March 16, 2007
Double Bubble: How counterfeit buyer agents inflated the housing bubble
Yesterday we blogged about the "Mortgage Meltdown" and record number of foreclosures, challenging the media and regulators to investigate how counterfeit buyer agents (a.k.a. double agents) helped inflate the housing bubble. If they do, here's the kind of "glaring" case study they may find:
My so-called buyer's agent (who promptly switched roles at contract signing without explanation), initially advised me to bid $750,000 for my house of choice, which was listed at $699,900. When I told her that such an offer was beyond my price range, she was quite adamant that I not offer anything under the list price. When I finally backed out the deal because of her bait and switch scam, I later heard that the house in question sold shortly afterwards for $682,000--in other words, nearly $70,000 less than the bid suggested by my so-called buyer agent.
This type of price inflation (caused by seller's agents masquerading as buyer's representatives) must have a very distorting impact on housing costs. The economic fallout is enormous: ordinary citizens are forced to move out farther in search of decent, affordable places to live, which leads to a host of problems connected with traffic congrestion, suburban sprawl, etc.
As I perceive it, the real estate cartel's use of dual agency [a.k.a. "designated agency"], which works to the detriment of the average consumer while enriching dishonest agents through the practice of double-dipping, contributes significantly to the manifold problems we see in the residential housing market and therefore should be fully exposed.
The homebuyer above concluded, "Isn't there any investigative team or media personage with the courage and tenacity to shed light on this problem?" We'd like to ask how homebuyer and sellers who have been victims of dual agency, designated agency, or faulty agency disclosure can use social networking tools, like blogs, wikis, and interactive mapping, to expose the problem and prevent other consumers from being harmed? Does anyone know if such an organizing effort is already underway, or have ideas about how to get one started?
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You thought subprime was bad? Wait until you see what's next.
Posted by: Corey | Mar 18, 2007 6:14:01 PM
Dual agency should absolutely be banned, nationwide.
The Mass. category called "Facilitator" is a bad deal, also. Read the description at your Mass website, to see its pitfalls.
Equally Terrible: The lack of Disclosure Requirements, on sellers and their agents, AND on the buyer's agent, in Mass.
I operate in San Francisco... Cal. has pretty good forms, which Mass really should have.
Posted by: jack barry | Apr 23, 2007 1:20:40 PM
There are plenty of exclusive buyer agents in Massachusetts, and more and more informed consumers are taking advantage of 100 percent loyalty.
Dual agency certainly is a great concern. There really isn't anyway to justify it.
I really enjoy this blog. It's very thought provoking. Keep up the good work.
Posted by: Rich Rosa | Nov 2, 2008 9:37:42 PM
Here is a good examination of Redfin's use of dual / designated agency with comments from the Redfin team. Highly relevant for anyone trying to evaluate the the brokerage service they offer.
Posted by: Terry Sanford | Aug 3, 2011 11:56:46 AM
Thought-provoking I hope to the average reader. It makes me whince to read Glenn Kelman put his investor driven need to grow his company ahead of the Zero Tolerance Conflict of Interest Policy a real fiduciary would offer. Can you imagine a law firm telling an divorcing couple that it's OK to represent both of them because they want their firm to grow larger?
The monthly tallying of leading buyer agents is interesting, too, but I wonder what the list would look like if it was based on a measure more meaningful than number of transactions, like the ratio of dollars saved off the original asking price (plus rebates and reduced commissions if any), divided by the fee paid by the buyer. If my back of the envelop calclation is accurate, our record is about $350 saved for every dollar paid on a fee-for-service basis by our buyer client.
Posted by: RealEstateCafe | Aug 3, 2011 1:38:08 PM
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