The whole premise that being a fiduciary is somehow too complex of a concept for the majority of agents to understand or implement is what lost me here. Maybe it's because I've done this for 13 years and have been working with buyers over sellers at about a 2 to 1 rate. I think the large majority of agents *are* able to act as fiduciaries, and the real issue is more about their education. (Or more importantly, a level of education that would also act as a barrier to entry, which would cut down on many of the bad actors before they even had a chance to make mistakes.)
Many of the times I hear of consumers complaining that they got shafted, it's rarely because of someone who had the intent to defraud them or act unethically, but very frequently because of an ignorant mistake that person made. If states mandated significantly greater education and shadowing requirements, I firmly believe a LARGE majority of the issues we see today would work themselves out quickly. If appraisers are required to complete thousands of hours of work under another licensed appraiser, I cannot imagine why agents aren't required to do the same.
Those real world experience hours and education would eliminate a significant amount of what you wrote about in this post, as well as the lawsuits that are a result of this inexperienced behavior.
Please read Bill North's take on what fiduciary agency requires and ask yourself whether you're truly living up to those requirements. It's possible, but I doubt it.
For starters, real fiduciary agency likely requires single-firm agency... or serious Chinese walls with lawyers watching carefully to prevent "leakage." If you are allowed to take on a buyer who *might* purchase a listing represented by your brokerage firm, then you are violating what fiduciary agency requires.
Well, Rob, here I am again. That Non-Realtor maverick in MA. I agree with you. The best way is true division of loyalty. Fiduciary duty is serious. Subagency does not have to be dead, AND it does not have to look the way it did in the 1970’s.
In our unique model, true division of loyalty is possible in 99% of the cases.
As you know, in 2022 we abandoned NAR and I opened a second brokerage, with a separate license and I am the BOR. It is a Seller exclusive brokerage, and is independent of NAR.
Then, we kept the older brokerage which is a Realtor brokerage, traditional model, assisting both Buyers and Sellers. The BOR is my son, an Attorney/Broker, but he is affiliated only with that brokerage. (now, that brokerage may evolve once the looming Buyer commission lawsuit comes to an end, time will tell).
Side note – we ONLY kept the older brokerage as a realtor brokerage because without NAR affiliation, we were denied access to the MLS.
Then we created a 'collaborative'. Meaning, the two brokerages share many things ~ tools, advertising, human resources (including some Broker Associates, because as you know with the power of the Broker license, an individual can affiliate with more than one broker/brokerage).
Then we revived subagency (LIMITED subagency) amongst our two brokerages, with full disclosure regarding vicarious liability, etc. But clients can consent & authorize subagency if they see a benefit to them.
I know you can think this through. It gave us many benefits!
We have nearly eliminated dual agency. Only Broker Associates who affiliate with both brokerages are at risk for dual agency. And they are more experienced and better equipped to handle the complexity of dual agency without breaching any fiduciary obligations.
The salesperson agents get to choose which type of agency they want to affiliate with. Obviously, a salesperson can choose only one.
If an agent is an exclusive Seller Agent in the exclusive Seller brokerage and suddenly a Buyer wants to hire them for Buyer representation, we offer options.
- Refer them to a trusted experienced agent, whom we respect from a different brokerage (for a referral fee) or
- a Buyer can consent to subagency to our other brokerage (the Buyer/Seller traditional brokerage.)
Associate salesperson agents who are under the Seller Exclusive Brokerage who manage a listing for the Seller client are not in Dual Agency when an assoaicate salesperson agent who is under our Buyer/Seller brokerage is interested = separate brokerages, separate licenses, separate BOR.
Just a few benefits^ , but the biggest one is a straight line that who you hire is your fiduciary, your advocate, your Broker/agent, and who the consumer pays. Full disclosure, consumer chooses and no smoke screen.
