New Agency Disclosure Law

Key points:

* As of Jan. 1 if you work with a real estate agent on a residential transaction, they should shove a form in your face.

* This form should clarify their relationship to you ("agency"), a concept that had previously been discussed by good agents with clients verbally (and by bad agents not at all).

* This form is a disclosure form only; it does not create a contract between agent and client.

* Agents with existing listings already have a listing contract in place with their sellers, so this form is recommended but not necessary.

* REBNY, our trade assocation, using this as a wedge to clarify the fine distinctions between "direct deals," "dual agency," and "dual agency with designated agents" as well as the distinction between "subagents" (which REBNY calls "broker's agents," I believe) and "co-brokers."

Yours in information,

ali r.
DG Neary Realty

For those of who REALLY care, I blogged about this change *in great detail* (with quotes from the the new form, the statute, and REBNY's pronouncements about it) when it was announced, in my Sept 1 post < http://www.realtown.com/sandymattingly/blog/manhattan-real-estate-business/new-real-estate-agency-law-disclosures-coming-to-manhattan-in-2011/ >.

Ali's Key Points are a good summary, so only go to my post if you REALLY want the details. I see the practical change as most directly impacting buyers. And agents; especially those "bad agents" Ali refers to who have not been following the law by having the discussions that have always been required. Enjoy!

sounds like a good idea given "some" agents werent so candid with their disclosures at the onset of a relationship with a client

seems like an easy thing to deal with, to insure proper disclosures, not so much a "shove" in the face

Sandy, that blog post was fantastic -- I have some questions if you can answer them.

Let's say I have a listing -- perhaps at 3 Hanover Square, an exposed-brick pied-a-terre. (*grin*) The new law says I have to declare my seller representation via form EVERY time I have substantive buyer contact -- which Neil Garfinkel has said is every appointment where I answer buyer questions (in other words, EVERY appointment).

Is Corcoran really training all its agents to coach their buyers to sign the forms at every appointment? Presumably the form is to protect me, to show that I declared my seller representation, but aren't you going to want a copy? How am I supposed to cross it back to you, via email?

I just envision a nightmare where you buyer rep somebody from out-of-town, and set up ten appointments, and then have to deal with getting ten seller disclosure forms in your inbox from just that one day.

ali r.
DG Neary Realty

ALI -- Quick response, but this may be better in a direct call/email dialogue [cell is on my blog; email is Sandy@[myblogname].com. I don't want to talk about how Corcoran trains, as I will undoubtedly say something that is a little different (in emphasis, at least) form what we have been told, and I just don't want to got there. But you should feel free to explain what Gil says ;-)

I will tell you that I will have copies of signed forms with me on all appointments (whether buyers or sellers, as both will sign in advance of any appointments) but that I do not expect to give my buyer forms to seller agents unless/until we make an offer, and I do not expect to give my seller forms to a buyer agent unless/until they make an offer; at which point we exchange the same forms signed by all. (On further review, it might be best to have a PDF of the form to send by email when all appointments are confirmed. A simple approach, easy to apply, whether or not it is strictly 'required'. hmmmm ... will think about that ...) If I represent a seller and have an appointment with an unrepresented buyer I will *definitely* give him/her a copy of my seller rep form.

I don't expect this to be a nightmare. Remember that all agents in NYS outside of NYC have been doing this for years. (And all townhouse and 1-to-3-unit coops and condos have been required to do this, even in Manhattan.)

Will it change the way Manhattan agents work? We can only hope. The biggest 'nightmare' won't be the paperwork, it will be those listing agents who are used to thinking of unrepresented buyers as 'their' buyers. They were always required to explain that they represented the seller ONLY and to get a form signed to 'represent' both, but I have my doubts about how often that was done *by the book*.

Happy to 'talk' about this directly. Happy new year!

ALI -- And I believe that one of your Key Points is wrong, or awkwardly phrased.

You say "Agents with existing listings already have a listing contract in place with their sellers, so this form is recommended but not necessary." But the form is required for all relationships, and I expect that sellers with existing (as of 12/31/10) exclusive listing agreements will be asked to sign the new forms and that new 2011 listings agreements will include the new form. (It will be part of the same document with the exclusive agreement in the Corcoran standard forms.)

