For Buyers Only on Martha’s Vineyard

In an article titled ‘AGENCY, Know Your Facts’ published in the January 2009 Newsletter by the Cape Cod & Islands Association of Realtors®, Inc the following points were made under the topic heading “ The Law”. There were many other facts discussed, but I thought these two would be of particular interest to consumers.

• “Designated Agency is a process where the broker of record, with the consent of the consumer, designates one or more agents to represent a Seller and designates one or more agents to represent a Buyer in the same transaction. The relationship with the consumer begins and ends with the designated agent and does not extend to the other agents in the office. In a designated agency firm, the broker is a dual agent and retains all legal and ethical responsibility for the transaction.”

Although there is a definition of Designated Agency on the Mandatory Disclosure form, I do not discuss it as part of my consumer education process because traditional real estate agencies on Martha’s Vineyard only practice Disclosed Dual Agency. The concept of Dual Agency in itself is difficult enough for consumers to wrap their minds around. I have a lot of information on agency representation on my website FOR BUYERS ONLY.

The main reason Designated Agency is not a consumer service offered on Martha’s Vineyard is because the offices are not large enough, and because the principal brokers realize this is much to frothy a concept for them to handle comfortably. But come on folks, read the definition again and see if it does not totally blow your mind. We all know that business is primarily all about the money, and with guidelines like these and human nature such as it is --- I mean really!

The next topic discussed in the newsletter was Agency Disclosure.

• “The Agency Disclosure requirement stipulates that at the first personal meeting to discuss a specific property, prospective Buyers and Sellers be notified of the agency relationship using the state disclosure form, which must be signed by the Buyer or Seller and retained on record by the broker for a minimum of three years.”

In Massachusetts, as stated above, the Agency Disclosure form is a Mandatory requirement. It is not a contract and therefore does not bind the consumer in any way to the agent they are working with. It is an effort to avoid misunderstanding and litigation by providing full disclosure. However, many agents do not present the Agency Disclosure form to the consumer at all. Perhaps they are fearful it will be off-putting or, in reality, it is because they themselves do not understand it and don’t realize it is the law. Also, many agents present the mandatory disclosure to consumers with the implied assumption that it binds the consumer to them as a ‘client’. This misrepresentation and use of the Agency Disclosure form is critical to any relationship actual or implied.

When an agent presents a mandatory agency disclosure form to a Seller and the agent selects that he/she represents a Seller, you can rest assured it is because that Seller has entered into a contractual relationship with the agent who is now the Seller’s fiduciary. The agent has an ‘Exclusive Listing Agreement’ with the Seller. If the agent selects that he/she represents the Buyer, legally that agent can only do so with written authorization and consideration from the Buyer. These are the elements that define a contract (“An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration”).

Establishing Buyer Representation must be a two-pronged conversation. “Mr and Mrs Buyer, I am required by law to present you with this Agency Disclosure form mandated by Massachusetts Law, which I must ask you to sign before we can discuss any properties you are interested in. I want to be your Exclusive Buyer Agent, but unless we also execute an Exclusive Right To Represent Agreement, I will not be able to advocate in your best interests as your fiduciary.”

If a written contract is not executed establishing a fiduciary relationship with a Buyer, the agent is actually a Facilitator and represents neither the Buyer nor the Seller. Just remember that the Seller will have 100% representation and you the Buyer can also have 100% representation, but only if you enter into an Exclusive Right To Represent Agreement without consent to Dual Agency.