Is The Traditional Real Estate Model Under Pressure?

 

Posted on Monday, May 22nd, 2017 at 3:42pm.

Is The Traditional Real Estate Model Under Pressure?

Asked to comment on changes affecting the traditional real estate model, Stephen Carpenter-Israel, President and Broker of Buyer's Edge, said that the increased use of house hunting websites, as well as a recent California Supreme Court ruling on the practice known as "dual agency" are shaking the industry to its core.  

 Stephen Carpenter-Israel - President & Broker of Buyer's Edge

Stephen Carpenter-Israel - President & Broker of Buyer's Edge

 

Tech Has Led to Increased Demand for Transparency

Over the past decade, consumers' widespread embrace of technology spurred the creation of firms such as Zillow, Trulia, and Redfin.  "These online databases disrupted the 'cartel' of the old brokerages that used to monopolize access to property data" explained Carpenter-Israel.

In essence, these tech firms revolutionized house hunting by giving consumers free access to information on their smartphones, empowering them to look for better ways to buy or sell their homes.  While this disruption brought greater transparency to the way the industry operates, "homebuyers are still turning to agents to help them parse through the noise and evaluate the true value of properties," said Carpenter-Israel.

With more information at their fingertips, there is a trend toward better-educated homebuyers and sellers becoming skeptical of the traditional brokerage model.  "As clients become savvier, they are increasingly looking for a true fiduciary relationship with their realtor," said Carpenter-Israel.  "They are demanding transparency and loyalty with no conflicts or competing interests."

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California Legal Battle: The End of Dual Agency?

In fact, the courts are beginning to pressure brokerages to deal more openly with what has historically been a fairly secretive system explained Carpenter-Israel. "In fact," he said, "The need for increased transparency and full disclosure was the focus of a recent California Supreme Court ruling that may change the structure of the industry." 

The litigation revolved around the practice of "dual agency" when a real estate broker is representing both the buyer and seller. In this case, the California Supreme Court ruled in favor of the home purchaser who said he overpaid because the size of the house was misrepresented by the listing agent, who worked for the same company as his buyer's agent.

"The ramifications of this ruling may lend credence to the case for eliminating dual agency and push the industry to accelerate the trend towards brokerages choosing to exclusively represent either buyers or sellers, but never both," said Carpenter-Israel. "With 25 states having already eliminated an individual agent's ability to serve as a dual agent, the timing may be right for a meaningful change."

Own Stocksy Supreme Court Reimage w Photo By- Chris Stone.jpg

Recently, California state representative Lorena Gonzalez Fletcher introduced legislation that would prohibit the practice of dual agency in commercial real estate transactions.

The proposed legislation may be the first of many efforts across the country that would fracture the traditional model of commercial and residential real estate firms representing both sides the deal. Ultimately, the outcome of these legal battles may require completely separate real estate firms to represent each side, not just provide a disclosure of the conflicts.

LEARN MORE ABOUT THE PROBLEMS WITH DUAL AGENCY →

How to Buy a Home In the Washington, DC Metro Area

How to Buy a Home In the Washington, DC Metro Area. Hire an Exclusive Buyer's Agent when you're ready to buy a home. It doesn't matter if you are looking to buy luxury real estate In DC or you are a First-Time Home Buyer in Maryland.

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What's Important to Buyer's Edge Clients When Selecting an Agent?

What's Important to Our Clients When Selecting an Agent?

In an effort to continue to provide leading Exclusive Buyer Brokerage Services, Buyer's Edge conducted a survey of our clients in 2017. Though our objective was to find out what we were doing right and how we could better serve our clients, it also provided our team with insight into what qualities matter most to homebuyers when picking an agent.

So what did we learn?

When selecting an agent, key factors for our clients were:

  • Finding an agent they could trust to protect their interests...
  • ...that had deep knowledge of the home buying and negotiation process...
  • ...who was well positioned to offer them deep local knowledge...
  • ...and responsive client service

98% Client Satisfaction

In 2017, we were pleased to learn that 98% of our clients surveyed were satisfied with their home buying experience.

