Bay State Realtors from as far away as Cape Cod packed a small hearing room in Boston last week to comment on regulations that have been drafted for a new agency law, which will give them more options in how they work with homebuyers and sellers, that takes effect later this year.

Leaders of the Massachusetts Association of Realtors spoke in support of the regulations and a disclosure form that were crafted by the state’s Board of Registration of Real Estate Brokers and Salespersons. But more than a half-dozen Realtors and two advocacy groups urged board members to make changes to the regulations and to the disclosure form that must be signed by homebuyers and sellers.

A key sticking point for some of the real estate professionals attending the hearing last week 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, argued that real estate agents should be required to certify that they have secured “informed consent” from consumers. They also asked 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 board’s proposed current version of the mandatory agency disclosure does not clearly advise and protect Massachusetts’ real estate buyers and sellers,” said Leo Berard, a Cape Cod real estate agent who serves as co-chairman of REAFRA.

MAR leaders, however, backed the proposed regulations and disclosure form.

“My association believes these regulations are productive, comprehensive and offer clarity and consumer protection in the profession regarding the options available to real estate professionals in their relationships with consumers,” said MAR President Maggie Tomkiewicz in prepared testimony.

David Drinkwater, broker-owner of Grand Gables Realty Group in Scituate and past MAR president, also spoke in support of the regulations. “These regulations will provide clear guidelines to a process that currently creates confusion in the marketplace. Specifically, these regulations will provide for additional choices for consumers when buying or selling a house as well as provide clarity to the brokerage community on how to properly disclose and obtain consent for these relationships,” Drinkwater said.

A ‘Huge Reversal’

Under a law passed by the Legislature last summer, a real estate firm 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. It also permits a firm to represent both a buyer and seller in the same transaction by having the broker-owner designate one or more agents to represent the buyer and another agent to represent the seller, a practice known as designated agency.

REAFRA members maintain that allowing companies to represent both a buyer and seller in the same transaction represents a clear conflict of interest, and they want to make sure that consumers understand the implications of signing off on designated agency.

Real estate agents currently must present a disclosure form to buyers and sellers during the first personal meeting to discuss a specific property. An agent typically checks off the type of agency describing the relationship between the agent, firm and the consumer, and the consumer signs it. The Board of Registration was charged with amending the disclosure form to add more agency options, included designated agency, to reflect the new law.

In a letter to the Executive Office of Consumer Affairs and Business Regulation, the American Homeowners Grassroots Alliance described the proposed disclosure form as “inadequate” and “confusing.”

“We consider this proposed form to be unclear, incomplete and anti-consumer, definitely not in the best interest of the Bay State homeowners you represent,” wrote Beth Hahn, president of the alliance.

Hahn continued, “Should sellers sign this misleading new form, all other agents in the firm the seller retains could legally represent buyers, negotiating a lower, not higher, price … though sellers still pay the commission. This huge reversal would happen with inadequate disclosure: without sellers’ receiving full information all implications of the change, and without sellers giving any true informed consent to the conflicts of interest now within ‘their’ office. It’s tantamount to an agency scheming, ‘Come list your property with one of our agents, and we won’t really explain to you how all the other agents in our office will be working against you.'”

Speaking on behalf of REAFRA, Suffolk University law professor Charles Rounds told regulators that a real estate sale is one of the most adversarial transactions and that there is an “inherent conflict of interest” when one company tries to represent both parties. He recommended that certification be made part of the disclosure form.

But Robert S. Kutner, a real estate attorney who serves as counsel for MAR, said while it’s appropriate to provide a consumer with a notice explaining the nature of the agency relationship, it’s unreasonable and illogical to require an agent under the penalty of perjury to determine someone else’s level of understanding or motivation and to certify that the consumer is not acting under constraint. The recommendation for certification is “fraught with peril,” said Kutner, because of the potential for consumers who are unhappy about an aspect of a real estate transaction to blame the agent after a home sale is completed for falsely certifying that they fully understood the agency relationship.

Kutner believes the certification recommendation is designed to prevent the legislation from being effectively implemented. “It’s a roadblock that’s being thrown up by people who don’t like the underlying legislation,” he said.

Noting the scandals that have rocked accounting, insurance and brokerage firms recently, Fred Meyer, a Cambridge real estate broker who is co-chairman of REAFRA, said the real question before the board is this: “How can the real estate brokerage business escape the conflict-of-interest scandals that have hit other [businesses]?”

In addition to asking the board to incorporate the recommendations of REAFRA, Meyer presented a 10-page consumer pamphlet designed to explain the conflicts of different agency relationships that he said he hopes the Department of Consumer Affairs would consider publishing.

The Massachusetts Public Interest Research Group, a public advocacy organization, also submitted a letter in support of changes recommended by REAFRA.

“The board’s form does not provide a straightforward explanation of whom the agency represents. The emphasis of the board’s form is all on the individual agent. But the individual agent is not the real problem because the consumer may already know or have worked with the agent,” wrote Deirdre Cummings, MassPIRG’s consumer program director.

Some Realtors urged the board to strike the words “exclusive buyers agent” from the proposed disclosure form, saying that the use of the term in the regulations contradicts how groups like the Massachusetts Association of Buyer Agents and the National Association of Realtors have long defined the term. According to buyer agents who spoke at the hearing, exclusive buyers agents never represent sellers.

The board will consider the comments from the hearing and forward its regulations to Secretary of State William Galvin’s office by mid-March.