Real Estate Consumer Disclosure “Misleading”!
Massachusetts revised its Mandatory Real Estate Licensee-Consumer Relationship Disclosure on January 24, 2017. The basics of the disclosure didn’t change, only the words and layout changed. Rather than clarifying a consumer’s choice the form is even more confusing and harmful to consumers. A .pdf copy of the Massachusetts Mandatory Real Estate Licensee-Consumer Relationship Disclosure is available here.
Timing of the Presentation of the Disclosure is Too Late:
Real estate companies in Massachusetts must disclose how they are going to work with you at the first personal meeting with you to discuss a specific property. Common sense tells you there is a problem with the timing of the presentation of the disclosure. As written, you could have numerous conversations with a licensee and even see several homes with them before even being given the disclosure. Ouch! You will have probably spilled your guts to the licensee about your buying power, price range, needs and wants, dreams and hopes before wanting to discuss a specific property. What if the licensee is representing the seller or ends up a dual or designated agent of the seller? Even if the licensee is supposed to keep such information confidential, do you think they will? You won’t really know, will you?
The better timing would be at first contact, whether online, over the phone or in person. In fact there could be a disclosure that simply said, “You are hereby notified that _________________ (insert name of licensee) and _________________ (insert name of brokerage firm) do not represent you in any capacity. You should not assume that any real estate broker or salesperson represents you unless you agree to engage a real estate licensee in an authorized brokerage relationship. You are advised not to disclose any information you want to be held in confidence until you make a decision on representation. Your signature below acknowledges receipt of this form and does not establish a brokerage relationship.” That at least in essence gives a “Miranda-type” notice to the buyer or seller, “You have the right to remain silent. Anything you say can and will be used against you…” Then an additional disclosure would be given once the buyer or seller has had a chance to understand their options and interviewed one or more licensees.
Oh, and let us not forget that several years ago a sting operation was conducted to see if licensees were providing the disclosure when it was supposed to be. Zero compliance was the result. Probably hasn’t changed much today.
The Disclosure Misleads Consumers
Into Thinking That Designated Agency is Real Agency:
In the case of designated agency only the so-called designated agent for the buyer is responsible to the buyer and the buyer is put on notice that the brokerage and all the other agents in the company may in fact represent the seller against them. However, the broker or designating agent is a dual agent and they must take a neutral position. The form doesn’t point out that designated agency is a form of dual agency. This is an important omission that could lead you to believe that the designated agent really is your legal agent. The designated agent is employed by and is a representative of the broker. The broker is a dual agent and thus the designated agent is a dual agent as well and thus not really your legal agent.
Designated agency is designed to mislead consumers in order to protect the in-house sale and a commission on both the buy and sell sides of a transaction. The licensees are now in a situation of trying to help a seller get the highest price and best terms AND trying to help a buyer get the lowest price and best terms. They are also in conflict with both the buyer and seller as they now want to double-dip commissions and make a deal generally without regard to the best interests of neither the seller nor the buyer. Designated agency is not true agency and a concept deliberate manufactured by the traditional real estate industry to mislead you.
The Disclosure Fails to Mention the Best Forms of Representation:
The best representation a home buyer can get is “exclusive buyer agency” also known as “exclusive buyer brokerage” or “exclusive buyer representation” or “EBA”. Exclusive Buyer Agents must work for a company that always represents buyers and never represents sellers or takes listings. The conflict of interest that traditional real estate companies have in working with buyers AND sellers goes away in an exclusive buyer company. Exclusive buyer agents never downgrade their services, like traditional real estate licensees, to dual agency or designated agency or transaction broker or facilitator. Hence, the best representation is with an exclusive buyer agent.
Another good option is a true “single agency”. True single agents represent buyers AND sellers but never in the same transaction. In the event a single agent’s buyer client is interested in buying a home listed by the single agent or someone else in their company, usually the buyer client is referred out to a buyer agent in another company so that the buyer can get true representation.
The Disclosure Fails to Describe “Informed Consent”:
Another missing piece in this revised disclosure is a description of what “Informed Consent” is and how important that is to buyers. You will find reference in the disclosure to “express and informed written consent” but no further definition or description. Informed consent means that a real estate licensee has the duty to explain to you any and all consequences of you agreeing to dual agency or to designated agency. That is not possible. There are an unlimited number of potential conflicts that real estate licensees don’t understand and thus can’t explain to you. Thus, real estate licensees don’t inform you and thus, you can’t give “informed consent”. So consumers under pressure from the licensee, give their consent even though it is in essence, “Uninformed Consent”. This really is a violation of the law and a major drawback to this disclosure leading to a buyer not really understanding what they just agreed to.