Yesterday, we blogged about the eye-popping phenomena of Million Dollar Markdowns across Massachusetts. Today, Valentine’s Day 2012, we’re turning our attention to another controversial subject — love and betrayal in the luxury home market.
We didn’t set out to expose conflicts of interest in the sales over $1 million, but when we recently prepared a “Listing Agent Report Card” a surprising finding jumped off the page: some of the best known luxury listing agents in Greater Boston routinely operate with a conflict of interest, either through in-house sales or dual agency.
Looking at single family homes sold over $900,000 in one community, we were stunned to discover that 70% of one well-known listing agent’s sales were in-house; and in more than one in four sales, the MLS listed her as both listing agent and sales agent. Does that mean she represented both buyer and seller — an obvious conflict of interest — or did one in four luxury homebuyers forgo their right to an exclusive buyer agent without a conflict of interest?
When our “Dual Agency Detective” analyzed sales of another leading luxury listing agency, we found the broker-owner “double dipped” on nearly one in five transactions during 2011. Was that conflict of interest disclosed to both buyer and seller so they could give “informed consent” on state mandated forms, or are luxury home buyers effectively denied their right to an independent advocate (and a 100% commission rebate in they work with The Real Estate Cafe)?
We’re not going to name names in this short blog post, but we have preliminary evidence that suggests that state requirements regarding disclosure are not being met.
Conflict of Interest: What conflict of interest?
Regrettably, surveys show that majority of agents don’t see anything wrong with dual agency, but consumer advocates agree that home buyers and sellers should “never agree to dual agency. Why should luxury home buyers, in particular, be concerned about dual agency? First, the stakes are higher; and second, high-end homebuyers place a premium on privacy and trustworthy advisors. As Inman News, a leading real estate news service, reported today:
Critics of dual agency say buyers and sellers are in the strongest negotiating position when they are represented by an experienced broker or agent who is an advocate for their interests.
Not only is it impossible for one agent to represent the interests of both the buyer and seller in the same transaction, critics say, but a “dual agent” may reveal information that undermines the negotiating position of one or both clients.
If real estate agents are not complying with laws to protect home buyers and sellers, be proactive! Ask YOUR prospective agent if they will pledge their undivided loyalty to you usingthis form, not because it’s Valentine’s Day, but because you have a legal right to receive that level of service! (Download the consumer brochure below prepared three decades ago by industry regulators for more information about your rights.)
Friends Don’t Let Friends Use Dual Agents
Before you go house hunting, regardless of whether you’re looking over $3M or under $300K, please ask our “Dual Agency Detective” to do a background check to see if your friend or agents you’d like to interview have a history of in-house sales and / or “double dipping.”
If they refuse to sign this form or incorporate the language into your buyer agency agreement, we’d be glad to represent you and rebate 100% of the buyer agency fee to you (see article in Wall Street Journal). As reported yesterday, two of our clients have receivedrebates over $85,000; one saved nearly $1 million off the original asking price and the other saved approximately $4 million.