Dual Agency Hot Potato
Never underestimate the lobbying power of NAR (National Association of Realtors). NAR managed to have the enforcement of the anti-dual agency rule postponed. The Department of Housing and Urban Development (HUD) had planned to implement the new regulation 10-1-13 to help fight Fraud in Short Sales.
“Dual Agency” is generally defined as one real estate brokerage company providing one or more representatives all from that brokerage, to represent both the Buyer and the Seller in a real estate transaction. In other words, the same company purportedly protects the Sellers interests and the Buyers interests. NARs position on dual agency according to an update today in Inman is that it is carefully regulated by state law in most states and despite the appearance of conflict is designed and regulated to protect the consumer interests in such a real estate deal. But not everyone agrees that such regulations are effective.
Douglas Miller, executive director and attorney for nonprofit group Consumer Advocates in American Real Estate (CAARE), said he was “completely disgusted” to hear about the rule change.
“What could have been a wonderful consumer-oriented decision by HUD was unilaterally wiped out by the lobbying power of NAR. To our knowledge, no consumer organizations were given a voice in this decision,” he said.
The article in Inman contains some priceless quotes by consumer advocates including Douglas Miller of CAARE (Consumer Advocates of American Real Estate) who said he was “completely disgusted” about the delay in implementing the consumer protection and short sale fraud prevention measures. “Instead of an arm’s length transaction, you end up with a transaction stripped of consumer safeguards that incentivizes the broker with the payment of a double commission. Dual agency brokers get paid twice as much for providing a fraction of the service”, he said.
NAR’s website and HUD’s website seem to diverge on what has actually happened to the dual agency ban. NAR says the ban is “gone”. HUD says it is delayed to allow time for additional discussion. The Inman article is enlightening in some ways. For example it was surprising to learn that nationwide, the size of brokerages is fairly small on average.
You can’t help but feel the pain of the home buying consumer if you’ve ever gone home shopping with a realtor, or heard such tales, of realtors who insist upon showing every single listing held by that realtor or other agents in her brokerage before reluctantly showing a listing of a different company. And tell me again just how you get the best price possible for that Seller while also making sure I am getting the best possible bargain buying it . . . . This age old question of integrity and consumer protection has now become a hill that many industry officials are willing to die on because now it is not just the consumer whose protection is at stake but it is also big lenders being victimized by short sale fraud who may have about the only lobby as powerful as NARs!