Transaction brokerage is coming to South Carolina in January 2017 as part of the revised Real Estate Title 40, Chapter 57. This topic has created a lot of questions and angst in the industry. Today we look deeper into transaction brokerage.
As brokerages continue to try to limit or eliminate their liability, many view agency as their greatest exposure to liability and believe transaction brokerage to be the answer. The number of states allowing transaction brokerage has increased to twenty-five states including Florida, Georgia, Colorado and Texas. Each state varies on how transaction brokerage is offered and how it impacts forms of agency such as dual agency.
Transaction brokerage is a type of neutral third-party real estate service where the licensee has no agency or fiduciary relationship with the consumers in the transaction. In most jurisdictions that allow transaction brokerage, it is offered as an alternative to single agency. Under single agency the licensee works “for” the client and has fiduciary duties to the client. In South Carolina those fiduciary duties include obedience, loyalty, disclosure, confidentiality, accounting and reasonable care to name just a few. In contrast to single agency where an agent is loyal to their client, in transaction brokerage the licensee is neutral. In fact, the consumer is not a “client” as that would denote a relationship that does not exist. The role of the transaction broker is to craft the transaction by bringing a willing buyer and a willing seller together. The broker assists the consumer in closing the transaction by completing ministerial act such as providing forms and information. While a transaction broker does not have the traditional fiduciary responsibility of single agency, the licensee must still follow the professional and ethical standards required of the profession.
Transaction brokers are considered to be facilitators of a transaction and are often said to represent the transaction, not the parties. Parties act on their own accord and are not bound by the acts of the agent. The parties make their own decisions absent any advice or input from the agent. If something goes array, the consumer typically cannot hold the agent responsible since the agent had no role in the transaction except for providing the information and forms. The brokerage has reduced liability as the licensee is not providing fiduciary services such as advocacy, advice or counsel. By not providing these services the agent theoretically has less exposure due to their actions and omissions.
In some states such as Florida transaction brokerage has completely replaced dual agency. In Texas and Colorado transaction brokerage co-exists with mandatory agency disclosure up front to all potential clients. South Carolina’s transaction brokerage can be offered in addition to single agency. Dual agency has not being eliminated.
As you can imagine, consumer advocacy groups are not fans of transaction brokerage. Many brokerages do not like this form or representation either. These groups view the concept as anti-consumer and as a way to drive down agent fees. Next week we will examine the arguments against transaction brokerage. Stay tuned as more layers of this controversy are unraveled.
Historical Fact- The Town of Elgin is named for a watch company that existed for less than 5 years. The town was previously know as Jeffers. The area traces its history to a post office that was established in the area around 1898. The town was named for the Post Master William T. Jeffers. In 1908 the name was changed to Blaney in honor of a New York banker who help fund the railroad expansion in the area. In 1962 State Senator John West recruited the Elgin National Watch Company to relocate to the area. Residents voted 61 to 16 to change the name to Elgin. Elgin Watch sold the plant in 1967 to B. F. Goodrich for the manufacture of tennis shoes. The name remained.