Date: Fri 30-May-1997

Publication: Bee

Author: KAAREN

Quick Words:

real-estate-agents-state-law

Full Text:

with photo : New Law Will Prescribe The Roles Of Real Estate Agents

B Y K AAREN V ALENTA

A new law will take effect on June 1 that will have a significant impact on

how all real estate transactions are conducted in the state of Connecticut.

"The reason for the new agency law is because buyers always thought that real

estate agents represented them solely. In reality, agents always traditionally

represented the sellers," said Melissa Pilchard, president of the Newtown

Board of Realtors.

The new agency law was officially unveiled at a press conference held by

Commissioner Mark Shiffrin of the Department of Consumer Protection and Gerald

R. Kunde, executive vice president of the Connecticut Association of Realtors,

in Hartford on Wednesday.

By law, Connecticut will now offer three types of relationships between real

estate brokers and the public: buyer, seller and disclosed dual agency.

"In the past, an agent who listed a house would put it out over the Multiple

Listing Service and grant subagency status to other agents. This established a

fiduciary relationship," Mrs Pilchard explained. "So any agent who brought a

potential buyer to see the house was, in fact, working for and on behalf of

the seller."

The biggest change that consumers will notice immediately is that before an

agent will show a potential buyer a house, a contract must be executed.

"It used to be that (a consumer) could just drop in (at a real estate agency)

and ask to see one house," Mrs Pilchard said. "Now, before an agent can take

anyone to look at a property, they both have to sign a contract. That's what I

think will be the most difficult part of the new law for people to

understand."

The contract gives the agent an exclusive right to represent the buyer - or

the tenant if it is a potential rental - in a real estate transaction. But the

contract also must specify a geographical area and a time limit.

"The contract may be only for the town of Newtown for a week," Mrs Pilchard

said. "Or it might be for Fairfield County for six months. That's up to the

client to decide."

In the past, many consumers haven't realized that an agent can show houses

listed by another agency so they wound up going to several agencies at the

same time. The new law will prevent this from happening, she said.

But along with the exclusive right to represent the buyer or tenant, the

contract carries obligations for the broker.

"Brokers now must use diligent efforts to find a property for you, which could

mean knocking on doors if nothing suitable has been listed," Mrs Pilchard

said. "The broker must agree to prepare a competitive market analysis on the

property, advise you on what price to offer, negotiate on your behalf, provide

information about the property and the community, assist with the loan

application process and do other things as well, always acting in your best

interest."

Dual Agency Relationships

An exception will occur when a buyer's agent and the seller's agent work for

the same agency, as happens when a consumer visits a real estate office to

check out one of its listings. In this situation, both the buyer and the

seller will be represented by the agency and must sign a contract, called a

dual agency consent agreement. (A potential buyer who refuses to sign this

dual agency agreement would have to go to another real estate firm to obtain

the services of another agent before viewing the property.)

"I don't know how people will feel about that," Mrs Pilchard said. "The agent

becomes a buyer's broker for everything except (his or her) own agency's

listings - for these you have to be a dual agent.

"Under a dual agency, an agent can show preference to neither the buyer nor

the seller," she said. "The agent can't disclose any personal or financial

information to either party. You can't disclose whether the seller would

accept less than the asking price, or whether the buyer might offer more."

The dual agency concept troubles Ann Krane, GRI, managing broker for Buyer's

Resource Real Estate on Route 25 in Monroe. Ms Krane's agency, which has been

in operation for nearly four years, will continue to exclusively represent

buyers.

"How can you represent both sides?" she said. "How can you get the highest

price for the seller and, at the same time, the lowest price for the buyer? In

my opinion, you can't have two masters because what you are left with is

non-representation. You go from being a negotiator to being a mediator or a

monitor in the process.

"I see it as a serious conflict of interest," she said. "It's not in the best

interest of either. Not that it isn't legal - the state of Connecticut made it

legal - but realistically it's not in the best interest of the consumer."

Some states, in fact, have given up agency relationships entirely and have

gone to transaction brokers which have no fiduciary relationships to buyer or

seller, Ms Krane said.

"Whether or not the state of Connecticut will go that route remains to be

seen," she added.

Reasons Behind The Law

Under Connecticut's new law, the seller - who was once represented by nearly

all agents through the subagency relationship - is now represented exclusively

only by the listing agent.

Mrs Pilchard said she expects confusion on the part of many consumers at

first. Most real estate agents have taken six hours of training, three hours

of which was mandated by the state, and some have taken additional classes to

educate themselves about the changes in the law, she said.

Eugene Marconi, vice president of legal affairs for the Connecticut

Association of Realtors, said the new law was enacted "to make the laws of

agency clearer, simpler and more practical."

Mr Marconi said a Federal Trade Commission study revealed that 71 percent of

buyers were under the impression that the real estate agent who showed them

property worked exclusively on their behalf. And, ironically, 74 percent of

the sellers thought the cooperating agent in a transaction was actually

representing the buyer.

"The FTC study also determined that 82 percent of buyers were under major

misconception that whatever information they gave to any real estate agent was

confidential," Mr Marconi said.

According to Commissioner Kunde, the commission's findings showed it was

"clearly time to overhaul a system that was put into service some 45 years

ago."