“Florida’s Dirty Little Secret”

Florida’s Dirty Little Secret

Transactional Brokerage Leaves Consumers as Clueless as Ever

Lawsuits Inevitable

By Tom Coler, ABR

Buyer’s Broker of Southwest Florida

The more things change, the more they stay the same. Twenty-five years after we fought to protect home buyers with disclosures about whose side their real estate agent was working on, the Florida real estate industry is worse than it has ever been. The “presumption of transactional brokerage,” which is now the law in Florida, has left the consumer as clueless as ever.

Presumption of transactional brokerage “presumes” all Florida real estate clients know their agent is merely a facilitator and is not working for them. But clients don’t always know that, creating a situation fraught with legal peril, which will be discussed later.

How we got to this precarious place is a case study in the enduring power of greed. Historically, Florida real estate agents represented the seller. When I first became licensed in 1977, every agent — even the agent helping you house hunt — had a fiduciary responsibility to the seller. The agent who brought the buyer was considered a “subagent” of the listing agent. Both agents were legally bound to secure the highest price and best terms for the seller. So if you told your agent that you would offer $500,000 for a home, but were willing to go up to $650,000 if necessary, your agent had a fiduciary responsibility to pass along your top price to the seller.

Unfortunately, that fact was not clear to the buyer. A 1983 study by the Federal Trade Commission found that 82 percent of buyers surveyed believed their conversation with an agent was confidential, and 57 percent thought the agent represented them. But buyers were never represented in a typical transaction.

By the early 1990s, 80 percent of state legislatures had passed laws requiring real estate brokers and agents to disclose, in writing, whom they represented — buyers or sellers. But the real estate industry didn’t like that and found a way around it. Brokers circumvented the spirit of disclosure with the practice of “disclosed dual agency.” Dual agency was as blatant as when the same agent acted as both the buyer’s agent and the seller’s agent in the same transaction, or as subtle as when any agent who claimed to represent buyers was working for a firm that also listed properties (and therefore favored those properties). By “disclosing” that they were double agents, they argued that they had fulfilled their legal responsibility. Consumers got the worse of both worlds, accountability without loyalty, while brokers continued to collect both sides of the commission.

A series of costly class action lawsuits in the mid 1990s, most prominently three lawsuits brought against Edina Realty of Minneapolis by more than 20,000 claimants, highlighted the problems with the practice of dual agency. Both buyers and sellers sued over the inherent problems that arise when the same firm represents both sides of the transaction. Buyers claimed they should have paid less; sellers claimed they should have received better prices for their properties. Many customers on both sides said they felt rushed to close, despite problems with the transaction. The lawsuits were successful; the buyers and sellers prevailed. Regardless of the conflicts of interest, many states still allow the practice of dual agency. 

Ralph Nader, the AARP, the Consumer Federation of America, the Federal Trade Commission, Money magazine and other media advocated that buyers should seek out and work with buyer’s brokers to assure that their interests were truly represented.  

In Florida, a real estate licensee may no longer operate as a dual agent, disclosed or undisclosed. Florida is one of two dozen other states to have a “presumption of transactional brokerage” clause. That means the agent is a facilitator of the transaction and does not represent either party. According to Florida statutes, “It shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer.” The statute goes on to explain that “[a] transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent.”

As a transaction broker, the listing agent no longer has a fiduciary responsibility to get the highest price and the best terms for the seller in exchange for the 6 percent real estate commission. Neither does the transactional broker have a responsibility to get the lowest price and the best terms for the buyer.

Bottom line, Florida’s answer to protecting the consumer is for the agent to represent no one at all, unless otherwise stated in writing. At least in the old days, the listing agent represented the seller.

What’s worse, in 2008, Florida dropped the requirement that agents disclose their transaction broker relationship to the customer. It is now just “presumed.” That is problematic. If buyers and sellers believe they have a true agent, and have received no disclosure that the agent isn’t their agent, and the agent does provide fiduciary duties, then an “implied agency” situation exists. That opens up the possibility for the customer — buyer or seller — to claim a breach of fiduciary duties. Furthermore, because agents cross the line from transaction brokerage to fiduciary agent, many in-house deals are in fact undisclosed dual agency. The practice of providing fiduciary duties to both a buyer and a seller in the in-house deal without disclosing it as dual agency is in fact undisclosed dual agency and an act of fraud. Real estate licensees and broker/owners are clueless.  

Litigating attorneys do not want to handle real estate lawsuits because the presumption of transaction brokerage clause covers many sins. However, our experience is that agents still call themselves agents, and in fact do negotiate on behalf of their buyers and sellers in violation of the law. I believe more lawsuits are inevitable. It’s deja vu all over again.

We just haven’t learned the lessons of our past. Florida’s non-disclosure is pro broker and anti consumer. Even more egregious is the pretense of single agency. The National Association of Realtors and Florida Realtors have “Exclusive Buyer Representation” forms that benefit the broker, not the buyer. The form states that the buyer can only work with that agent. Meanwhile, the broker is not a single agent unless a certain box at the bottom of the form is checked. Fake left, go right.

Since 1980, the population of Florida has more than doubled, from around 10 million to more than 20 million people. Real estate is big business. There is no incentive for the industry to do the right thing.

Fortunately, buyers do have a choice. Consumer advocates, the U.S. Department of Housing and Urban Development, and countless media organizations such as CNN Money, New York Times, Kiplinger and U.S. News & World Report recommend that buyers hire an “exclusive buyer agent” who will exclusively represent their interests and is legally bound to negotiate the lowest price and best terms for the client. For more information, visit the National Association of Exclusive Buyer Agents website at naeba.org.

The Buyer’s Broker of Southwest Florida is dedicated to representing only buyers. We do not list homes for sale and never represent sellers. This exclusive buyer representation avoids conflicts and ensures that the interests of buyers are protected at all times, from house-hunting and negotiation, to inspection, financing and closing. The Buyer’s Broker always seeks the lowest price and best term for its buyer clients, offering 100% loyalty 100% of the time

The Buyer’s Broker of Southwest Florida covers the Gulf Coast region from south of Tampa Bay to Marco Island, and has represented many nationally known individuals who have purchased significant million-dollar properties and who remain anonymous to protect their privacy. In 30 years, the firm has never been involved in any litigation.


Tom Coler, Accredited Buyer’s Representative (ABR), long time licensed Florida real estate law instructor, and an early advocate of buyer representation, is owner of Buyer’s Broker of Southwest Florida, operating in Sarasota and Naples. His efforts have earned him membership in the Hall of Fame of the Real Estate Buyer’s Agent Council (REBAC). Coler is a graduate of Georgetown University’s Edmund A. Walsh School of Foreign Service and the Thunderbird Graduate School of International Management, and has a corporate, government and entrepreneurial background. He can be reached at (941) 366-1844 in Sarasota or (239) 649-1111 in Naples. Website: www.buyersbrokerswflorida.com.