Sandy, you're the best as always.

I haven't talked to Gil about this yet, but what sounds logical to do on the sales side is to present you with two forms every time you come in with an appointment buyer, have your buyer sign both, and you keep one and I'll keep one.

but yes, let's chat about this more off-board as it rolls in ....

Happy New Year!

ali

So, since it's legal for a broker to represent both the buyer AND the seller, who does he owe fiduciary duty?
Seems like a conflict of interest where transactions could be steered by the broker to favor whichever party he chooses.
A sellers broker should be trying to maximize the sale price and a buyers broker should be trying to minimize the sale price.
Am I missing something?

So, how does this law offer increased protection for consumers? Why would anyone simply give up their right to absolute fiduciary protection just so a brokerage can double its profit?

And what happens if a seller does not want to give consent (and give up rights) in advance?

It's this sort of confusion which leads to corruption and why the general public would prefer to sell or buy on their own using the internet.

This is no better than saying one lawyer can represent both the defendant and the plaintiff. Everyone knows that cases are often steered by attorneys bilaterally outside the courtroom but at least they are forced to go through the motions (no pun intended) and put on the charade that each represents the best interest of their client.

I guess disclosure is a step in the right direction... right?
It's too bad that people simply don't understand what they're signing half the time.

Come on Albany... you can do better than this. people's livelihoods are at stake.

ANDWIN -- The disclosure form states that an agent or firm canNOT offer FIDUCIARY services to both sides: "In such a dual agency situation, the agent will not be able to provide the full range of fiduciary duties to the buyer and seller"; "A designated sales agent cannot provide the full range of fiduciary duties to the buyer or seller."

The concepts are simple, the application less so.

The Consumer Protection aspect is that this written disclosure is now mandatory; previously, the (substance of the) disclosure was mandatory, though not the form (in writing). For a longer explanation, see the link to my blog, down below in this thread, 3 days ago.

i was at the REBNY seminar today which addressed the new Disclosure Forms and regulations. The topic is new to most, and therefore still very unclear. However, the attorney brought up one scenario with which this disclosure is not necessary, mainly due to the lack of "substantive contact".

If as seller's agent, I conduct an open house, and during this open house 100 prospective buyers come some with and some without brokers, you are not required to have these people sign the form if you have not had "substantive" contact with them (defined as merely walking through premises and not asking questions).

With that logic couldn't the following also be true then? (new scenario) in which I as listing broker do not have any substantive contact with a potential buyer and STRICTLY address their broker when showing the property. Any questions asked by buyer would be communicated via their broker and threfore no substantive contact with buyer is made.

I realize that this can be construed as going around the norm, but I see the brokerage community adopting such methods. Or we can embrace these forms, and use them as the DOS intended.

I do want to point out though that with the new disclosure forms, the listing broker will now have to have buyer sign these forms, and the buyer's broker will also require he or she sign THEIR forms. So to see one listing this poor purchaser will have to sign 4 forms just to see one listing. after 3 OH, i can see the average buyer in NY get sick of this process, and ultimately hope that brokers find a loophole around it.

curious to hear what SMattingly and Ali's thoughts are on this. As well as others.

andwin, there are two cases where there's going to be a buyer and seller and one broker, and IMHO they're not nefarious. Consider:

Case #1) I'm the listing agent on a property and I advertise the listing (let's say on Streeteasy). Jane Doe calls me, comes in, tours the property, and then wants to buy it. In this case, the disclosure form is a formal way of me doing what all agents should do (and what I should have done anyway) -- to declare that I am an agent of the seller, and owe fiduciary duty to the seller, and while I have some obligations to the buyer to be honest and forthright, to let Jane as the buyer know I'm not working for her.

Case #2) I'm a buyer's agent and I'm running around an area (let's say Downtown) with a client, Jack Doe. I'm his agent. I may be in the possession of confidential information about how much money he makes and his impending divorce, but that's okay because I owe him fiduciary duties. Then he decides he wants to see a listing that I have Downtown.

Well, I can't split my brain in half. Even if *I* could, my *firm* is now on both sides of the transaction and therefore has the potential to have a conflict of interest.

So I have the choice of telling Jack that he can't see the listing, or that he's creating a dual agency situation (which I now do by handing him this lovely form) and we all get to work through that.