Moreover, we found that Buyer’s Edge's Net Promoter Score of 94...

...was on par with some of the world’s leading brands...

...and far above real estate averages 

See here for more info on Net Promoter Score (NPS).

OWN Buyer's Edge Real estate DC, MD, VA NPS Score vs. Benchmarks

What does this mean for our Exclusive Buyer's Agent Model? 

EBA status wasn't the first thing our clients considered... However, our unbiased representation allows us to better protect our clients' interests.

In particular, our clients cited: 

  • Our team’s expertise, style, and responsiveness...
  • ...and that exclusivity helped foster a relationship of trust

We also learned that our buyer-centric philosophy boosts our clients’ confidence in recommending us to friends, family, and co-workers going forward. Greater than 75% of our clients in the past 2-3 years have recommended us two or more times.

Ultimately, the Buyer’s Edge experience is about loyal, friendly & responsive representation and education that helps our clients “find the right home." We love what we do every day because of clients like you. 

If you have any questions, please don’t hesitate to reach out! Or check out the full

Buyer’s Edge Home Buying Process & Client Feedback Survey here.

Happy Earth Day! - 23 Incredible Sunrise|Sunset Photos to Remind You Just How Lucky We Are to Live On This Planet

A++++FREE Unsplash.com, Earth Day SUNRISE BuyerAgent.comDC, MD, VA Buy a Home,.jpg

 

Happy Earth Day. We live on a beautiful planet. Sometimes it's nice to be reminded of that during the home and condo buying process in the Washington, DC metro area. With the hot, Spring real estate market in full swing, homebuyers find themselves running all over town looking at new real estate listings in DC, MD, VA with their exclusive buyer's agent. They frantically wonder, "Will we ever find our dream home? Will we ever win a multiple bidding war at our price point? Will we live in Arlington, VA, Bethesda, MD or Logan Circle, DC?  Will I still want to live with my partner after this process?"

 Photograph by Washington, DC Photographer: Monica Sawyer

Photograph by Washington, DC Photographer: Monica Sawyer

 

Yikes! Time to take a deep breath and remember that there will be other homes and other condos to call your dream home, if this is not the time or the place for you. It's better to take you time and purchase a home that is at the best possible terms and price. Buyer's Edge is in your corner and we have your back. Exclusive buyer agents and their broker choose to work for homebuyers 100% of the time. One focus, one vision and persistent determination for homebuyers in DC, MD, VA. No dual agents and no sellers. No conflicts of interest. What a concept.

Yes, it's a beautiful world - from sunrise to sunset.

 Search for Active Real Estate Listings and SOLD Listing Data Now.

Or call Stephen Carpenter-Israel, President and Exclusive Buyer's Broker of Buyer's Edge in VA, DC, MD.

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Dislosures Protect Washington, DC Area Homebuyers

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Noncompliance with real estate disclosure laws has been a persistent problem, but it seems to be getting worse rather than better. Since Maryland discarded the common law of agency in the late nineties, the whole arena of disclosure has devolved into a morass of confusing disclosure statements, and improper implementation.  And those who suffer the consequences are consumers.

Real estate licensees themselves often do not understand the rules of disclosure.  So how does the consumer stand a chance? In Maryland enforcement of state agency disclosure requirements is lax to non-existent. According to a Maryland Real Estate Commission spokesperson, unless an agency is being examined for other violations, compliance with agency disclosure is not examined. Nebraska is one of the very few states that use regular audits of brokerage files to ensure that every transaction includes a written disclosure signed by the client. This is a policy that would benefit both the consumer and industry if implemented in Maryland.