I understand what you're referring to and believe there's probably two different topics of debate within the fiduciary discussion. There's the legal definition of a fiduciary and Bill's opinion that two agents of the same brokerage cannot legally be fiduciaries. Then the broader concept of what a fiduciary actually is. I disagree that two independent contractors who may hold their licenses at the same brokerage somehow cannot also uphold the duty to put their client first before themselves. I'm not talking about the legality of what is or isn't possible, I'm just talking about the general idea of what can and cannot be done by a true professional. (This form from NAR seems like a pretty reasonable set of requirements, but if your argument is that it's not true fiduciary because other industries have stricter fiduciary guidelines, then isn't that an issue with the rules and their need to be enhanced? https://www.nar.realtor/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf )
Understanding the specifics of how that could be regulated are well beyond my skillset, but the ability to act as a fiduciary, and the subsequent value a buyer's agent provides when always looking out for their client's best interest, should be reasonably easy concepts for agents to uphold. It seems like an easier path to achieve the goal you've mentioned would be to create clear guidelines (which exist in other fiduciary professions) instead of getting rid of buyer agency altogether.
Maybe I'm too optimistic and have too high of an opinion of people within the profession, but I believe that proper education and minimum skill requirements could eliminate the same issues you've mentioned here.
I get you, Josh. And I'm not being argumentative (I don't think).
The "broad concept of fiduciary agency" simply does not exist. Fiduciary agency and fiduciary duties are long-rooted in English common law and they are what they are.
What you want, what all of us want, is some kind of an elevated standard for professionals that lie between used car salesman and lawyers. I think that's fine, and the Code of Ethics might be a place to look for something like that.
But once you embrace long-standing standards like agency, fiduciary duty, etc. then you don't get to make up your own definitions of what those are.
It is to easy to become a licensed real estate agent. The hours of classroom and apprenticeship to become an appraiser makes becoming a real estate broker a joke. So many of today's issues could be solved by making this a degree and adding mandatory mentoring and monitoring of agents for a minimum number of transactions. Most training new agents receive are the same as the 80's- here's your desk, here's your phone good luck.
I couldn't agree more. I had an absolutely incredible mentor 13 years ago who absolutely exemplified what an ethical agent should be, and I consider myself very lucky for that experience. After my years in the industry, I now see just how rare that experience was, and it's unfortunate that there isn't more being done to essentially mandate time under brokers like the one I had.
Thanks, Rob. I started in the late 1980s before buyer agency was a thing in most markets and thinking this exact thing that it’s time to go back to the way it was before
I have been educated by attorneys-and I am not one, to be clear-to know that anything represented to the buyer by a subagent is liability to the seller. For example, a sub agent tells the buyer that the seller is going to do all repairs and add a pool-so the buyer relies on that and moves forward. Seller has NO IDEA the sub agent said it but is still liable for their representations.
True... just like the seller would be liable if the listing agent said such a thing.
I would sue the subagent for acting beyond the scope of authority, because without a clearly stated power of attorney, there is no ability for the real estate agent to bind the client without the client's explicit approval.
Well I would think if that subagent stated something that was incorrect, or completed the contract poorly that could have the buyer sue all 3, seller. Listing agent, and sub agent
Agreed. Well sort of. Agents have been trained to exploit fiduciary duties and few have an inkling of what it means to be a fiduciary. They all think they understand it. They don't. I agree. At the same time, all the agents who work for large brokerages are engaged in dual agency whether they believe it or not (their brokers are dual agents). And the fact that they claim to represent buyers on inhouse deals is a legal fallacy that is stunning. It's also one of the worst bait and switches possible - claiming to be a fiduciary when they're not going to deliver fiduciary level services.
We don't need subagency at all. Why? So listing brokers can continue to collect double fees? I'm sorry to say it, but we need to abolish buyer agents and not bring back subagency. Subagency is just a way to keep fees high. Home buyers need unfettered representation, not a poser who quickly switches hats to dual agent, designated agent, facilitator and buyer agent again. In other words, they need showing agents to get them in the house and then they need lawyers who have paralegals trained to vet out the fine points of the home (measurements, pricing, negotiating strategies).
