FRONT LINES: Standards of practice

BY ROBERT FREEDMAN

Double duty, double risk

Practitioners try to adjust to limited-service brokerage operations.

The buyers liked the ranch-style house in the Oviedo section of Orlando, and their agent, Jerry Stoffer, ABR®, CRS®, answered their questions about it as best he could.

The sellers had questions for Stoffer, too. As well they might: A few weeks earlier, they’d paid a broker a modest fee to include their house in the MLS and, with the exception of the broker planting a For Sale sign in their yard and handling a few other minor tasks, the broker was otherwise absent from the transaction.

It thus fell to Stoffer, as the only professional working the sale, to field questions from the sellers—on appropriate disclosures and typical and customary repairs, among other things—without violating his agency relationship with his buyer clients or acting in a way that implied he had responsibilities toward the sellers.

“I got double duty and double liability for just showing up and being the only professional who was talking,” says Stoffer, a broker-associate with RE/MAX 200 Realty in Winter Park, Fla.

With the arrival of brokerage operations in which licensees do little more than post listings in the MLS for a fee, sales associates working with buyers often must pick their way through rocky ethical and legal terrain as they try to get deals closed, with little industry guidance available to them.

“The only thing I could say to a selling agent where you have a largely uninvolved listing agent is not to do the things the listing agent should do,” says Robert Moline, CEO of HomeServices of Nebraska, in Lincoln.

Since agency responsibilities differ from state to state, and can differ within a state, the nature of the challenge in working with limited-service brokerages can vary widely. At a minimum, it can put buyers’ agents in an awkward position.

“If the agreement between the seller and a listing agent who just posts the house on the MLS for a fee includes an offer of compensation to the selling agent, the sellers could think the selling agent has a responsibility to them,” says Patricia Bentley, CRS®, GRI, NAR Professional Standards Committee member and associate broker with Houlihan Lawrence in Bronxville, N.Y. “The sellers need to be made aware from the beginning what the relationships are.”

The listing agent usually acts as a buffer between the buyer’s agent and the sellers, but that’s not the case in these instances, Bentley says.

In Texas, buyers’ agents aren’t permitted to communicate offers to sellers, even with permission from the listing agent. An absentee agent can thus create complications for the agent who shows up. “State law says an agent who represents one party can’t communicate directly with another party, so clearly that creates a problem for buyers’ agents wanting to comply with the law,” says George Stephens, CRB, broker-owner of ERA Stephens Properties in Houston and immediate past chair of the Texas Association of REALTORS®.

To help practitioners get a handle on these kinds of problems, lawmakers and regulators in some states have stepped up efforts to flesh out minimum standards of practice for licensees.

In June, Illinois legislators passed a bill backed by the Illinois Association of REALTORS® requiring licensees to provide a minimum level of service when they enter into exclusive broker agreements with clients. These services include presenting offers and counteroffers to the client, assisting the client in negotiating counteroffers, and answering client questions about counteroffers and contingencies. Illinois Gov. Rod Blagojevich is expected to sign the bill.

REALTORS® in Texas are backing an effort by the Texas Real Estate Commission to insert similar language into the definition of “negotiate” in state rules governing real estate licensees. Commissioners are waiting for the state attorney general to rule on whether the commission has the authority to include the minimum standards in the definition.

For Stoffer, efforts such as these show movement in the right direction. Every time he gets involved in a sale in which the seller isn’t represented by the broker who posted the listing in the MLS, he says, he must walk a difficult line. “There’s a fair chance of misunderstandings when I talk to the sellers,” he says. “The more I talk, the more I put myself at risk.”

Who could afford the White House?

Whether it’s George W. Bush or John F. Kerry,the winner of the presidential election in November will have a lot on his mind. But at least he won’t have to worry about affording $106 million to buy the White House. That’s the market price for the colonial style mansion at 1600 Pennsylvania Ave., according to veteran real estate practitioners who priced the house for HouseValues Inc. (www.housevalues.com), a Bellevue, Wash., company that provides market value estimates to homeowners and lead generation and prospect management services to practitioners.

The house comes with its own dentist office, movie theater, bowling lane, and running track—but it has a few negatives, too. It’s open to the public, so privacy can be a problem, at least during visiting hours, and the west wing is an add-on, albeit a pretty nice one. Also, contrary to popular belief, George Washington never lived in the house.

Have buyers you think would be interested in this 132-room house with 39 baths and 29 fireplaces? Here’s what HouseValues estimates it would take:

Brokerages gain financial ground

Against the backdrop of strong home sales, 60 percent of residential brokerages said their profitability increased from 2002 to 2003, and 53 percent said they expected it to increase again this year, according to the 2004 NAR Profile of Real Estate Firms,released in late June.

Larger brokerages were more likely to report increased profits; 81 percent of companies with 50 or more associates said profits were up in 2003, compared with 74 percent of those with 11 to 50 associates and 60 percent of those with 10 associates or fewer.

For franchise affiliates, the profitability picture is mixed. As in years past, more companies than not, 59 percent, said affiliation has improved their profits. But franchisees painted a better profitability picture in previous years: 72 percent in 1999 and 79 percent in 1996 said affiliation had improved their profits.

Other findings:

• Fifty percent of residential companies said they upped their training spending in 2003, and 81 percent said their training investment improved their profitability.
• Sixty-one percent said they increased their technology spending in 2003, and 61 percent said their technology spending increased their profitability.
• Eight percent said they participate in affinity arrangements, and 8 percent said they’re members in a national or international relocation/referral network. For those with them, 57 percent said affinity arrangements increased profitability, and 81 percent said relocation/referral networks increased profitability.

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