Facilitator, Transaction Broker Agent or Unrepresented?
By Paul Harsch On: 06:03PM / Wednesday February 26, 2014
Real estate practice varies considerably from state to state. Anyone who has moved from another state and purchased in this region understands this.
Besides those "roles" as we will call them, some states in our region have also adopted or are actively considering adopting designated agency, limited agency, and broker agency. As a practicing licensed broker in Massachusetts, Vermont and New York, I have had to adapt myself and my practice to differences in all three states. For the purposes of this column I will primarily focus on real estate practices within Massachusetts and Berkshire County specifically.
Massachusetts currently recognizes the roles of agents and transaction brokers who are also referred to as facilitators. The consumer, buyer or seller, may be represented by an agent as one option. By simple definition, an agent is a licensee that is required under law to follow the specific legal instructions of his or her principal, the buyer or the seller.
As a "fiduciary," the duties required of an agent are remembered by the acronym "OLD CAR." These include obedience, loyalty, disclosure, confidentiality, accounting (of funds) and reasonable care.
A transaction broker's or facilitator's duties are different in some respects. By law the facilitator still has to provide disclosure, accounting and reasonable care and he or she may also provide confidentiality as is practiced in our firm.
The differences are most easily understood by thinking of an agent like an attorney who is duty bound to follow and consider only the interests of their client, regardless of the interests, needs, concerns of the other party. The facilitator can be compared to a mediator who must do his or her best to take the interests, needs, concerns of both parties into account, however different they may be, in order to assist them in fashioning a workable mutually acceptable agreement.
An agent, if they are practicing agency to the letter, has one goal in mind, seek the best outcome possible for only their client, at the expense of the other side. A facilitator seeks to find the middle ground meeting the needs of both sides, neither of which gains any particular advantage over the other.
The agent is biased, the facilitator objective.
Which approach works best or is the right one depends in large measure on all those involved. Our firm practices facilitation and has done so for years with great success and praise from our clients but other firms practice only agency. Therein lies the complication inherent in agency.
If a buyer walks into an office which serves their seller clients as agents that buyer either remains with that firm and effectively has no representation and is at a distinct disadvantage in any negotiations or that buyer has to leave and find another licensee who can represent their interests. Buyers who are unrepresented working with a seller's agent are quite liable to be paying more than they might otherwise and may suffer other disadvantages as well.
Under the law there is a "fix" for the agency conflict within a firm, if that firm elects to offer it which is labeled "designated agency." In that case, it is in theory possible to have two separate agents in the same office, each representing the interests of their individual clients, the buyer and the seller. How this works out in real life is still a mystery to me particularly when those two agents let's say are close friends within the same firm or have both worked on the seller's property previously but now one of them is supposed to become completely independent from the seller's interests and strongly support and represent only the buyer's interests. I think the reader can catch the problem here.
If on the other hand the seller is represented by a facilitator, then a buyer can enter that firm with the confidence they are being given the exact same benefits and advantages as the seller and the playing field is level to begin with.
What this boils down to is the perspective of the typical consumer. If the consumer is the sort that is clearly hoping to gain a significant advantage over the other party they may believe there is to be an advantage in having an agent working exclusively for them. Of course they had better hope that the other party doesn't find a more competent agent or facilitator is representing the buyer in which case they may wind up at the short end of that match.
If on the other hand the seller or consumer is more typical and their perspective is to settle at fair value in the marketplace and no surprises, then facilitation is the most direct route to achieving that result.
Another concern when hiring an agent that is rarely mentioned is the vicarious liability exposure that flows from an agent's acts to their principal for any errors, misstatements of facts, misrepresentations or any act that causes liability. By contrast there is no vicarious liability exposure from a facilitator to their clients. That is a potentially very significant concern regarding agency that consumers and licensees need to take into consideration when deciding on what form of representation is best for them.
In sum, before committing to work with a real estate licensee, be certain you understand all of the ramifications of the choice you make and that the licensee explains your options thoroughly.
Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.
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Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years. He has achieved personal career sales exceeding $131 million and company sales from 1979 will top $500 million in 2014. Harsch is a member of the Berkshire, Massachusetts, Southwestern Vermont and National associations of realtors, is a licensed Massachusetts real estate instructor and earned the CRB, CRS, GRI and CBI designations. Harsch is a 1969 graduate of Williams College.