Archive for Sunday, September 21, 1997


September 21, 1997


A new law that takes effect Oct. 1 will change the way real estate transactions are handled.

On Oct. 1, home owners and home buyers will see a change in the way a real estate broker or agent handles the sale or purchase of a home.

In April, Gov. Bill Graves signed into law the Brokerage Relationships in Real Estate Transactions Act. Part of the law focuses on how the relationship between an agent or broker changes throughout the transaction if they end up representing both parties together. Until Oct. 1, this is referred to as dual agency -- the representation of both the buyer and seller at the same time. After Oct. 1, the process will be known as transaction brokerage.

The transaction broker is described as a broker who assists one or more parties with a real estate transaction without being an agent or advocate for the interests of either party.

"I'm very positive about it," said Mike McGrew, 1998 president of the Kansas Board of Realtors and vice chair of McGrew Real Estate, 1501 Kasold. "There's a lot of aspects of the law that will be really good for the public and the industry too."

The impending change has generated some controversy. If a real estate company now lists a home on the market and also finds a buyer for that home, the agent at that point must become a transaction broker and cancel any contractual agreements with either the buyer or the seller. As of Oct. 1, the agent will only assist both parties with the paperwork and it will become illegal for them to to counsel either side or reveal any confidential information.

"That's a problem," said J.R. Demby, an exclusive buyer agent and a member of the BRRETA task force, which worked to create the legislation. "You can't represent two people with different positions in a situation and be fair to both."

The effects

Demby, who has been in real estate for 18 years and now has an office at the corner of Sixth Street and Lawrence Avenue, cast the sole vote against the legislation, saying it could have been simplified in another way.

"It used to be agents only represented sellers," he said. "A better system would be if all Realtors represented the sellers and they could still sell to the buyer but not confuse the situation. "

Also as of Oct. 1, a home owner selling his home without the assistance of a real estate agent will be able to turn to an agent or broker to assist him with the paperwork and guidance.

"I think you'll see more of this in the future," Demby said. "In fact, I'm going to be offering this type of service for a flat fee starting in January."

The paperwork involved in selling a home has gone from a couple of sheets to more than 20. "There's five times the documentation," he said.

Demby sees another problem with transaction brokerage, when a problem arises with the sale and the owner and seller can't turn to their transaction broker for advice.

"It would be wonderful if everything went perfectly through a real estate transaction, but it doesn't," he said. "(Agents are) still getting paid for a service but at that point they are no longer a full-service entity."

If the agent has a contract with the seller and finds the buyer for that house as well, the contract is resolved and the agent isn't allowed to exchange confidential information or offer advice. However, the fee for selling the home to the agent remains the same.

"If you counsel one party it's illegal," Demby said.

Other states' experience

The state of Colorado invented the transaction brokerage method and today is one of 16 states using it.

"It's worked out wonderfully in Colorado," said Karen France, director of governmental affairs for Kansas Association of Realtors. "We went to Colorado and interviewed their real estate commission and they use it a lot and they're comfortable with it."

France said that the transaction broker will be relied on most in rural towns "where people know everybody."

"A transactional broker can come out and offer the kind of impartial services that's needed. Why do we have to pit friends and relatives against each other?"

France said she doesn't believe the amount of commission paid to agents will change after the new law takes effect.

"Colorado has had the law for four years and has indicated there hasn't been a reduction in commission because of it," she said.

Preparation for new law

McGrew said a variety of town hall-type meetings have been available for Realtors to offer a better understanding of the new law before it goes into effect. However, training is not required.

"The attorney for the Kansas Association of Realtors has been teaching this and it's been a challenge," he said. "One of the things on my list as state president is to get everyone acclimated to this as soon as possible."

Agents and brokers are required to take a class on the new laws before they renew their licenses, which is done every two years.

"They're required to have 12 hours of education every two years," McGrew said. "There are 6,700 Realtors, let alone 12- to 13,000 sales people, and everyone needs to understand the new law. Hopefully the profession will rise to the occasion."

At McGrew Real Estate, McGrew said one informational meeting has already been held and another is scheduled for this week, offering more detail on transaction brokerage.

Industry outlook

Demby believes changes in the industry have only begun. Eventually, he said, the number of Realtors will decrease, especially as use of the Internet increases.

"You can do all the investigating yourself on the Internet," he said. "You can pull off geographical information and there are already 900,000 listings posted on the 'Net."

France also sees the Internet becoming an important information source in real estate but believes a decline in the number of Realtors is farther off.

"I don't believe there will be a huge drop in the number of people selling real estate but the industry will shift," she said. "It depends on how quickly consumers will shift to Internet, but for now, you still need that person to pull it together."

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