KATHY ROOSA – ‘A lot of chaos’

In the Massachusetts real estate world, agents and homebuyers and sellers are confronted by a dizzying variety of agency relationships and vocabulary that can lead to confusion.

Ask three attorneys to define what a buyer’s agent or seller’s agent does and you’ll get three different answers, said one real estate professional.

That’s because the Bay State is a common-law state with no specific definitions or legislation guiding agency relationships.

Some Realtors are hoping to clear up any confusion by introducing agency laws in the state that clearly define the roles of seller’s agents, buyer’s agents, subagents and dual agencies – all of which are currently practiced in the commonwealth.

The Massachusetts Association of Realtors recently formed an Agency Task Force to tackle the issue. The group has been meeting regularly and hopes to unveil a list of recommendations by the end of the year.

William Mullen, a continuing education instructor who was appointed chairman of the task force, said it’s too early to say whether the task force is even going to recommend “taking a legislative approach” or writing specific agency laws.

He said the task force might survey MAR members to see how Realtors interpret agency relationship and how they feel about legislation.

“It’s definitely a priority for us to look at and analyze it thoroughly,” said Mullen.

Real estate professionals said the problem in Massachusetts and other common-law states is that agency can be interpreted and practiced in different ways.

“Right now, I believe [that] in the Massachusetts real estate market, there is a lot of chaos and confusion in that marketplace. [There is] inconsistency with interpretation of ‘agency’ from company to company,” said Kathy Roosa of New England School of Real Estate, formerly the Kathy Roosa School of Real Estate, in Manchester, N.H.

Roosa, a member of the task force, said legislation would provide much-needed guidance and standardize the practice in the industry.

Roosa said states like Maine and New Hampshire have very specific laws and guidelines that would prevent “inconsistent interpretation among licensees.”

Other real estate professionals and groups, like the National Association of Exclusive Buyer Agents in Florida, argue that the common law of agency in the Bay State doesn’t need to be changed. Altering the system could be harmful to consumers, they say.

Some exclusive buyer’s agents, for example, say new real estate labels that are being employed in several states – such as transaction broker, facilitator and designated agent – are really cover-ups for practicing dual agency without getting full disclosure and informed consent from buyers.

However, Edward M. Moore, executive vice president of the Greater Springfield Association of Realtors and a member of the task force, said a designated agent “follows the agent and not the brokerage firm.” In a designated agency relationship, the fiduciary responsibility of the agent is supposed to be with a designated client, he said.

Ronald Huth, who owns Buyer’s Choice Realty in Hamilton and who also serves on the Agency Task Force, said he is resistant to the strong push to practice dual agency in the Bay State under a different name, like appointed or designated agency.

That could be deceptive to consumers unless the agency relationship is significantly changed, not just renamed, he said.

“There are some real benefits of the current system,” Huth said. “Common law does require that if an agency is going to represent both the seller and they buyer, written consent needs to be gotten.”

Huth acknowledges, however, that there are some complications and “difficulties” with dual agency, and having laws in place would make agency relationships more defined and easier for consumers to understand.

‘Wrought With Liability’
Problems emerge when the same real estate office tries to represent both the buyer and the seller, Huth said. In situations like that, there can be an “inappropriate” sharing of information between agents within an office, and that could lead to some liability issues.

When agents who work for the same company but operate in different offices – sometimes in cities that are miles apart – try to broker a deal, there is less of a chance of the inappropriate exchange of information, he said.

Moore said there is a perceived problem with dual agency today because the question always remains: Who does the agent represent, the seller or the buyer?

And the big question in any real estate transaction always lingers in the background: Where does the agent’s fiduciary responsibility lie?

Moore said he does not favor one system over another as long as agency definitions and relationships are consistent across the board.

A proposal to change dual agency relationship in Massachusetts about two years ago to an appointed or designated agency system was squashed after consumer advocates opposed it.

Realtors were “split” on the issue, Huth said.

The potential for problems exists not only within dual agency practices, but also with subagency relationships.

Carolyn Chodat, vice president of legal affairs for MAR, said some subagents are themselves confused about their role in a transaction.

Subagents work closely with buyers and may by their actions and words appear to be representing the buyer when in fact they are supposed to be working for the seller.

“What a subagent owes the customer buyer is factual information,” said Chodat. The subagent does not owe and should not be giving a buyer advice or guidance in making a home purchase, she said.

Huth, who says subagency appears to be a “dinosaur” in today’s market, said subagents are supposed to represent sellers and, as such, anything they say or fail to say can become a liability for them and the seller.

Oftentimes subagents barely know the seller and have minimal contact with the seller when they are showing a house, he said.

It would be better to have a specific system in place that allows agents who know and trust each other as professionals to choose to have subagency relationships, Huth said.

“True subagency has a place. But the unilateral offering of agency … is wrought with liability,” Huth said.

There are approximately 34 states that have specific legislation regarding agency, with 21 states employing non-agency practices, according to information provided by the Association of Real Estate License Law Officials. Non-agency means that real estate agents don’t represent either the seller or buyer in the transaction, but are merely facilitating the sale.

Many states that have adopted agency legislation have included some or all of the recommendations regarding agency that the National Association of Realtors put forth several years ago.

ARELLO does not have a position on which agency relationship is best, according to spokesman Craig Cheatham.

But many states have grappled with some of the same issues confronting Massachusetts, he said.

“That’s playing out all over North America,” Cheatham said.

Agency is practiced differently across the country, with some states using different labels for the same type of agency relationships, he said.

States that have attempted to create laws have done what MAR has – they set up a task force to examine what options are available. But Bay State Realtors will have to undertake ” a massive education process” over the next few months, he said.

GSAR’s Moore welcomes the education. Moore said he believes that pre-licensing requirements in the Bay State are not as rigorous as other states.

“We need more education in Massachusetts,” said Moore. “That’s part of the problem right there.”

Realtors Push for Laws Defining Agents’ Roles

by Banker & Tradesman time to read: 5 min
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