With Terry Story, 29-year veteran Real Estate Agent with Keller Williams in Boca Raton, FL
Transaction Brokers Address Real Estate Transparency Problems
We’ve all heard about terms such as a buyer’s broker or agent and a seller’s broker or agent. Now, there’s a new term for real estate agents. They opt to become transaction brokers.
When Terry Story started out in the business, everyone worked as a seller’s agent. This basically meant that all realtors represented the seller. This created a fiduciary relationship. For example, say the seller said his roof was 10 years old. It would be the agent’s responsibility to verify that the roof was indeed 10 years old. This resulted in a slew of lawsuits against sellers’ agents.
To counter that, realtors began to represent buyers in home purchase transactions. Buyers’ agents bore all the responsibility of due diligence on the property, including uncovering defects that the seller did not disclose.
Realtors did not like bearing all the risk and liability of uncovering hidden defects, especially when everything was caused by the seller not telling the truth. Hence, being a buyer’s agent was not a popular option with realtors either.
This led to the creation of transaction brokers to remove the liability from the agents.
Now, every realtor in the State of Florida is a transaction broker. As transaction brokers, agents have an obligation to be fair and honest, disclose all known facts, be accountable for funds, and use skill, care, and diligence in transactions. Transaction brokers have limited confidentiality obligations.
A transaction broker does not represent the buyer or seller. Instead, s/he acts as a neutral resource to help both parties complete a home sale.
What does that mean? Assume Terry is your agent and you are the seller. If you tell Terry there is a leak in your roof, you cannot expect Terry to keep your secret. As a transaction broker, she is obligated to disclose anything that would materially affect the buyer.
In Florida, transaction brokers cannot reveal seller’s motivations or buyer’s motivations.
There’s another term called single agency. This is where a realtor represents the buyer or seller in a single agency. This brings back the fiduciary relationship and all the problems that go with it.
For example, if the agent works with Keller-Williams, s/he cannot show you a Keller-Williams property. Doing so would be deemed a conflict of interest. This makes agents’ jobs complicated.
Lack Of Trust
Brokers shield buyers and sellers from each other. If a buyer presents an offer, how does s/he know if the seller saw the offer? All a buyer can do is call the agent and hope for an honest answer.
Lack of trust is a major issue in such cases.
If a buyer’s agent says, “I don’t know’, s/he’s viewed as inept and could lose the buyer.
To overcome this lack of trust, Terry recommends relying on a routine. When you submit an offer, always call to confirm that your offer has been received. Then, follow it up with confirmation that it’s been presented to the seller.
In earlier days, decades ago, buyers’ agents would directly present their offers to seller. Now, face to face meetings have been replaced by email, e-signature, etc. Terry does not see a lot of cases where offers aren’t presented to sellers. What bothers her more is the lack of a timely response and unprofessionalism by agents.
Fortunately, real estate laws are being re-written to ensure transparency, and change things for the better.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story. Terry’s a 29-year veteran with Keller-Williams located in Boca Raton, Florida. Welcome back.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: Welcome back. I almost said, “Welcome back, Keller Williams.” Welcome back, Terry. You know, I have a question for you this week. I keep hearing these terms, buyer’s broker, seller’s broker, and then I heard this term transactional or transaction broker. What is the difference?
Terry Story: Oh my gosh, that’s a loaded question. Okay, so you have to understand a little bit of the history. Many years ago when I started, when I was a little girl, when I started in real estate, we worked as seller’s agents, which basically meant that all realtors represented the seller. It created a fiduciary relationship.
Steve Pomeranz: We know that in our business because a fiduciary relationship means that you put the customer first.
Terry Story: Correct, and there’s legal obligations. So there’s this huge lawsuit that took place, a suit where the realtors were sued for representation.
So for example, if a seller said, my roof is 10 years old, it would be the agent’s responsibility to go out and verify that the roof was 10 years old.
Steve Pomeranz: Oh, wow.
Terry Story: So that became a big problem. So then they switched like, ha, okay, we won’t do that anymore. We’re going to switch to buyer representation. Same thing happened. No good, you know?
So they then did this new thing called transaction brokers. Now today, the state of Florida, we all work as transaction brokers. What does that mean? Okay. So you hire an agent to be your representative as a seller, and you as a potential buyer want to engage an agent to assist you in the purchase of a home. We all work as transaction agents. What does that really mean? We have an obligation to be fair, honest, disclose all known facts, accountable of funds, use skill, care and diligence in transactions, present offers in a timely manner, but there is limited confidentiality.
What does that mean? For example, if I am your agent and you are the seller and you say to me, “Hey, agent Terry, please don’t tell anyone that I have this huge leak on my roof. I’ve covered it up. No one will ever find it. We’re good, right?”
