Thanks to the leadership of Senior Managers and attorneys, specifically Ed Reale and Cia Comnas, Brown Harris Stevens (BHS), with five offices in the Hamptons and one on the North Fork of Eastern Long Island, is taking real estate brokerage on the East End in a whole new direction.
First, some background: In 1984 the Federal Trade Commission (FTC), published a landmark five year study that provided evidence that buyers and sellers of residential properties commonly misunderstood who the real estate broker was representing. 74.2% of buyers believed that the broker was representing them, when, in fact, the broker was representing the seller. The study also found that 74.4% of sellers also thought that the brokers were representing the buyer when, in fact, the broker was representing them. As a result, in 1985, the National Association of Realtors recommended that all states implement mandatory agency disclosure statutes. In 1991, New York passed such a law, requiring knowledge and informed consent by sellers and buyers to agency relationships. All states adopted agency disclosure laws, but the particulars are not the same in every state. A 2006 national study conducted by real estate experts, Jonathan A. Wiley and Leonard V. Zumpano, points out that non-compliance by real estate brokers and confusion among the public was commonplace.
Real estate brokers on the East End have traditionally represented sellers. The agency disclosure requirements often prove cumbersome, confusing, but legally required. BHS has embarked upon a practice of representing buyers which, I believe, because of its good sense, will require other brokers to follow suit, proving a benefit to the way the real estate business is conducted for all parties concerned.
I recently spoke to Ed Reale to discuss this critical BHS policy change and he explained, “We had been experimenting with the practice of representing buyers for some time to see how it would work out before we went company-wide with it, but we have been representing buyers for about a month and a half.”
To clarify, if a seller lists a property for sale with BHS, the agents represent the seller, but, Reale went on to say, if the property is listed with a different brokerage firm and BHS has a prospective buyer who is interested in that property, then BHS represents buyer.
“We have had no problem with other brokers accepting that and we have likewise been approached by other brokers who want to show properties listed with us who tell us they are representing the buyers,” says Reale. “We make sure that we establish that right up front rather than the old way of doing business where we are both attempting to represent the seller.”
In those situations as required by law, brokers are presented with an agency disclosure form that indicates that BHS is representing the seller, and they in turn furnish BHS with a disclosure form indicating that they are representing the buyer. Further says Reale, “when the situation is reversed, we do likewise. I would add, that if agents followed the agency disclosure laws, there is little reason for confusion among the public, and I must say, while it is not always easy to explain, our agents have been quite diligent about it. That is the basis for everything that follows.”
What about in Manhattan? “Buyer brokerage has already caught on in Manhattan, especially with BHS,” Reale says. “The bulk of the deals in Manhattan are condos.”
Reale has confidence that local agents can easily make the transition from acting almost exclusively as seller’s brokers, “[Agents] already know the market and what comparable properties are selling for, what the zoning and building requirements are, environmental issues, and anything else that a buyer would want to know. In fact, acting as a buyer’s agent, they would be able to provide even better service to the buyer than they could representing the seller.”
The levels of responsibility for discovery and disclosure of pertinent information about a property do not change says Reale, “the law requires that a seller’s broker disclose any facts that would affect the desirability or value of a property to a buyer even when representing a seller.”
In the end a buyer represented by a buyer broker might be a better prospect for both the seller and the seller’s broker since they’ve already been fully vetted agrees Reale, “Many of the issues that could affect the deal have already been addressed.”