Duel agency

Proposal to allow ‘designated agency’ under fire in Wisconsin

Monday, February 11, 2002

By Camilla McLaughlin
Inman News Features

The Wisconsin Association of Realtors is fielding a proposal to revise the state’s real estate law to permit so-called "designated agency." But one Wisconsin buyer’s agent is pulling out all the stops to marshall opposition to the idea.

The association said the change "would allow a broker to designate individual agents as the agent for a seller or a buyer client and thus avoid dual agency within the firm."

The proposal would apply only to in-house transactions and consequently would affect only a small percentage of sales. But as brokerages continue to grow in size, some observers note, the potential is great for an ever-increasing number of transactions in which the buyer and the seller are represented by the same firm.

The Realtors’ association contends designated agency wouldn’t deviate much from the way business already is conducted in the state.

"In other states this is a dramatic issue. In Wisconsin we already have laws regarding confidentiality in place," said association General Counsel Rick Staff. He said the state’s 1994 Agency Reform Act already assures confidentiality to all parties in a home purchase transaction.

"Wisconsin has the strongest duty owed to all parties in the transaction of any state. All parties, including the customer, have the right of confidentiality," he said.

If the law were changed, designated agency could be utilized at the principal broker’s discretion. Proponents say this alternative to disclosed dual agency would result in a higher level of representation. Staff said the concept is backed by some state regulators the chairman of the state’s real estate commission.

The proposal is in the preliminary stages and still must under go hearings before it is considered by the state legislature.

At least 20 other states already allow designated agency. But such groups as the National Association of Exclusive Buyer Agents consistently oppose it and even heavy-hitters like Ralph Nader have weighed in against it.

"If 25 states do a stupid thing, it’s still wrong," said Jay Reifert, broker/owner of Excel-Exclusive Buyer Agency in Madison, one of a handful of exclusive buyer agencies in Wisconsin.

Reifert said the proposal is another step in the dilution of the agent-client relationship that began when Wisconsin placed confidentiality for all parties ahead of that relationship.

He said neither the current nor the proposed law is in alignment with the tenets of the common law of agency.

"The basic precept of the common law of agency is that the agent is to put the interests of the client ahead of all others, including his or her own," he said. "The temptation with designated agency is to put the interests of the firm ahead of either client, the buyer and the seller." Reifert isn’t alleging that any specific firm would do so, but he believes designated agency opens the door to temptation.

Reifert charges that Wisconsin's laws "benefit large real estate companies by allowing them to give lip service to agency, while creating an artificial legal concept that will allow them to put together the deal at the expense of one or both clients in the same transaction."

Reifert is taking action against the proposal by circulating a large number of lengthy e-mail messages decrying designation agency as a "conspiracy" to "restrain trade." The messages are being sent to thousands of real estate agents and hundreds of government officials, consumer advocacy groups, lobbyists registered in Wisconsin and the media, according to Reifert.

Jim Imhoff, chairman of the Wisconsin Real Estate Commission, believes designated agency is an appropriate response to changes in the industry. He cites as an example his own Madison-based company, First Weber Group, which has 21 offices and 325 agents.

"If a buyer agent in my company has a client who wants to purchase a property listed by another agent in my firm it is dual agency. Under the current law, the ability of those agents to represent each party is diminished. Most states have recognized that fact and gone to designated agency. That makes sense, particularly since most real estate firms now are large companies," he said, noting the dwindling number of firms with only three or four agents.

Dual agency years ago was taboo in much of the real estate industry. But it gained respectability under the cloak of disclosure as more agents began to represent buyers. Concerns about broker liability and consumer protection have spurred a number of Realtor organizations to push for designated agency laws at the state level.

Some states have adopted such changes with little fuss. But in other states designated agency has become a battle pitting exclusive buyer’s agents against Realtor organizations with each side arguing it is looking out for consumers’ interests.

States grappling with agency representation issues include Massachusetts. The state’s legislature defeated a designated agency proposal several years ago, but a task force that includes exclusive buyer agents and so-called "traditional" agents reportedly is studying the issue of representation.


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