I agree Doug. IMO, a lot of this has to do with the cost/value of the buyer’s agent. The Internet and a lock box make it very difficult to come up with a consistent dollar figure that reflects the performance - not that there's anything wrong with that :)
I think maybe I'm missing something regarding sub-agency. Listing agent A works for Broker A. Agent A engages agent B from broker B, to be a sub-agent to agent A. Wouldn't broker B want to have a say in this? Wouldn't broker B be responsible for agent B's actions in the transaction, and possibly also dragged into any improper actions of agent A? Vice-versa for broker A. Or maybe my question is moot, since the risk issues for brokers are really not that different today...
I think you're correct with respect to broker B, but as you point out, it isn't as if broker B's liability is less because agent B is a fiduciary to the buyer. If anything, I think liability is now increased since agency places such a heavy burden on agent B that he/she is simply not equipped, prepared, or educated enough to take on.
Again, most of the problems and shenanigans that led to lawsuits in the 80s and 90s would have been problems simply under license law. No agency duty is going to permit lying and total incompetence for licensed professionals.
Sub-Agency should be more prevalent, especially for one off showings. However, a buyer should never be prevented from negotiating that a seller pay their buyer agent compensation into the offer/deal. Many buyers want a dedicated professional agent working as their true fiduciary but simply do not have the additional cash to pay that agent on top of the myriad of additional expenses when purchasing a home. These buyers should not be forced to choose between going at it alone or the increased upfront cost of paying their agent directly, which would at best significantly delay their purchase or at worst prevent them entering the market entirely.
FLASH -- A Heaven e-mail from Bill North to Notorious Rob: "Bless you, my son!"
The author of Agency Relationships in Real Estate who got me started on my career path. A true hero.
The whole premise that being a fiduciary is somehow too complex of a concept for the majority of agents to understand or implement is what lost me here. Maybe it's because I've done this for 13 years and have been working with buyers over sellers at about a 2 to 1 rate. I think the large majority of agents *are* able to act as fiduciaries, and the real issue is more about their education. (Or more importantly, a level of education that would also act as a barrier to entry, which would cut down on many of the bad actors before they even had a chance to make mistakes.)
Many of the times I hear of consumers complaining that they got shafted, it's rarely because of someone who had the intent to defraud them or act unethically, but very frequently because of an ignorant mistake that person made. If states mandated significantly greater education and shadowing requirements, I firmly believe a LARGE majority of the issues we see today would work themselves out quickly. If appraisers are required to complete thousands of hours of work under another licensed appraiser, I cannot imagine why agents aren't required to do the same.
Those real world experience hours and education would eliminate a significant amount of what you wrote about in this post, as well as the lawsuits that are a result of this inexperienced behavior.
Please read Bill North's take on what fiduciary agency requires and ask yourself whether you're truly living up to those requirements. It's possible, but I doubt it.
For starters, real fiduciary agency likely requires single-firm agency... or serious Chinese walls with lawyers watching carefully to prevent "leakage." If you are allowed to take on a buyer who *might* purchase a listing represented by your brokerage firm, then you are violating what fiduciary agency requires.
Well, Rob, here I am again. That Non-Realtor maverick in MA. I agree with you. The best way is true division of loyalty. Fiduciary duty is serious. Subagency does not have to be dead, AND it does not have to look the way it did in the 1970’s.
In our unique model, true division of loyalty is possible in 99% of the cases.
As you know, in 2022 we abandoned NAR and I opened a second brokerage, with a separate license and I am the BOR. It is a Seller exclusive brokerage, and is independent of NAR.
Then, we kept the older brokerage which is a Realtor brokerage, traditional model, assisting both Buyers and Sellers. The BOR is my son, an Attorney/Broker, but he is affiliated only with that brokerage. (now, that brokerage may evolve once the looming Buyer commission lawsuit comes to an end, time will tell).
