Gov. David Paterson signed into law yesterday measures that will increase consumer protection by adding more transparency to the real estate process.
I’ve been ranting about agency disclosure–who’s representing whom–in New York forever, so I welcome the law, which goes into effect on Jan. 1
The law mandates that that agency disclosure forms be completed for all residential transactions. It permits consumers to give their advance consent to dual agency representation–that is, explicitly allowing consumers to demonstrate their understanding of a situation in which a broker must represent the best interests of both buyer and seller.
Controversy has bubbled in the industry for years over dual representation. How, skeptics ask, can one person ever manage to represent both sides of a transaction, keeping each side’s bottom or top line confidential and overcoming an inherent conflict of interest of the commission that the broker has at stake? It’s a fair question.
I’ve engaged in dual representation only once in my career, and I do think it worked out best for both parties. But I know a number of real estate agents and brokers who will not touch such a transaction with a 10-foot ballpoint pen.
My particular peeve considers what is known here as a “direct” sale, in which the broker in Manhattan and elsewhere in New York City seek to help themselves to the entire commission from representing the seller while merely facilitating the buyer’s side of the transaction.
In other words, the broker is supposed to pass on communications without providing advice on how to win an offer. No winking, no nodding, no raised eyebrows are allowed.
If you believe a direct deal works that cleanly, have I got a townhouse to sell you for 10 cents on the dollar.
Yet I’m continually surprised by how naive are some buyers. Just Sunday, I ran into two women after they visited an open house and were heading to several others unaccompanied.
They had no idea of the dangers of putting themselves in the hands of the listing broker. Even if they don’t ultimately call on my services, I said that they had to make certain to find their own broker to represent them–at no cost to them.
“Thank you,” one of them responded. “That’s good advice already.”
(I don’t pretend to be a paragon of altruism, so I confess that, of course, I handed them my card.)
Under the law before the new legislation was enacted, verbal consent for agency disclosure was accepted for multifamily buildings of more than four units. Supposedly.
The new law specifies that a written agency disclosure form must be used for all residential transactions. In addition, the amendments to existing statute have created a section on the agency disclosure form where consumers can give their advance consent to being represented by two agents from the same real estate brokerage in the same transaction. That’s a good thing, too.
There must be penalties for violation of the law, but I haven’t yet seen them. I hope they are strict.
Especially in Manhattan–where so-called pocket listings (which a broker keeps to herself or himself without showing them on broker databases) are endemic and broker avarice so often trumps a client or customer’s best interests–the more transparency, the better.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022