The following letter was published in the Speaker's Special Project on Real Estate Agency Law report prepared for the meeting of the Committee on Real Property & Probate and the Committee on Business Regulation & Consumer Affairs held on April 12, 2000, in Tallahassee, Fl.
Cover page: TIME TO END (picture of) BAND-AID REAL ESTATE LICENSEE LEGISLATION!
TO WHOM IT MAY CONCERN:
The Florida Association of Realtors is requesting that the Legislature perform an interim study on re-writing legislation to provide a presumption of Transaction Brokerage for all residential real estate transactions. To that end, it will be helpful to look at the considerations involved in that recommendation.
Prior to 1991, Real Estate Licensees in this State functioned as Seller's Agents or Seller's Subagents. Those relationships, previously thought to have been etched by the hand of G-d, came under scrutiny in Florida. Study revealed that an Agency relationship requires that the Agent be the fiduciary of the person he represents (buyer or seller). That is, an Agent has a paramount responsibility to support the best interest of the principal, even though those considerations were contrary to the Agent's own personal interests. Since the Licensee (Broker) only gets paid if he produces a transaction, it is difficult, if not impossible, for the Agent to represent his principal, while at the same time earning a living and looking out for the Agent's own best interests.
If Agency is flawed, Dual Agency is doubly flawed. It is almost universally accepted that Dual Agency, with conflicting fiduciary obligations to two adverse commercial interests, lacks moral substance. Indeed, how does one Broker get the highest price and best terms for the seller and the lowest price and best terms for the buyer? Yet, until quite recently, Dual Agency was permitted and practiced in this State.
SubAgency is a system where a seller authorizes a Listing Broker to appoint other "then unknown" Licensees to act for him in the marketing of his property. Aside from the obvious disadvantage of being represented by people you don't know, the liability legal exposure to the seller from multiple unknown Agents was unacceptable and unjustified.
Agency, SubAgency and Dual Agency were the only ways in which real estate Licensees did business in Florida through 1991.
In 1992, Florida, at the prompting of its real estate professionals, and with inspiration from other States, created "Transaction Brokerage" as an authorized Licensee relationship. Transaction Brokerage creates a relationship between a real estate Licensee and the public wherein the Licensee acts as an independent contractor in order to accomplish the sale or purchase of a parcel of real property. The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards.
In creating the Transaction Broker, the Legislature made it one of several ways in which the Licensee could relate to the general public. Others, at that time, included Seller's Agent, Buyer's Agent and Dual Agent.
RECENT FLORIDA REAL ESTATE RELATIONSHIP LAWS:
With the advent of the Transaction Broker, and out of fear of change, some elements of the real estate industry pressured the Legislature to preserve the old, flawed system. As a result, we have seen:
All of the foregoing have left a critical Florida industry floundering and in extremis, e.g.
A SIMPLE SOLUTION:
The curious irony is that there is a simple tried and proven solution to this minefield of confusion and legal exposure. Transaction Brokerage has been a functioning professional real estate relationship in Florida for almost ten years. Many of the larger and smaller real estate firms in this State have adopted it as their standard operating procedure.
The concept of Transaction Brokerage was born and nurtured in this State with a special assist from the South Broward Board of Realtors, Inc. It works well in Florida. The Florida Legislature can make a millennial gift to the people of the State of Florida and to the real estate professionals of this State by making "Transaction Brokerage" the presumed [default] legal relationship for all residential real estate transactions, and by authorizing "Agency" relationships when requested in writing and consented to by interested parties.
South Broward Board of Realtors, Inc.