Agency Service Before Agency Agreements. It’s still a thing.

Buyer agency came into Wisconsin in the early 1990s. Real estate agency rules have always required a signed agreement before providing real estate agency service. In life, we expect practices to change to fit the rules. That doesn’t happen. In real life, rules get modified to make the law fit the method. Practitioners resist making a total concession, and enforcers are reluctant to enforce compliance. Buyer Agency is an excellent example of modifying rules to apply to standard practice, with the enforcer’s soft commitment to enforcing compliance.  

WB-36 Wisconsin’s Buyer Agency Agreement

Whether a licensee has the right to act as a buyer agent without a signed WB-36 is a question for lawyers. Depending on which side of the argument, a lawyer could be right. Real estate license law may not allow a licensee enough wiggle room to withstand a challenge. The agent who acts as a buyer agent provides agency service and waits to have an agreement signed until they’ve provided enough courtesy to help the buyer decide they should make an offer on the property is in a dangerous position. 

A self-proclaimed top agent in the Madison real estate market acknowledged before a room of eager first time home buyers of the expectation of a signed agreement before service. He then announced: I don’t have my clients sign a buyer agency agreement until we sit down to write an offer. Maybe he intended to give the audience some comfort in knowing he wasn’t as hard to work with as licensees who comply with Wisconsin law. What other rules might he not abide by? 

Pre Agency. Sub Agency. Buyer Agency. If you’re talking to a prospective home buyer, you are one or the other as a licensee. Pre Agency is one of those modifications made to make the law fit the practice. Pre Agency allows the licensee to provide some nonsubstantial service to a person. The service is at best enough for the parties to get to know each other. Because the need for substantial service comes early in the process, pre agency should be short. A need for disclosure of agency and a choice of sub-agency or buyer agency comes up quickly. 

Illegal or unethical is not up to me. But if the law requires an agreement before providing agency restricted services, and the rules require licensees to put the agreement in writing, it’s safe to assume the Board would have a disciplinary decision to make should a complaint be filed. 

How is this still happening?

Some licensees or brokers might have decided it’s better to capture business than to follow all of the rules. Capturing customers and pretending they are clients might be more comfortable than having a conversation that the licensee or broker is unskilled in. 

The same way we trace an illness back to patient zero, we can identify where the practice of agency service without an agreement exists in each firm. An audit of a firm’s files will provide a dated Disclosure of Agency form, and/or a WB36 Buyer Agency Agreement, and the dated Offer to Purchase. The responsibility for compliance rests with the firm. If files get reviewed as they are supposed to be, a broker should address the agents’ practice. Expecting the firm’s service incidents before the agreement’s cart to be ended quickly and early in the year is reasonable. 

Consumers who are represented by brokers who have not complied with agency law are out there. I know this because we hear from consumers that agents didn’t require a signed agreement in their previous experience. Real estate is a business with a long history of providing essential service for free. Consumers know price opinions, pre-selling consultations, tours, and free are all real estate agent giveaways. Is the buyer agency service just another freebie? Why is compliance so much better with the seller agency listing contract? Or is it?

What are the other optional rules?

Consumers who get agency-level service (negotiating ideas, value opinions, property critique, strategy advice) without a signed WB36 Buyer Agency Agreement may not be getting anything for free. If the signed agreement rule is deemed optional, what are other rules that the agent considers optional? Confidentiality isn’t optional, and failure to keep confidentiality will cost you. 

Buyer Agency

Regardless of hopes, expectations, and myths, buyer agency places the licensee and the buyer on the same side with a shared perspective. Buyer agency is a privileged relationship where the most effective assets a Realtor legally has at her disposal are available for the buyer. Without buyer agency the licensee is unquestionably working as a sub agent for the listing broker with clear obligations to the interests of the seller. There is no gray area in Wisconsin real estate agency law.

In my opinion, there is one reason for working as a buyer agent and this is it: I intend to legally provide all of the services, share all of my insight, and work with the buyer to create appropriately safe terms. And this is important: Some of those terms may be to the advantage of the seller. I believe an informed person, given logical choices, is  comfortable taking on risk commensurate with the reward.

The assumption that buyers are best served by tipping the scales of every point in their favor is dangerous in the real estate market. Price is always important and to some extent it may be second to risk. Given a competitive price, prudent sellers weigh the risks of the contingencies before committing. An attractive number with high risk and low probability of closing might appeal to the gambler, but for the typical home seller who has other plans and commitments to meet, shifting risk to the buyer in exchange for a reasonable price is a more acceptable strategy.  The wise buyer agent knows the areas of a boiler plate contract ideal for softening.   We will find some of those easy to improve areas of offers in the coming weeks of Skill Share Thursday’s at Restaino & Associates. 9:30 to 11:00. Let me know if you want to attend.

Buyer Agency. The Purpose Is Not About Getting Paid

You’re a Wisconsin real estate licensee. What’s most important to you, (a) getting paid, or (b) being on the right side of the law? I know you said “B”, being on the right side of the law. That’s the reason we do buyer agency service right? No? What?

Somewhere along the way to providing buyer agency service the notion that buyer agency contracts are about getting paid took a hold of our industry and has not let go. I could be wrong, I sometimes am, but it seems that the purpose for Buyer Agency is inherent to the consumer demand that made Buyer Agency Service relevant. That demand came from two places: First, the buyer who wanted the licensee on their side for the insight the licensee could share for the buyer’s benefit, and second, the broker who wanted to fill the demand.

In the beginning, as far as  Wisconsin is concerned,  I put the beginning around 1990-91 when the first buyer agents appeared on the scene guns blazing to advocate on par with lawyers for their buyer clients. To be sure those first agents were all about getting it done for their buyer clients who they captured with a wide net of agency contracts, but taking no prisoners of sellers or their Realtors. The traditional industry responded the way traditionalist are prone to…they rose up to do battle with the Advocates. The generals rallied their troops, sides were taken, lines were drawn, and prisoners were few.  When it became clear that the Buyer Agents would not surrender the cry for help went up, “There Outta Be a LAW!” And one was made. (That’s what happened in Wisconsin where producing laws is a close second to producing cheese. In other states the Realtors cried “There Outta Be an Ethics Code”. Either way, there was a lot of crying) If the advocates would not surrender peacefully, then the law would eliminate licensee advocacy. The advocates could remain, but the behavior was now illegal or worse, unethical or both. Only lawyers could advocate  and that makes sense because they’re just better designed for such confrontational behavior. They are. It’s in there DNA. Without advocating as a reason to be, real estate licensees were offered “facilitating”. But facilitating didn’t sound like anything worth three, or four, or five, or six or seven percent of the purchase price and the industry rallied to remain “Agents”. In the end, the legislature gods gave us our unique brand of agency…and it was good, for about ten years.  Maybe I’m going deeper into this than I should, but the story was a good one…OK, back to the topic.

The purpose of the buyer agency relationship is not about getting paid, it’s all about being on the right side of the law so we can (1) do what we do best without unusual restrictions, (2) give the client a summary of services they can hold us accountable to, and (3) in the end earn our compensation.  If I’m effective at what I do, a person who has reason to trust me will want me contracted with them.  If I want to apply myself and my skills for a person, I will want to contract with them. If the first reason to have a contract is to satisfy my erroneous belief that the contract will give me a better than even chance of getting paid, my motive is way off base and this relationship is off to a rocky start.

I’m going to press the blue PUBLISH button now. If you have strong feelings, or mild ones, let me know. This is just my opinion, I’d like to hear yours.