What is Designated Agency?

On Wednesday Oct 17, the board of Directors of the New Hampshire Association of REALTORS will meet to vote on recommended proposed legislation which would allow NH REALTORS to act as Designated Agents or Facilitators.

Read my previous post for complete details Designated Agency and facilitation in NH.

Read also a draft copy of the legislation here draft-agency-legislation-9-12-07.pdf

NHAR’s Legal committee chair Mary Beth Rudolph describes what the NH version of Designated Agency would actually look like in the field.

I’ve reprinted it with her permission as it is vitally important that all New Hampshire REALTORS understand that if approved what these changes would mean to them.

Designated agency (aka appointed agency) is a practice where one or more individual agents in a firm is appointed or designated to represent the interests of a client to the exclusion of all other agents affiliated with the same firm. A “designated buyer agent” is able to provide full representation to the buyer client even if the buyer is purchasing an in-house listing as long as that buyer agent is not also the “designated seller agent” for that listing. The reverse is also true for the designated seller agent. The individual agent becomes a dual agent only when he or she is both the designated agent for the buyer and the designated agent for the seller (i.e. the buyer you represent wants to purchase one of your personal listings).

The principal broker is responsible for appointing which agent is designated to represent each client of the firm.

The advantage of designated agency is that the consumer will receive full, more personal representation by their designated agent. It mirrors consumers’ expectations. When consumers hire an agent, they don’t expect that every other salesperson in that company is representing them or has access to all their confidential information.

In the model recommended by the NHAR Agency-Task Force, the principal broker can delegate their appointing powers to a managing broker or other broker in the firm who becomes the appointing agent. In this model, when the appointing agent names both a designated buyer agent and second agent as a designated seller agent to represent the two parties in an in-house sale, the appointing agent becomes a dual agent. In this example, the two designated agents are not considered dual agents.

Without the delegation of appointing powers to an appointing agent, the principal broker retains the power of appointing and also is the dual agent. In either case the principal broker and managing broker still have full responsibility for the activities of all the licensees affiliated with them even if they delegate their appointing powers to a separate appointing agent.

Some key points to note about designated agency:

· Consent of the parties is required – that can be obtained upfront with the listing agreement and buyer agency agreement.

· If the firm is a designated agent for both the buyer and the seller in a transaction, written notice must be given to the client – that can be done on the Purchase & Sales Agreement or before.

· Dual agency is not eliminated – it is just limited.

· Control of confidential information is essential – offices that elect to practice designated agency will have to adopt and enforce policies to control the sharing of confidential information about clients between agents. That can mean separating pending files from listing files, removing confidential client information from listing files available to all agents in the office, restricting access to pending files, the use of locked cabinets and desks, private conference rooms for meetings with clients and instituting a policy of discussing properties and not people at sales meetings, etc.

· Over 50% of states have passed legislation enabling the practice of designated agency over the last fifteen years.

If this legislation is enacted, firms will have a choice about whether they want to practice designated agency or traditional agency. They can do nothing and continue to operate the way they have in the past without any changes. For those firms which elect to practice designated agency, all offices and licensees of that firm must practice designated agency. Obviously, if this legislation passes, REALTORS will need training, sample policies, new forms, etc……Mary Beth Rudolph

Questions or concerns about this feel free to comment here and I’ll do my bet to get answers for you. Remember this is only proposed and even if approved on the 17th we still have a long way to go before it becomes practice.