Side note – we ONLY kept the older brokerage as a realtor brokerage because without NAR affiliation, we were denied access to the MLS.
Then we created a 'collaborative'. Meaning, the two brokerages share many things ~ tools, advertising, human resources (including some Broker Associates, because as you know with the power of the Broker license, an individual can affiliate with more than one broker/brokerage).
Then we revived subagency (LIMITED subagency) amongst our two brokerages, with full disclosure regarding vicarious liability, etc. But clients can consent & authorize subagency if they see a benefit to them.
I know you can think this through. It gave us many benefits!
We have nearly eliminated dual agency. Only Broker Associates who affiliate with both brokerages are at risk for dual agency. And they are more experienced and better equipped to handle the complexity of dual agency without breaching any fiduciary obligations.
The salesperson agents get to choose which type of agency they want to affiliate with. Obviously, a salesperson can choose only one.
If an agent is an exclusive Seller Agent in the exclusive Seller brokerage and suddenly a Buyer wants to hire them for Buyer representation, we offer options.
- Refer them to a trusted experienced agent, whom we respect from a different brokerage (for a referral fee) or
- a Buyer can consent to subagency to our other brokerage (the Buyer/Seller traditional brokerage.)
Associate salesperson agents who are under the Seller Exclusive Brokerage who manage a listing for the Seller client are not in Dual Agency when an assoaicate salesperson agent who is under our Buyer/Seller brokerage is interested = separate brokerages, separate licenses, separate BOR.
Just a few benefits^ , but the biggest one is a straight line that who you hire is your fiduciary, your advocate, your Broker/agent, and who the consumer pays. Full disclosure, consumer chooses and no smoke screen.
I understand what you're referring to and believe there's probably two different topics of debate within the fiduciary discussion. There's the legal definition of a fiduciary and Bill's opinion that two agents of the same brokerage cannot legally be fiduciaries. Then the broader concept of what a fiduciary actually is. I disagree that two independent contractors who may hold their licenses at the same brokerage somehow cannot also uphold the duty to put their client first before themselves. I'm not talking about the legality of what is or isn't possible, I'm just talking about the general idea of what can and cannot be done by a true professional. (This form from NAR seems like a pretty reasonable set of requirements, but if your argument is that it's not true fiduciary because other industries have stricter fiduciary guidelines, then isn't that an issue with the rules and their need to be enhanced? https://www.nar.realtor/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf )
Understanding the specifics of how that could be regulated are well beyond my skillset, but the ability to act as a fiduciary, and the subsequent value a buyer's agent provides when always looking out for their client's best interest, should be reasonably easy concepts for agents to uphold. It seems like an easier path to achieve the goal you've mentioned would be to create clear guidelines (which exist in other fiduciary professions) instead of getting rid of buyer agency altogether.
Maybe I'm too optimistic and have too high of an opinion of people within the profession, but I believe that proper education and minimum skill requirements could eliminate the same issues you've mentioned here.
I get you, Josh. And I'm not being argumentative (I don't think).
The "broad concept of fiduciary agency" simply does not exist. Fiduciary agency and fiduciary duties are long-rooted in English common law and they are what they are.
What you want, what all of us want, is some kind of an elevated standard for professionals that lie between used car salesman and lawyers. I think that's fine, and the Code of Ethics might be a place to look for something like that.
But once you embrace long-standing standards like agency, fiduciary duty, etc. then you don't get to make up your own definitions of what those are.
It is to easy to become a licensed real estate agent. The hours of classroom and apprenticeship to become an appraiser makes becoming a real estate broker a joke. So many of today's issues could be solved by making this a degree and adding mandatory mentoring and monitoring of agents for a minimum number of transactions. Most training new agents receive are the same as the 80's- here's your desk, here's your phone good luck.
