Dual Agency - Should Brokers/Agents Disclose Their Commissions?

North Carolina's real estate commission requires firms conducting dual-agency transactions to reveal the total compensation they receive to the buyer.

Three North Carolina Realtor associations want the state's real estate commission to reconsider its interpretation of this disclosure rule.

Rule A.0109 went into effect on Oct. 1, 2008. It requires the state's real estate licensees to reveal, in writing, any compensation "of more than nominal value" they expect to receive from their client (the buyer, seller or both) and any compensation that the licensee expects to receive from any other party for that transaction.
Written disclosure must happen before the principal makes or accepts an offer to buy or sell.

The letters reveal objections to the rule's requirement that firms reveal the total compensation they receive from a dual-agency transaction to the buyer (the seller would likely already know since he/she would be the one paying compensation for both) and cite obstacles to the rule's application in practice.

"I am writing this letter because I fail to understand the reasoning, the logic or even the consumer benefit, in having the real estate brokers in N.C. disclose the firm's total compensation in a dual-agency transaction to the buyer client," Tony Jarrett, regional vice president at Allen Tate Realtors, who has requested that the commission reconsider its interpretation of the rule as it pertains to dual agency. said in a Dec. 18 letter to the commission.

Critics say reporting the total compensation amount would be misleading when a seller pays for additional marketing of a new development as part of the listing agreement, or if a broker is required to report the amount the seller paid a third party (through the brokerage) as a referral fee.

They also cite questions of timing. The rule requires written disclosure before an offer is made and "made in sufficient time to aid a reasonable person’s decision-making." What happens if the listing agent cannot be reached or is reached after hours and cannot remember the specific compensation amounts?

George Bell, a Realtor who works with Jarrett on the North Carolina Association of Realtors' Forms Committee said, "This isn't about what the buyer should or shouldn't know. It's how it (the rule) should be applied."

The North Carolina Real Estate Commission's legal counsel, Tom Miller said, "If the seller is paying disproportionate amounts of money, I (as the consumer) have a right to know that in order to weigh the advice given with given information," Miller said.
"This is the conundrum that every dual agent has. A dual agent has an inherent conflict of interest."

The challenge for the commission, Miller said, is to figure out which complaints have merit and try to address them without diminishing the benefit to consumers.

I completely understand the nature of a dual agency transaction. It is the desire of every brokerage to have their agents represent the buyer and the seller. It maximizes the infrastructure and operations of the brokerage while providing "consistency of service" for the consumer. However, some brokerages attempt to maintain control of their clients by primarily showing internal listings without primary regard to the needs or wishes of the consumer. Many consumers do not understand this potential conflict of interest activity.

I applaud the North Carolina Real Estate Commission. I believe full commission and fee disclosure in a dual agency transaction should be a requirement in California.

What do you think?

Best to you,

Jim Herrera

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