Time to End Let’s Pretend

A few years ago, the Florida Legislature made a new kind of relationship for real estate agents called “transaction brokerage.” This was meant to help agents and clients avoid conflicts and lawsuits. Now, they’re proposing to change this and make agents represent either the buyer or the seller, but without the same responsibilities. This basically turns the transaction broker into something like a regular agent, which goes against how it was supposed to work in the first place. The proposed act would allow transaction brokers to represent buyers without having any legal obligations to them, like trust, loyalty, confidentiality, or full disclosure. This means that buyers could be at risk for any mistakes or negligence of the brokers, with limited benefits in return. The real estate brokerage industry is struggling to find a balance between their duties to clients and making money from transactions. In the post-World War II real estate business, agency and subagency were very powerful. It was believed that real estate brokers had always been agents, and the law of agency had a strong history in English common law. The idea of subagency made sense when third parties were involved.

The concept of agency became the accepted legal relationship for real estate brokers, and it worked for decades. However, the idea of only getting paid when a deal is closed is strange when compared to other professions like doctors and architects who get paid for their time and expertise. It creates a conflict for brokers who want to do the best for their clients while also needing to make money.

In simple terms, real estate brokers have always been seen as agents, and they only get paid when a deal closes, which can create problems. The real estate industry started to see itself as a profession, with ethical standards and quality of service. However, there was a conflict between the trust and confidentiality of agency and the transaction-based payment for services. Some people tried to create new laws to preserve the idea of fiduciary representation, but it caused more problems. Real estate agents are trying to change the rules of agency to avoid legal responsibilities while still calling themselves agents. Some states have a program called “designated agency” where one broker can have different agents representing the buyer and seller in the same transaction. But in reality, all the agents in the office still work together and share information, making it seem like a way to avoid fiduciary duties rather than a real separate representation. The real estate industry has been using the word “limited” a lot lately, like “limited agency” and “limited disclosure.” This is basically a way for agents to say they represent you, but with limits on what they have to do for you. It’s not really necessary and can be kind of shady. In Florida, there’s a proposal to change the rules for independent transaction brokers to allow them to give limited representation to both the buyer and seller without having to follow the usual rules for fiduciary obligations. It’s potentially risky and might not be a good idea. The proposed change to transaction brokerage in Florida is causing a lot of problems. It basically creates a situation where the transaction broker is representing both the buyer and the seller, but without the usual legal protections and obligations of a dual agent. This could lead to disputes and lawsuits between clients and the real estate licensee, as it blurs their role and makes it unclear who they are really representing. Other states have similar nonagency options, but Florida’s proposal is causing a lot of concern. If Florida combines transaction brokerage with representing clients in real estate transactions, it could be a step backward for the state. This could affect the progress made in real estate brokerage. The proposed act is seen as a compromise, but compromises can sometimes lead to losing both rights or goods. This information is from an article written by a lawyer for the Realtor Association of Hollywood-South Broward.

Source: https://www.floridabar.org/the-florida-bar-journal/time-to-end-lets-pretend/