In both these situations, the goal is to keep the consumers as informed as possible.

ali r.
DG Neary Realty

Apt O -- My understanding in the case of a seller agent talking to a buyer agent is that no Form is *required* (assuming they are from different firms), because neither agent is having substantive contact with the other principal. But I also do not think that this paperwork 'burden' will prove to be such a burden. I will carry copies of my Buyer Agency Form around on appointments. If my Buyer is going to bid (or we have substantive contact with seller agent) I will give that agent a form (and expect it back, signed by seller). Do these things by email and PDF and it won't even be that tough.

That does not seem to me where the rubber is going to hit the road. THAT will be in Ali's scenarios, esp #2.

Ali Front -- Your Case #2 is a very difficult situation, so talk to Gil! Before you say a word to Jack Doe about your listing, you already have (a) a fiduciary obligation to that seller, *and* (b) a fiduciary obligation to Jack about all other properties. But you know something about Jack that any seller would not be entitled to know without his consent. You ARE in conflict at this point, and I can't say I know exactly the way it should turn out.

One possibility is that both parties agree that you are a Dual Agent, which would mean that you gave neither one of them any advice going forward. (Why would that be in their interest?? That is a tough one.) Alternatively, maybe you can 'cure' the conflict if Jack agrees to be represented by another agent, but I am not sure; you might have to tell seller you have some information about Jack that you can't share with the seller, then you continue to represent the seller while Jack is stuck with a new agent.

There are lots of tricky scenarios one can hypothesize, but Case #2 seems to me the most difficult *likely* one.

Some agents are going to hate your Case #!, but only because they have profited from some confusion about who represents whom. They were *always* supposed to have the disclosure conversation with an unrepresented buyer; now they have to get the form signed (for their own protection, actually).

@Sandy, you can just call me Ali (or FP, whichever you prefer) ;>

My case #2 is taken straight from the video I watched of Neil Garfinkel (the REBNY counsel) talking about the form. I am a rather young broker from a small firm, so I/we don't carry that many listings at any one time, but that case is going to come up all the time for you. Corcoran has, what, 2,000 agents? Every time you show a Corcoran listing, or a different Corcoran agent takes a client to one of your listing, you are creating a dual agency.

Because, remember, you're not the broker; the firm (I guess technically through Tresa Hall, isn't she your sponsoring broker?) is.

Let's say you're repping a buyer. According to Neal, that buyer has three choices - to not go to any other Corcoran listings, to go with you and accept the dual agency, or to take another agent from your firm as "dual agency with designated agents."

It's a huge marketing point for small firms who want to rep buyers, when you think about it. Would love to hear from Keith/W81 on this point.

***

@UES, as I understand it, you are indeed right that you could skip the form on appts when you are the listing broker and talk only to the buyer's broker -- you are not having any substantive contact with the principal.

However, if I am showing a listing, I have probably three whole minutes with that client, even in the presence of his/her broker. If I waste that three minutes by not talking to that client, then I am really not doing my job, and I think somebody from my firm should take me out back and hit me with a two-by-four.

ali r.
DG Neary Realty

I have always used the Agency Disclosure forms provided by the DOS to show buyers that Agency can be selected. I think this new twist cements the fact that buyers are entitled to their own broker to represent their best interest; transparency and clarity. This way if I can't make it to an open house or my customer reaches out to a broker on her own for one reason or another, I don't get the stink eye from the "listing" broker when I later email with a follow up question,lol.

Keith
The Burkhardt Group

"It's a huge marketing point for small firms who want to rep buyers, when you think about it. Would love to hear from Keith/W81 on this point."

"Huge marketing point" might be a slight overstatement. As Keith mentioned, we've always used the forms to emphasize our allegiance to the buyer, to document our specific commitments (including commission rebates) and to assure the client that she can walk away at any time. I've never asked a client to sign the form, and I don't plan to start. So clients probably won't see any change in the way we conduct business.

Where we might reap some benefit, as you imply, is in the reaction from the big firms. Will they start thrusting disclosure forms on buyers at viewings, demanding signatures on a document that essentially says, "We work for the seller; our job is to screw you. Sign Here."? I saw that on Sunday at an open house for a high-end condo conversion marketed by Corcoran. In terms of competitive positioning, I was pleased, though I felt sorry for the very junior assistant who was stuck explaining the forms to wary Upper West Siders.