I couldn't agree more. I had an absolutely incredible mentor 13 years ago who absolutely exemplified what an ethical agent should be, and I consider myself very lucky for that experience. After my years in the industry, I now see just how rare that experience was, and it's unfortunate that there isn't more being done to essentially mandate time under brokers like the one I had.
As does becoming licensed to cut hair...much more difficult than getting an RE license.
Thanks, Rob. I started in the late 1980s before buyer agency was a thing in most markets and thinking this exact thing that it’s time to go back to the way it was before
Vicarious liability.
The primary risk of seller sub…thoughts?
Not sure what you mean. How can anyone get vicarious liability when everything is disclosed and agreed to?
I have been educated by attorneys-and I am not one, to be clear-to know that anything represented to the buyer by a subagent is liability to the seller. For example, a sub agent tells the buyer that the seller is going to do all repairs and add a pool-so the buyer relies on that and moves forward. Seller has NO IDEA the sub agent said it but is still liable for their representations.
True... just like the seller would be liable if the listing agent said such a thing.
I would sue the subagent for acting beyond the scope of authority, because without a clearly stated power of attorney, there is no ability for the real estate agent to bind the client without the client's explicit approval.
Well I would think if that subagent stated something that was incorrect, or completed the contract poorly that could have the buyer sue all 3, seller. Listing agent, and sub agent
Agreed. Well sort of. Agents have been trained to exploit fiduciary duties and few have an inkling of what it means to be a fiduciary. They all think they understand it. They don't. I agree. At the same time, all the agents who work for large brokerages are engaged in dual agency whether they believe it or not (their brokers are dual agents). And the fact that they claim to represent buyers on inhouse deals is a legal fallacy that is stunning. It's also one of the worst bait and switches possible - claiming to be a fiduciary when they're not going to deliver fiduciary level services.
We don't need subagency at all. Why? So listing brokers can continue to collect double fees? I'm sorry to say it, but we need to abolish buyer agents and not bring back subagency. Subagency is just a way to keep fees high. Home buyers need unfettered representation, not a poser who quickly switches hats to dual agent, designated agent, facilitator and buyer agent again. In other words, they need showing agents to get them in the house and then they need lawyers who have paralegals trained to vet out the fine points of the home (measurements, pricing, negotiating strategies).
I agree Doug. IMO, a lot of this has to do with the cost/value of the buyer’s agent. The Internet and a lock box make it very difficult to come up with a consistent dollar figure that reflects the performance - not that there's anything wrong with that :)
I think maybe I'm missing something regarding sub-agency. Listing agent A works for Broker A. Agent A engages agent B from broker B, to be a sub-agent to agent A. Wouldn't broker B want to have a say in this? Wouldn't broker B be responsible for agent B's actions in the transaction, and possibly also dragged into any improper actions of agent A? Vice-versa for broker A. Or maybe my question is moot, since the risk issues for brokers are really not that different today...
I think you're correct with respect to broker B, but as you point out, it isn't as if broker B's liability is less because agent B is a fiduciary to the buyer. If anything, I think liability is now increased since agency places such a heavy burden on agent B that he/she is simply not equipped, prepared, or educated enough to take on.
Again, most of the problems and shenanigans that led to lawsuits in the 80s and 90s would have been problems simply under license law. No agency duty is going to permit lying and total incompetence for licensed professionals.
Sub-Agency should be more prevalent, especially for one off showings. However, a buyer should never be prevented from negotiating that a seller pay their buyer agent compensation into the offer/deal. Many buyers want a dedicated professional agent working as their true fiduciary but simply do not have the additional cash to pay that agent on top of the myriad of additional expenses when purchasing a home. These buyers should not be forced to choose between going at it alone or the increased upfront cost of paying their agent directly, which would at best significantly delay their purchase or at worst prevent them entering the market entirely.
I'd like a study showing that buyers (a) want a true fiduciary agent, and (b) they understand what a fiduciary is.
Love it! Go Rob!