For the past twenty five
years or so home buyers have had two kinds of agents they could
use to buy a home, buyers agents or sellers agents. The problem
was that very few home buyers knew that buyers agents were
available. Traditional real estate agents were taught to make the
best of this confusion and as a result most home buyers thought
the agent showing them homes represented them. In fact, the agents
were legally obligated to represent the sellers unless there was a
written agreement with the home buyer to represent them.
This confusion about the roles of the
real estate agents is one of the major reasons the public has such
a low opinion of the real estate industry. The Federal Trade
Commission did a study of the real estate brokerage industry in
1983 and determined that the vast majority of home buyers thought
that the real estate agent showing them homes was working in
their best interest. The vast majority was wrong! The FTC then
started putting pressure on the states to have real estate agents
disclose, in writing to consumers, whom they represent.
In the early nineties, most
states adopted agency disclosure laws requiring real estate agents
to finally tell consumers the truth about who they were working
for. Tennessee passed it's law in 1996. The National Association
of Realtors had long been against buyer representation in the
market place, but with the requirement that real estate agents now
tell consumers the truth, the handwriting was on the wall. Few
buyers would knowingly want to work with agents that are working
for the seller's best interests.
The NAR (National
Association of Realtors) did a reversal and endorsed buyer agency
as a alternative in 1993. In 1994 Michigan's agency disclosure law
prompted the general manager of the area's largest real estate
company to say "It's the single most important change in real
estate law in all my 19 years in real estate." It is a sad
statement about the real estate industry that a law requiring
agents to tell the truth can by itself be a tremendous change.
