Los Altos Real Estate Blog

A hot topic in California this year has been the practice of REO agents with master listing agreements putting signs on homes and soliciting buyers without cooperating with other agents or Realtors.  Unfortunately, we could find no legal way to limit the practice as most of these brokers were not Realtors.  My opinion on the matter was to put legislation in place to stop these brokers but the timeframe to do so would have been too long.

Violating State Law

The question then becomes one of agency.  If an agency relationship exists between a buyer and an agent or Realtor and the REO broker solicits them, has that REO broker then violated the state business code?  Perhaps but proof is difficult and this is what they're counting on.  So that leaves us with one other tool in our arsenal to try and stop these brokers.

Buyer/Broker Agreements

I've never used one and few people in my area (Silicon Valley) do.  However, there are seveal areas within California where they are used.  I've certainly seen other agents and brokers around the country who also use them.  Most agents believe, as I do, that they should trust their clients and such an agreement is unnecessary.

However, if you're working with consumers who are looking specifically at foreclosures this may be the ticket to locking our unethical REO brokers.  Interfering in the agency relationship may not have teeth but violating the terms of a buyer/broker agreement does.  While it does to some degree put limitations on the consumer, it actually protects them in the long run.

A Win/Win for Realtors and Consumers

By using the buyer/broker agreement you protect the consumer from being pulled into a deal where the REO broker may not (and probably IS NOT) looking out for their best interest.  The reason the REO broker is trying to "double end" the deal in the first place is that the commissions are low just doing one "side" so doing both makes the transaction worth while.  However, they're less likely to present the consumer with a factual market analysis since they are technical dual agents with the buyer and bank.  Considering how many listings are coming from the bank, who are they more inclined to look out for?  Not the consumer!

Educate your clients that using a buyer/broker agreement is in their best interest and that in signing it, you're trying to protect them from other agents who aren't.  It's better for them and it's better for you.