MAR Director Resigns Over Agency Legislation
Realtor Initiative to Redefine Client Relationships Finds Its Way Into Senate Budget Bill Amendment
By Aglaia Pikounis- Reporter
An amendment quietly slipped into the Senate budget that would implement a controversial proposal to change the way real estate agents represent buyers and sellers in Massachusetts has caused a stir within the industry and the resignation of a Massachusetts Association of Realtors director.
The amendment essentially backs a proposal approved by MAR late last year to clarify agency relationships in this state.
Fred Meyer, a past president of the association, resigned from the MAR Board of Directors last week after learning about the budget amendment that was adopted by the Senate on May 20.
"It's absolutely outrageous," said Meyer, a Cambridge real estate broker. Meyer said Realtors should have been given the opportunity to voice their opinions about the proposed agency changes at a public hearing, and was angry that MAR neglected to discuss the amendment with its membership.
MAR had its annual lobbying day last Tuesday and did not include the initiative on a list of legislative priorities that it distributed to its members and the press. In fact, while a list of speakers discussed a host of bills, only MAR President Judy Moore briefly mentioned the topic of agency in her opening remarks to members gathered for the lobbying day, saying that the association was "exploring options" to push its agency proposal forward.
"The proposal was buried in an obscure outside amendment to the Senate budget bill, and is now being pushed for passage in a small House/Senate conference committee ... with no hearings and no public debate on its merits and demerits. This undercover and cowardly attempt by our association, whether ultimately successful or not, is absolutely reprehensible," wrote Meyer, in a resignation letter to MAR.
He continued, "There were hundreds of Realtors on Beacon Hill [Tuesday] for the annual Realtor Day on the Hill. That would have been the proper forum for Realtors to discuss this issue with their legislators. But instead, avoiding all discussion, the association is attempting to get its proposal through the back door."
When asked why the issue wasn't discussed as a priority issue during the lobbying day, Moore said, "I did mention that we are working on the issue and when it is time to enlist their [members] active support we will do that, and that is exactly our plan."
In response to Meyer's criticism that MAR was trying to sneak the proposal through, Moore said that the process has been "very public." The amendment has been posted on a State House Web site for over a month, she said, and MAR leaders met with members all across the state to discuss the agency proposal before the board of directors voted on it last year. The MAR board of directors voted overwhelmingly in support of the agency proposal in December.
"We've been given a clear mandate by our board of directors to move this forward and ... we have done this," she said. "We really are thrilled that the Senate has taken this action and hopeful that this will be part of the final budget."
The amendment language was not included in the House budget. A joint conference committee currently working on a compromise budget will decide its fate. The committee could decide on the budget within two to three weeks. But Meyer, and members of the Real Estate Agents for Real Agency - a coalition of real estate agents and brokers that Meyer helped form to fight the agency proposal - vow to lobby the committee to reject the amendment.
Under the MAR proposal and budget amendment, the broker-owner of a real estate company, with the consent of the consumer, would be able to designate one or more agents to represent the buyer and one or more agents to represent the seller in the same transaction. In addition, listing agents would be required to get written consent from sellers to allow other agents to work as subagents of the seller, and real estate agents would be able to function as transactional broker to work with consumers and assist with the transaction but have no fiduciary responsibility to either.
Supporters say the proposal is consumer-driven and reflects years of research and input from many real estate professionals and legal experts and changing industry trends. Massachusetts, unlike 37 other states, lacks specific and comprehensive laws that guide real estate agency relationships and practices, which causes confusion in the real estate industry as many Realtors interpret agency in their own ways, according to proponents of the MAR proposal.
"We already have companies out there practicing designated agency and other business models ... that are changing the environment throughout the state and there [are] more companies that are going to be changing the way they do business," Moore said. "This is happening whether there's legislation or not. We certainly - our members and our directors - want standard business practices. It's good for the consumer, it's good for the real estate professionals and it makes a lot of sense. So that's what we're tying to accomplish here and we're doing this through a process that we have determined makes a lot of sense to accomplish the goal of our directors."
Sen. Andrea F. Nuciforo, D-Pittsfield, introduced the budget amendment on behalf of MAR. The amendment is intended to clarify the types of relationships that real estate agents have with consumers, explained Nuciforo.
"This amendment is designed to bring Massachusetts in line with the majority of states around the country that already" have legislation on agency relationships, said Nucifero.
But critics worry that the changes - particularly the call for designated agency - would ultimately harm consumers and smaller real estate companies. They argue that agents within one company can't truly represent both a buyer who is seeking the lowest purchase price and a seller who is seeking the highest price in the same transaction.
Others have problems with transactional brokerage, which they believe is fraught with liability, and think as a practice will ultimately devalue the role of a real estate agent and eventually erode traditional commissions that agents receive.
Rather than providing clarification on agency relationships, many critics fear the added options will only confuse consumers and agents and, as a result, agents may fail to provide full disclosure about the implications of selecting one form of agency over another and obtain true informed consent from buyers and sellers.
"We're very disappointed and disgusted at what's happened here," said Leo Berard, who along with Meyer chairs REAFRA, the group opposing the agency proposal. "It's a real disappointing eye-opener as to the way our industry wants to work in a very self-serving way against consumers."
Berard said the proposal is mainly backed by large real estate brokerage firms that are interested in keeping both sides of a transaction and commission in-house.
"If this [proposal] is so good, then the public needs to hear both sides of the story and there needs to be some public debate on this," he said.
This article is presented courtesy of Banker & Tradesman, a publication of the Warren Group