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Below is a Boston Globe article about agency disclosure and consumer advice from the Massachusetts Attorney General. Realtors breaking state's disclosure law: Consumer Affairs 'sting' finds buyers not informed By Tina Cassidy, Globe Staff and Karen Curran Contributing Reporter The Boston Globe Originally Published 3/29/97 Throwing a bucketful of caution at consumers just as the spring real estate market heats up, a state-led sting operation has found that many brokers are breaking the law by not immediately informing potential home buyers that they represent the seller. In a report to be issued Monday, the Massachusetts Office of Consumer Affairs sent representatives to 45 real estate firms throughout the state - including some of the largest and best known companies, and found that all of them failed to initially present a mandatory paper explaining that the real estate agent works for the home seller unless otherwise stated. The disclosure sheets, to be signed by the potential buyer upon the first face-to-face meeting with a broker, have been required since the law was amended in 1993 in order to dispel the potentially dangerous myth that traditional real estate agents work for the buyer. But while Consumer Affairs Secretary Michael T. Duffy said the office was stunned by the findings, industry representatives said they were not surprised, blaming the brokers' failure on ignorance rather than an intentional skirting of the law. "Am I surprised? No. I guess I'm not surprised," said Richard Dils, president of the Massachusetts Association of Realtors. "And I guess it probably is evidence of some of the things we, as a professional association have been saying for years, that we need to have mandatory continuing education." After seven years of trying, that call for mandatory education passed the Legislature last year and the Massachusetts Association of Realtors is working with the state Board of Registration of Real Estate Brokers and Salespersons to define courses for the program. Massachusetts is one of the last states in the country, besides New Jersey, yet to begin ongoing training for brokers. Duffy said the sting operation, conducted March 17-24 in 29 communities from Haverhill to Cape God, was initiated by consumer complaints and timed to coincide with a Beacon Hill hearing this week for a bill that some say would water down the agency's regulations. Despite not being presented with a disclosure sheet at any time during his house hunting last October, before being named Consumer Affairs secretary, Duffy said he was still not prepared for the sting results. "We were very surprised to find out there was no one who had met the requirements," said Duffy. "At no time when I was house hunting did a Realtor tell me that they worked for the seller or have me sign a disclosure form. I had no idea that there was such a law. And some brokers asked me for financial information. I think I'm probably not unlike lots of consumers. The sting operation sent people into 45 offices. The investigators said they were interested in looking at properties ranging in value from $100,000 to $800,000. In some instances, investigators were told they could not be shown properties that day but appointments could be arranged. Philip S. Lapatin, general counsel for the Greater Boston Real Estate Board, said he would like to know more about what transpired between the investigators and the brokers before determining whether the law was broken. "If all that happened was that a tester went in and said "I'm interested in purchasing a house, but the conversation didn't get to the point of being shown suitable properties, my argument would be no violation occurred," Lapatin said. "I would be appalled to think that we would have a zero pass rate because I know how much effort we've put into educating our members. But Duffy said he believes the legal requirement is "clear and unambiguous. It's the first in-person contact. It's right from the get-go ... There can still be a real liability to a consumer in handing over information if they're not informed the broker is working for the seller. Consumer Affairs is sending letters to all of the real estate offices that were investigated, advising them they must comply with the law and a follow-up test is likely. Failure to comply in the future could result in a reprimand or a license revocation, according to Duffy The agency disclosure law was first enacted in January 1990 and is considered one of the most important regulations of the Massachusetts real estate license law. It requires buyers and sellers be given a written form at their first meeting with a real estate agent describing three relationships a broker may have with a customer, seller's agent, buyer's agent or disclosed dual agent (agent for both buyer and seller). The laws were enacted because of the confusion and potential conflict of interest in most real estate transactions. Sellers pay the broker's commission. Most consumers do not understand that unless you have a written contract stating the broker represents you, the buyer, all real estate brokers work for the seller. The sting operation left almost no major brokerage firm unscathed. Hunneman & Company-Coldwell Banker, Re/Max, Century 21, Jack Conway Co., Prudential, and Carlson Real Estate will be cited for about one-third of the agency disclosure violations. The balance, about two thirds, were independent brokerage agencies. Carlson Real Estate of Boston did provide the agency disclosure forms as part of a package of documents, but did not require the buyer to sign them, in accordance with the law. Thirty-two brokers failed to provide any type of agency disclosure and 12 agencies provided a brief disclosure statement that did not meet the legal requirement. Real estate brokers contend agency disclosure is difficult to apply to the letter of the law. Most brokers present the required forms but generally at the first good opportunity and not necessarily the first meeting. Richard B. DeWolfe, chairman and CEO of DeWolfe New England in Lexington, said he was not surprised by the sting. "I think what you find in the field is the discrepancy between what the law requires, which is providing that disclosure at the first personal contact to discuss a specific property, and what the individual agent views as a meeting for the purpose of qualification of interest. The agent may be more concerned about establishing a rapport with the individual than they are about giving the information required by law," DeWolfe said. "I don't think there is anything wrong with the law. I think when you get 50 out of 50 not doing it, what does it say? It says it's a culture out there in the business. Representative Arthur J. Broadhurst (D-Methuen) has introduced a bill that would amend current laws to clarify the duties of real estate brokers. The legislation is expected to be taken up by the House sometime next month. Consumer Affairs recommends buyers make sure the real estate agent is licensed and in good standing, not assume the broker works for you, only tell the seller's agent what you would tell the seller directly and not to sign any document without understanding it fully. Reprinted with permission from The Boston Globe
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