No. We can’t keep that confidential. Anything that would materially affect the other side has to be disclosed. So, know when you’re dealing with your realtor, which your broker relationship is, again, state of Florida, we’re all transaction brokers, we can’t reveal seller’s motivations, buyer’s motivations.
Steve Pomeranz: Which I don’t like, by the way. I want to know, from the inside-
Terry Story: I know. Everyone wants to know.
Steve Pomeranz: Inside track.
Terry Story: And that’s why everyone will say, “Well, you know, I can’t reveal it,” or … I can’t tell you. Or they’ll say, “Well, what offer did you just have?” We can’t reveal that.
Now we can if we’re given permission by the seller, you know, but understand when we’re dealing with these relationships, we have to honor them and respect them.
Now there’s another thing called single agency. Okay? So what you can do, for example, if I was a buyer, I can go to an agent and this is limited. Not many realtors do this by the way, but anyway, you can ask them to represent you in a single agency. Now that brings back the fiduciary relationship and the problem with that is—multiple problems with it.
Number one, if for example, the agent works for Keller-Williams and the agent now wants to show you a Keller-Williams property.
Steve Pomeranz: Conflict of interest?
Terry Story: Yes. And you have to have a dual agency and transition to a … It’s very, very complicated. That’s why we’ve pretty much got rid of it. It does exist if you hear single agency, but it is very complicated to actually.
Steve Pomeranz: Well, let’s say I was a billionaire and I wanted to come down to the state of Florida and get a home. You know, it seems to me that I would hire a buyer’s agent. Go down, take care of, you know, find, scout out the whole area, find me this swath of property, you know, kinda like Bill Gates did up in Wellington. I don’t know how he worked, but it’s this kind of mental idea that I have, mental image. I would think that a buyer’s broker would make sense there because you need somebody who’s advocating for you and who’s out there looking. Now using your leaking roof example. A buyer doesn’t have to worry about that. A buyer’s agent. A seller would because he has to check to see if the seller is telling the truth.
Terry Story: Correct.
Steve Pomeranz: Buyer seems to have less responsibility there.
Terry Story: The buyer’s agent … It would be then the buyer’s agent responsibility to go check it all out, verify the permits. There’s a lot of liability then put on the agent when really everything is caused by the fault of the seller not telling the truth, so that’s why they did with transaction brokers to remove the liability from the agents. I mean when you hire an agent to help you, they’re doing everything that they can that you’ve asked them to do. They can’t reveal motivation.
Steve Pomeranz: They can’t even like-
Terry Story: How can they tell you what it is if the other side isn’t telling them what it is. So what’s the difference?
Steve Pomeranz: Yeah. But I mean, you can wink at me, you know, you could like go. I can’t tell you, but you know.
Terry Story: If you know, I guess.
Steve Pomeranz: No, that’s never happened to me. I tell you, they stick to the rules.
Terry Story: Yeah, absolutely.
Steve Pomeranz: Okay. I’ve got another question for you. So this is actually a question asked to a journalist. It says, how do I know the seller actually received my offer? I called the listing agent the other day to find out if he presented my buyer’s offer. So this is from the voice of a broker.
Terry Story: Right.
Steve Pomeranz: And he said, “Yeah, yeah, I presented it.” But this broker is saying I don’t believe him. And what angers me most is he doesn’t understand why I’m upset. The buyer feels I’m inept because I have no clue what’s going on with her offer. “I don’t know” doesn’t bode well with buyers. I get blamed and my customer walks.
Terry Story: Yeah. Unfortunately, you know when you’re dealing with somebody that’s unethical or not even unethical but unprofessional, you may have this sort of thing. When you submit an offer, always ask to confirm that they’ve received it, follow it up with confirmation that it’s been presented.
Years ago, Steve, we would sit in front of the customer, even if it wasn’t our customer, to go present an offer. Those days are long gone. Everything’s done by email, e-signature. I mean, there has to be some trust. Obviously, this one broker doesn’t feel comfortable with the agent.
Steve Pomeranz: Well, it used to be the code of ethics stated that they didn’t have to say anything, but I think that’s changed now. They have to actually say they did, they have to show that they did.
Terry Story: Yes. The laws are actually changing.
Steve Pomeranz: They’re going to be changed.
Terry Story: Been changing where they … Yes, but I don’t know how often that happens where they say it was presented and it wasn’t. There’s always stories out there.
Steve Pomeranz: The big idea is if you haven’t heard back, the answer has been no. Most likely.
Terry Story: Right, but it’s just unprofessional. That’s the bottom line. It’s just unprofessional.
Steve Pomeranz: Right. Okay. Very good. My guest, as always is Terry Story, 29-year veteran with Keller-Williams, located in Boca Raton, Florida, and she can be found at TerryStory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.
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