Agent Violates His Fiduciary and Ethical Duty To Put His Interest Above His Clients.
The National Association of Realtors DANGERReport™ said it best,
“Masses of marginal agents destroy reputation. The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents. This knowledge gap threatens the credibility of the industry.” NAR Danger Report, 2021
This honest and yet sad finding of the National Association of Realtors is never more true when it comes to agent compensation. It is the elephant in the room that no one is talking about. How can you as a consumer (buyer or seller) get truly unbiased advice or objective counsel when your agent is motivated and paid by commission? No matter how ethical or morally upright your agent is, the fact is, you can not. The fact they are paid by commission makes them, by definition, biased. We ignore this truth, this conflict of interest, because too many people are making a lot of money with business as usual. It is tough to get my colleagues to understand this because their salary depends on them not understanding it. My only recourse is to educate the consumer, you. Below is a real-life example of a recent conversation I had with a Realtor here in Nashville, Tennessee. The astonishing part is, he isn’t just some other Realtor. He is the team leader and namesake of a top producing team. Below is an exact transcript of my text conversation as well as my side commentary.
J*** S***** · 08:28 PM; sorry for the late text any offers on ***********. ? also want to make sure commission is 3%
COMMENTARY: All property details, from list price, square footage, and offered compensation, are disclosed and advertised in the multiple listing service.
Jesus Gonzalez · 06:07 AM; *********** is active. The co-op is $1.00
COMMENTARY: By telling him the “co-op” is $1.00, I’m telling him that the commission is $1.00, not 3% of the sales price.
J**** S***** · 06:42 AM; is it for sale or rent commission is 1 dollar ?
COMMENTARY: Even though the MLS clearly states the property is “FOR SALE” he is asking to confirm it is for sale. It is a common practice here to list properties that are for rent with a $1.00 commission.
Jesus Gonzalez · 06:55 AM; It is for sale. The co-op is $1.00
J*** S***** · 06:56 AM; we will cancel showing i’m not working for a dollar sorry
Jesus Gonzalez · 06:57 AM; To say as much is a potential violation of your fiduciary and ethical obligation. Nonetheless, when your customer want’s to see it, I’m sure they will reach out to me directly.
COMMENTARY: Here is where the agent made a series of critical errors. Errors that could cost him his license to practice. First and foremost, by Tennessee law, he must have a negotiated and signed representation agreement with his buyer. That agreement must outline what his buyer agrees to pay him as compensation for his services. Yes, you heard me correctly. The buyer agent is required by law to have a representation agreement in place that outlines what the buyer will pay him for his services. For reference, TAR Form RF141 Exclusive Buyer Representation Agreement (Designated Agency) page 1 of 6, paragraph 3, subparagraph E lines 37-42. In other words, what the seller offers to pay the buyer’s agent should never stop the agent from being unwilling to show the buyer any property they want to see. I suspect this agent is in violation of the law and does not have his representation agreement. Or, he does have a representation agreement however, left lines 37-42 blank. Either way, a critical error. Second error he made is assuming that by not showing his client the property that in some way, they will ignore it or not want to see it. The agent does not understand the power of syndication to sites like Zillow or Realtor.com. Buyers in this age do not need an agent to find a property. Buyers do not need an agent to tell them how spectacular property is or isn’t. Buyers have all the information at their fingertips via their smartphones and tablets. Therefore, if he refuses to show a property because of his error, the buyer will fire their agent and call me directly. I will happily show the property.
J*** S***** · 06:57 AM; good luck
Jesus Gonzalez · 06:57 AM; Thank you, you too.
J*** S*****· 07:29 AM; i spoke to my clients we will still go see but it will be contingent on me getting paid…. they will see what they think of the home if it works they will add some money to pay me is that acceptable?
COMMENTARY: After reading his last reply, you might be thinking to yourself, “Hey, he has come to his senses” but, he is digging a bigger hole for himself. To convince his clients that any offer they make would have to be contingent on the seller paying his commission is not just unethical but, in my opinion, a clear and unquestionable violation of his fiduciary duty. He is putting his interest above his clients and if this agent is not careful, he could find himself without a real estate license to practice in Tennessee.
Jesus Gonzalez · 07:31 AM; If your buyer submits an offer, it will be presented. As you know, I am not the decision maker so, I can not speak to what is or isn’t acceptable till after I receive my client’s instruction.