Below are examples of real estate agent practices permitted under Georgia Brokerage Law (BRRETA) that conflict with client interests. Sage avoids these practices through True Agency (fiduciary) representation.
Acceptable Price vs. Best Price
As a homebuyer or seller, you engage an agent with the expectation that he/she is a skillful negotiator and will tenaciously fight for the BEST deal for you. BRRETA, however, requires a buyer’s agent only to “seek a property at a price and terms acceptable to her buyer-client,” and a listing agent only to “seek a sale at a price and terms acceptable to her seller-client.” This standard substitutes the concepts of advising, advocating and negotiating for the client with “persuading” the client to accept a deal. It also opens the door to the other conflicts of interest discussed below.
True Agency requires us to diligently promote our clients’ interests in attempting to find and purchase the best home at the best price for our buyer clients and to obtain the highest sales price for our seller clients.
Engaging in Designated Agency
Designated Agency occurs when a brokerage represents both the seller and the buyer in the same transaction, with one of the firm’s agents representing the seller and another representing the buyer. Designated Agency is a serious conflict of interest; imagine the same law firm, through different attorneys in the firm, representing both you and an opposing party in a lawsuit or business transaction. Designated Agency is legal under BRRETA and is a regular, financially rewarding practice that is particularly common in the larger real estate companies.
True Agency precludes Designated Agency. Because we resolve potential conflicts prior to accepting a new client, Designated Agency (and the resulting conflict of interest) is never an issue with Sage.
Accepting Competing Listings
When you hire a brokerage to sell your home, you expect the company, through your agent, to zealously market your home against its competition. BRRETA allows real estate companies and their agents to list homes for sale that directly compete with their other listings. In fact, it is common for a brokerage (or even a single agent) to have several competing homes listed for sale in one neighborhood. Clearly, it is impossible for your agent to aggressively sell your home against its competition when she and her company are also selling the competition against your home.
True Agency precludes Sage from listing homes that would logically compete with each other.
Representing Competing Buyers
Homebuyers compete among each other for the best homes. As a serious buyer, you engage a real estate brokerage to help you identify, evaluate and purchase the best home for you. You expect your agent to work loyally and diligently to out-hustle and out-maneuver other buyers, positioning you ahead of your competition for the best opportunities. BRRETA allows real estate companies and their agents to have multiple buyer-clients seeking substantially similar properties. This practice, of course, opens the door to conflicts and compromising of clients’ interest.
True Agency avoids the potential conflict of representing competing homebuyers. Prior to accepting a new buyer-client, we confirm that there is no relevant overlap between that buyer’s home criterion and that of an existing Sage client.
Abandoning the Effort Prior to Closing
A home is not sold until it actually closes; there are many situations that can kill a deal between contract and closing. BRRETA, however, provides that, once there is a contract, a buyer’s agent is no longer required to seek properties for her buyer-client and a listing agent is no longer obligated to seek buyers for her listing. This explains why listing agents can place a self-promoting “Under Contract” sign on their listing, well before closing, despite their client’s interest in continuing to invite inquiries from potential back-up buyers.
True Agency requires that we continue to diligently seek properties for our buyer clients and purchasers for our listing clients until closing.
Accepting an Undisclosed Commission bonus
Listings frequently offer a commission bonus (above a base-line 3%) to induce agents to SELL the home to their buyer clients. BRRETA does not require buyer agents to disclose the commission they are receiving until closing. Because a commission bonus (by design) influences an agent to steer her buyer-client toward one home over another, accepting a commission bonus is a conflict of interest.
True Agency requires that we disclose and rebate to our buyer-client any commission or bonus paid to us in excess of a 3% commission share.
Commission Double Dip
A typical home Listing Agreement provides for a total commission (customarily 6%) to be paid to the listing agent’s brokerage upon the sale of the home. The listing agent, in turn, markets the home with an offer to share the commission (typically 3%) with a buyer agent’s brokerage. If the buyer has no agent, the listing brokerage / agent is entitled to keep the entire 6% commission. Clearly, a listing agent has an incentive – a double commission – for the home to sell to an agent-less buyer, rather than to a buyer with an agent. The lure of a commission double-dip would, obviously, influence a listing agent in advising her seller-client, particularly when there are multiple offers on the home.
True Agency eliminates the double dip commission conflict. Our Listing Agreement provides that, where there is no buyer agent, the total commission to be paid by our seller client is reduced to reflect that there is no buyer-side commission to pay. This, of course, also keeps more money in our client’s pockets.
Steering Buyer Clients
BRRETA permits an agent to choose whether or not to show a buyer-client a particular home, or to influence a client’s decision with respect to a particular home, based on the agent’s and her brokerage’s interests. It is more profitable (to an agent and her brokerage) for clients to purchase the agents listings, her brokerage’s listings or listings offering a commission bonus. It is also common for agents to steer clients away from by-owner homes, limited-service listings or homes in which other buyer-clients may have an interest.
True Agency requires that we show buyer-clients all homes meeting their criteria, while providing unbiased information and objective advice concerning any listing.