Why is disclosure so important?  It’s important because in some relationships, the real estate licensee may have fiduciary duties to his or her client of undivided loyalty, obedience, confidentiality, accounting, and reasonable care. Unfortunately, most consumers believe that if they are looking to buy a home, and they call the licensee whose name is listed on the “For Sale” sign in front of the house, they become the client of that licensee!  Nothing could be further from the truth.  In most cases, that licensee has all of those fiduciary duties to the seller of the home, not the buyer.

Since buyers and sellers obviously have divergent goals and adverse interests, the buyer calling the listing agent or attending an open house is not truly represented as a client at all—but merely “sold to” as a customer.  In fact, the licensee listing the home has a responsibility to disclose to the seller anything they can learn about the buyer that will help the seller get a better price.

The Maryland Real Estate Brokers Act is deeply flawed and contains conflicting provisions. The most grievous conflict becomes evident when the consumer unwittingly becomes involved in a dual agency transaction. Maryland does require disclosure of a “dual agency” relationship – where one intra-company agent represents the seller, a separate intra-company agent represents the buyer and the broker purports to represent both sides in the transaction as the dual agent. Here is where the conflict in Maryland’s statutory agency law exists between §17-530 (d) (1) (v), which give the intra-company agents the ability to provide services to the consumer, i.e. “those provided by exclusive seller or buyer agents” that the broker cannot provide, and the provisions of §17-321 and §17-528 (e) of the Act.

Section 17-321 allows the agent to “provide real estate brokerage services on behalf of the broker of the firm.” Section 17-528 established the relationship between the broker and the client. If, by common and everyday meaning required by §17-530 (f) (2) (i) of the act, the broker cannot provide the same services of an exclusive seller or buyer agent, how can the agent who is limited to providing real estate brokerage service on behalf of the broker perform those acts?

The biggest problems are these:

  • The current law contains conflicting and misleading language;
  • There are categories of agency that have common and everyday meaning that are not included in the current law or disclosed to the consumer in the current agency disclosure form;
  • Maryland’s law is clear as to the “when” and “how” disclosure is made to consumers but agents non-compliance has rendered it useless since the consumer will have already disclosed confidential information to the licensee before the consumer is informed of whom the licensee represents;
  • Compliance by real estate licensees with the disclosure law has been abysmal and known since 1983with no concerted effort to improve it by the Realtor® dominated State Real Estate Commission or industry;
  • There is no effort to enforce compliance with agency disclosure.

Amendment to the current Maryland Real Estate Brokers Act must include:

  • Elimination of §17-530 (d) (1) (v) which creates the conflict;
  • Inclusion of all agency options in the statute and in the mandated Agency Disclosure Statement;
  • Requirement to obtain the consumer’s written confirmation that they have received and understand the information;
  •  Enforcement with specific audits for compliance and penalties for non-compliance.

Three studies by National Association of Realtors® (NAR) since 2002 show that only about 30 to 35% of home buyers actually receive agency disclosure statements at the first meeting with a licensee.[1] This is a level that is virtually unchanged since it was first revealed by the Federal Trade Commission in 1983.[2] In a fourth study earlier this year, 73.33% of the Realtor® respondents ranked agency disclosure among their top three concerns citing it as an area marred by sloppy practices.[3]

In many instances, the failure to comply with the state disclosure law (and the failure of the state regulatory body to enforce compliance) constitutes a deceptive trade practice which is harmful to consumers.  The level of noncompliance is not acceptable and must be addressed with revisions to the Maryland Real Estate Brokers Act.

Mr. Sullivan is Vice President and Associate Broker at Buyer’s Edge Co.,  Inc.

[1] Legal Scan:  Legal Issues Facing Real Estate Professional. 2009. National Association of Realtors®

[2] Federal Trade Commission.  The Residential Real Estate Brokerage Industry. (Washington:  Government Printing Office, Volume 1, December 1983), 69.

[3] 2011 Legal Scan: Legal Issues Facing Real-Estate Professionals, National Association of Realtors®