms that are used in other parts of the country where facilitation is practiced. In addition to offering facilitation forms, the association is encouraging members to take buyer representation courses because buyer agency is becoming more common, explained Hutchinson.

“The industry is going to be changing; there are going to be new business models, new forms of agency,” he said.

Hutchinson’s firm, Brad Hutchinson Real Estate in Melrose, has been a traditional seller’s agency and has not offered buyer representation, so his company will be using the forms to work with real estate companies that don’t offer subagency.

But some industry leaders warn that agents should be cautious about facilitation or non-agency, and others fear that identifying transactional brokerage as an option will diminish the role of Realtors in transactions and ultimately erodes traditional broker commissions. They argue that consumers will be less likely to pay full commission prices if they’re not being offered what they consider full service or representation.

About 10 years ago, an advisory group for the National Association of Realtors charged with assessing the advantages and disadvantages of non-agency relationships to both real estate licensees and consumers recommended that NAR not further develop or promote the non-agency/facilitator concept. Instead, the group advised NAR to promote a legislative framework that individual states could use to clarify the law of agency as it applies to real estate brokerage.

A Clear Ruling

Edward Sweeney, a partner at the West Yarmouth law firm of Ardito Sweeney Stusse Robertson & Dupuy, said real estate licensees must be very cautious when it comes to non-agency practices.

Sweeney said he believes that a real estate broker who is “intending to act pursuant to their license cannot hold themselves” out to be a non-agent real estate broker because under the law a broker must have some type of agency relationship. The law does not specify what that agency relationship is or to what extent the relationship can be changed or modified by a contract, he said.

“In other words, they’re [non-agents] acting beyond their license,” said Sweeney, who has worked with the Cape Cod & Island Association of Realtors.

Sweeney said he hasn’t told clients that they can’t practice as facilitators in the Bay State, but he advises them that they should get a clear ruling from the Massachusetts Board of Registration of Real Estate Brokers and Salespersons to ensure that they are acting within the purview of their license.

“There isn’t anything that clearly says that the activity undertaken by the facilitator is disallowed,” he said.

If it’s determined that they’re acting beyond the purview of their license, Sweeney said brokers should make sure that the board believes it’s an activity – an unregulated activity – they can undertake and that they can still hold themselves out as real estate brokers. He added that if brokers are acting beyond their license, they should determine whether they’re covered under errors and omissions insurance.

“It’s in the best interest of all real estate brokers that this matter be clarified,” he said.

In a letter dated April 12, Joseph R. Autilio, executive director of the Board of Registration of Real Estate Brokers and Salespersons, tried to clarify the issue after Steve Ryan, general counsel for MAR, contacted him requesting information on facilitator relationships and disclosure requirements.

“As you know, the relevant licensing law does not create relationships that agents have with their clients. Therefore, the board sees no impediment to the establishment of facilitator relationships between brokers and their clients,” wrote Autilio.

“Where, however, agents enter into an exclusive relationship representing either the seller or the buyer, then those agents would have to comply with the board’s agency disclosure regulation, thereby providing the requisite written disclosure. Please be advised that the board is not endorsing facilitator relationships. Indeed that is not something in which it plays any role. Additionally, the board certainly lacks the jurisdiction and expertise to know whether simply characterizing a relationship as ‘facilitator’ forestalls any further inquiry into whether such a relationship actually exists.”

Autilio continued, “The board only notes that the relevant licensing law does not establish agent-client relationships. Instead, that is left to the agent and client. Consequently, real estate agents and the clients can arguably establish ‘facilitator’ relationships. If indeed, facilitators are not exclusive agents for either the seller or the buyer, then the board’s agency disclosure requirement would not apply to those relationships and, therefore, no agency disclosure would be required.”