Real estate industry could change dramatically

Vermont Business Magazine, Jan 1994 by Edelstein, Art

If a series of proposed rule changes now at the Vermont Real Estate Commission are adopted this year, Vermont will become a national leader in the way real estate is sold. The rule changes, which deal with disclosure to potential buyers, will also affect the way subagencies do business, and virtually end dual agency work.

The proposed changes, which have yet to be reviewed at public meetings (planned for this winter), are causing confusion and contention among some licensed brokers. Some leaders in the real estate community believe the changes will greatly improve the way the industry does business. But, some licensed brokers oppose the changes, saying the proposed changes attempt to "fix something that isn't broken."

Instigating the reforms is the widespread misconception among home buyers who believe that brokers and agents work for them. At least 80 percent of buyers in a real estate study thought the broker was working for them. But, under the current system, unless the real estate agent specifically agrees to work for the buyer (known as a buyer-broker agreement), he or she is legally bound to represent the best interests of the seller. Buyer-brokering has become more popular here, but still is not the norm.

BUYER-BROKERS

The typical scenario is this: A couple looking to buy a home goes to a real estate agent to help them find a house. The broker shows them homes in an area, most of which are not listed with the broker's agency. When showing a home with another agency's sign out front, the broker becomes a sub-agent. But, technically, the broker is working for the seller, and cannot offer negative opinions of the properties. Under a buyer-broker arrangement the broker could offer advice on the quality of the house and on making an offer.

Massachusetts has witnessed problems between buyer-brokers and traditional agents, who are sometimes in conflict over the sale of a home and how the sales commission will be split. In that state the dust has still not settled over the relatively new practice of buyer-brokering. But Vermont sales brokers say they don't mind working with buyer representatives if it will help sell a house.

"In Chittenden County we went through the contentious phase about 1989-1990, when people said they wouldn't work with buyer-brokers," said Glenn Martin, a Richmond broker. "Today there is full cooperation and people understand how it works, it isn't a problem here. But, it could vary in other parts of the state."

"Overall buyer representation is a regional type of activity, but in California it's a very normal way to represent the buyer," said Robert Arkley, past president of the Vermont Association of Realtors.

Arkley believes buyer-brokering is "spotty" here. He estimates 20 percent of real estate transactions in the state are closed with a buyer-broker. The practice is most prevalent in Chittenden and Rutland counties.

Buyer-brokering, said Arkley, is more common now than in the past and comes in response to a growing consumer demand that the buyer have representation when looking at property.

"The hazard has always been that in many cases the sub-agent may not be as familiar with the property as the listing office and there is a high probability the sub-agent would misrepresent the property out of unfamiliarity," he said.

The sub-agent, said Arkley, is a licensed broker who obtains the property information from the Multiple Listing Service, a listing of properties for sale which every real estate agent pays a yearly dues for. In some cases, he said, this sub-agent, who may only be looking at a computer sheet or book listing, has made mistakes in what the buyer was told. This sub-agent, like the listing agent, works for the seller.

"This trend is coming on relatively slowly," said Arkley, "but as the public gets more educated about the dangers of sub-agency, they will want to hire their own buyer-broker."

Arkley sees more buyer representation here as Vermont becomes a state where more corporate transferees are assigned. Home offices, he said, are insisting that as employees transfer here and look for a new home, they contact and use a buyer-broker. This, he notes, is becoming more frequent with transfers to IBM and General Electric.

"They want to know their employee is being represented. This is adding to the momentum of change."

Buyer-brokering is definitely growing said Martin. "We're finding it's a third of our clients; We didn't do any buyer-brokering four years ago."

"Buyer-brokering is not a contentious issue where I work," said Toni Trombley at National Trombley Real Estate in Burlington. Unlike the Massachusetts scenario, she sees buyer representation as a helpful way to match sellers who want to sell with buyer-brokers who have motivated buyers.

"There is less liability for the seller when the buyer is represented," said Trombley. As a buyer representative, she checks properties thoroughly for the buyer's interest. This can include mechanical systems, zoning rules, and even looking at city hall's plans for development in the area that, she said, may impinge upon the buyer's interest.