I just had a very interesting conversation with some well-heeled luxury brokers from Los Angeles. They told me that since the new requirement to sign a 14-page State-sponsored Buyers Agency Agreement before showing a property has gone into effect, they have seen a dramatic rise in dual agency deals.
Los Angeles brokers told me that consumers are confused and overwhelmed by the new process. “A rising number of homebuyers are deciding to work directly with the Listing Agent to avoid working their way through the new buyer’s agency agreement process,” said one broker.
By imposing the need to sign a lengthy complicated form at the time when consumers are just beginning their home search, consumers are avoiding Buyers Agency Agreements and may actually be placing themselves at higher risk.
Logically, one would think that consumers would know that no one person can negotiate or represent the best interests of two sides of a transaction equally and equitably. The confusion of the Buyers Agency process seems to be clouding their judgment. To secure the opportunity to view homes, some are skipping the Buyers Agency Agreement process and, in the process, giving up their right for a real estate professional to negotiate on their behalf. While the dust may settle and consumers may figure out the new processes eventually, it may not. In Los Angeles a rising number of agents are walking the tight rope of getting business done while taking on more risk with dual agency.
To avoid this dangerous trend, some brokerages like eXp, and others are choosing to encourage their agents to use their own 1-page agreement instead of the 14-page CAR agreement to encourage more compliance with the terms of the Anti-Trust Settlement.
Regardless of what Buyers’ Agency Agreement a brokerage chooses, early indicators suggest that brokerages need to educate their agents on the risks of dual agency and do everything in their power to protect the best interests of consumers who choose dual agency out of frustration, not an informed choice.
Today, dual agency is illegal in the following eight states: Wyoming, Alaska, Vermont, Colorado, Florida, Maryland, Texas, and Kansas. While dual agency is legal in California, it requires strict adherence to specific rules and regulations outlined in the California Civil Code, particularly Sections 2079.13 and 2079.14. To avoid dual agency legal challenges, we highly recommend that every brokerage re-visit the disclosures and explanations required to protect the best interests of your clients and your brokerage.
I fully agree that this is a very real concern, that buyers are foregoing their own representation, in what is typically the largest and most complicated financial and legal transaction most people encounter in their lives. I’m very hopeful that the real estate industry will take the time and energy needed to completely overhaul HOW real estate transactions are handled by real estate agents and brokerages on behalf of consumers. As a broker since 1999, (a period just after buyer agency came into effect across most of the US,) I feel that it is appropriate to de-couple MLS membership and Realtor membership across the country, while also increasing the transparency about brokerage fees. This is too important an issue to resolve, if we as an industry are only partially resolving the issues to satisfy some court-sanctioned agreement to a lawsuit.