New Real Estate Disclosures for New York: Who Really Benefits?
New York's new law will allow buyers and sellers of all dwellings to sign, in advance, just one catchall consent form agreeing to dual agency representation for any property. A dual agency relationship is when both the seller's agent and buyer's agent represent the same brokerage. And under existing law, buyers have had to sign a new form before each showing of any property in which a dual agency relationship exists.
Arguments can be made for whether the new law, effective in January, benefits the broker's agent, the seller or the buyer. In theory, it is meant to make disclosures more transparent for the buyer. But unless a buyer is willing to skip seeing quite a few properties, or chooses to use an agent from a small boutique brokerage, he or she just might not be that much better off.
Under current law, buyers and sellers of single-family dwellings across the state receive such written disclosures, but only verbal disclosure has been required for deals involving condominium and cooperatives within the five boroughs of New York City, which is composed mostly of multifamily buildings with more than four units.
Where written disclosure was in effect, a new form allowing dual agency representation, where relevant, has had to be signed in advance by both the seller and the potential buyer with each showing. This has slowed the process for homebuyers and sellers, but also curbed the speed by which real estate agents could show properties listed by their own agency. With the new law, as announced by the Real Estate Board of New York, each party can elect to give implied consent by signing in advance one form that would apply to any dwelling. (They of course could also decline any and all potential dual agency conflict.)
REBNY, New York's real estate professionals board.
"They probably did it when that dual agency was created [with an offer]," he says. "I don't think people could easily comply with the letter of the law."
Too much unnecessary paperwork and the exclusion of NYC co-ops and condos is fixed with the induction of this law, signed by Gov. David Paterson earlier this week.
"We think it is a good thing that the consumer receives that form. You will see a dramatic change in how [brokers] deal with consumers," says Garfinkel.
"In theory [the new law] makes a lot of sense," says New York City real estate broker Diane Saatchi, of Saunders & Associates. "In practice, I don't know that it makes a lot of difference."
It doesn't matter much because the agents are all, in effect, working more for the seller than the buyer, whether the same broker is being used our not, says Saatchi. "It is clear that we work for the seller because the seller pays the commission," she says. "If the buyer and the seller both paid the commission, then that might make a difference."
Garfinkel disagrees with what he says is a typical view taken by real estate agents associated with the National Association of Realtors. "REBNY says if you're not representing the seller, you are representing the buyer, but NAR says you're representing both."
"Our job is to be honest to both parties, even in a dual-agency situation," clarifies Saatchi. "If I know that the seller's property is next to the garbage dump, I can't withhold that from the buyer, but to tell that to the buyer isn't looking out for the seller."
Saatchi says that when an agent represents both parties, closer bonds are usually formed with the buyer than the seller.
"When you work with a buyer you really get to spend way more time with them than you do with a seller," she says. "You meet their kid, or their uncle, when they come to look at the house, or their dog is in the car with you. But they are not the ones we represent.
"I understand having this law and the forms, but it doesn't really match our practices. You're not taking care of the real problem with it."
The new law appears to protect the agents more than it does the parties to the transactions. If agents were not always complying with the existing law -- by having the paperwork signed prior to each individual dual-agency showing -- then the agents were liable. If the agents were not verbally informing their co-op and condo clients of potential dual-agency situations, they also were liable. Now with it all having to be in writing up-front, there is less of a chance for an agent to be accused of not following the law. But at the same time, buyers who opt into a dual-agency situation before they've ever seen a single property no longer need to be told immediately prior to a showing if a particular home creates a dual agency situation.
It seems to me that this new law doesn't really create more transparency for the buyer and seller. Remember, REBNY, with 12,000 paying members, represents real estate professionals, such as agents, brokers, banks and builders, but not the parties to the transactions. So just as Saatchi says agents truly work for the person who is paying them, we can conclude that the same is true for those REBNY truly represents: Its own paying members.
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