"It's a huge marketing point for small firms who want to rep buyers, when you think about it." Only in the sense that buyers working with (e.g.) Corcoran agents will more often face a dual agency with designated agents situation, in which *the firm* has the (main) conflict; for *any* agent taking a buyer to your own listing there is an 'issue'.

"Where we might reap some benefit, as you imply, is in the reaction from the big firms." On a small-firm listing, that listing agent has the same disclosure obligation, including the exact same obligation to "thrust" forms, as a large-firm listing agent. If you (W81) really "don't plan to start" asking clients to sign the new form, you should read the new form again ... it is MANDATORY. It might be easier for a small firm (because of having fewer dual agency with designated agents situations), but that just means the client signs a different part of the form.

Not to criticize, but to riff off what you (W81) said about that "very junior assistant" you saw ... (1) that agent has the exact same disclosure obligation to unrepresented buyers that s/he had on Dec 31, the only difference is that now this form is required; (2) that agent has the exact same disclosure obligation to unrepresented buyers that you have on your listing since Jan 1, form and all.

I assume that you will follow the law and use (get people to sign) the new form. The only agents disadvantaged by this form are agents who prefer that people not be clear about who-works-for-whom, which has often been listing agents wanting to double-end a deal. If they are used to keeping it a secret that they work only for the seller, then, yes, this will be a big (difficult?) change; for agents who have already been having the conversations that have always been required, this is a mere paperwork change.

As Keith said, "this new twist cements the fact that buyers are entitled to their own broker to represent their best interest; transparency and clarity". I.e., that "fact" has always been a "fact" but not always the practice.

Well, W81st, I didn't mean to imply that ALL big firms screw their customers by working for the seller. Just as you are pursuing a specific expertise in buyer representation, the flip side of other specific expertises (IDK if that's a word, but you know what I mean) is that those agents *will* face dual agency situations, & not just with designated agency.

For example, Sandy's long suit is lofts. If he trains both buyers and sellers to think "lofts = Sandy" then he's going to get in situations where those buyers and sellers want him, specifically, and he's going to be on both sides of the table.

ali r.
DG Neary Realty

SMattingly - Just to expand on Ali's point: for those of us who work exclusively with buyers - and exclusively as their agents - the disclosure is less worrisome than for listing agents. For me, the form is mostly an opportunity to say to the client, "Yes, I really do work for you, and I'm happy to put it in writing."

That said, it seems that I may have missed an important aspect of the legislation. Under the old law, I think we simply had to maintain adequate records to demonstrate that the agency disclosure had been provided. So I e-mailed the completed form and asked the client to acknowledge receipt. Most people find it much less threatening to send a "Yup, I got it" e-mail than to sign a legal form that looks very much like a contract - although really, the signature was just the legal equivalent of "Yup, I got it."

Has the signature requirement been tightened for agents working on behalf of buyers? If so, thanks very much for bringing it to my attention.

Yup, it is tighter, W81, so get it signed! And I agree that a buyer-only agent's life will be easier than for those of us who sometimes rep buyers and sometimes rep sellers. Fun all around, though ;-)

SMattingly: Thank you again for your advice. I've reread the amendment and searched the new form. It looks as though informed consent (i.e. the client's signature) is specifically required only in cases of dual agency. The paragraphs defining "DUAL AGENT" and "DUAL AGENT WITH DESIGNATED SALES AGENTS" contain the critical text: "A SELLER OR BUYER MAY PROVIDE ADVANCE INFORMED CONSENT TO DUAL AGENCY BY INDICATING THE SAME ON THIS FORM." The other paragraphs defining agency relationships are mute on the topic of consent; in fact, they don't mention the signature section at all.

On the other hand, I'd rather be safe than sorry. I'm not a lawyer, and I don't want to hire one to parse the form. So from now on, I'll ask nicely for a signature. At the first sign of resistance, though, I'll probably back off.

West 81, please be aware that there are already DOS representatives checking that we enforce the new law, it is REQUIRED that you sign agency disclosure with any client you represent, regardless of whether it is a buyer, seller, or ends up being a dual agency. You can be fined, although i am not sure of the amounts, and/or sued, if you do not have a signed disclosure agreement with each client. The "advanced informed consent" is so that if you represent the seller, you can in advance get their agreement for dual agency and dual agency with designated agent deals (when you have a sales listing(.. The form itself is part of the new law that went into effect, which does require signatures.

nycbrokerdax: Thanks. I might have to ask a lawyer to clarify the implications for the buy side. I can't find an explicit change to the signature requirements in Real Property Law §443. The law has always stated that if a signature cannot be obtained, the agent has to retain evidence of disclosure (and the relevant party's refusal to sign) for three years. That leaves open the question of how aggressively an agent should pursue a signature, and what constitutes "refusal".

Could DoS fine an agent who provides the disclosure, but doesn't demand a signature forcefully enough? I guess that's possible, and always has been, but it's clearly not the purpose of the law and I doubt there's a precedent for it. As for being sued, I agree that a signature could be useful in the event of a lawsuit; but if somebody wants to sue you, they can sue you.

If someone refuses to sign the form, the DOS requires that agents sign an affirmation (in the presence of two witnesses)

West 81st, I just sent a copy of the forms including the affirmation form to your gmail... I have a ? for you in there too, when you get a chance.

ali

I have an appointment to go back to an apt that I saw last month. I am not represented by a broker and have made all arrangements through the seller’s broker. The broker has provided a Seller Agent Form.

My question is that the broker checked off both Seller’s Agent and Dual Agent with designated sales agent, along with advance informed consent.

I am not looking for broker representation and don’t want any commitment to the agent, so is this the correct?

Wouldn’t the seller be better represented from a fiduciary position if the broker was not a Dual Agent?

Ieb - yes that is the correct form. The checked box next to "advanced consent to dual agency" is letting both you and the seller know that there MAY be a dual agency relationship, not necessarily that there is one. The change in the law has allowed for the advanced consent, and agents are checking off the box in the event it occurs down the road.

FP - do you mind sending me just the affirmation please? Dbaruh@gmail.com Thx

UES - There is no dual agency relationship and there will NEVER be one so then why is this correct????

nycbrokerdax wrote:
The "advanced informed consent" is so that if you represent the seller, you can in advance get their agreement for dual agency and dual agency with designated agent deals (when you have a sales listing(.. The form itself is part of the new law that went into effect, which does require signatures.

Any seller who signs an advance consent to give up his Fiduciary protections is an idiot. But then again, without the idiot rich there would be no New York Real Estate Market at all.

ieb Wrote:
"...Wouldn’t the seller be better represented from a fiduciary position if the broker was not a Dual Agent?"

THANK YOU!
Of Course they would. Any reasonable person can see that.
I would love to be a fly on the wall listening to the creative rhetoric that agents spew to prospective clients in order to get them to sign this thing.
What's happening hear is That the NY State legislature has told the real estate community that they don't have to observe their fiduciary duty to their client as long as they tell them in advance.

A layman's translation:
Broker -
... Hi, sign an exclusive contract with me for 6 months. If you happen to sell your apartment to anyone during that period I still get paid. Oh, and I will also probably be representing most of the buyers that I show your apartment to. So I'll be getting paid twice for this. And I can't guarantee that your best interest will be a big concern to me.
Now sign this other thing that says I told you - you understand that you're contractually bound to me but I owe you no fiduciary responsibility at all...

My question is - Why is the NY State legislature enforcing a form that protects the brokers and disenfranchises the public? What ever happened to protecting consumers?

UES, I sent you the whole packet -- I don't have the affirmation as a sep. PDF.

ali r.

I am not a Realtor but a Seller.......this is the result of my Agent..with a large firm ,friends referral, who did not explain one word of what her Agency Relationship was, only to have me sign this conflict of interest form which can ,give me, the
Principal the ability to say have the buyer get their represention immediately......as my Agent becomes combative when i say up the price,or get me the beset deal as Buyer has been in the building before with another Agent....where the agent simply Defends the buyer, another comment having to do with Double Dealing creating mistrust....all for double commission.............CANNOT BE DONE......ITS CALLED SLEEPING WITH THE BUYER.......NO FIDUCIARY HERE!.