I
t's been six months since industry rule changes took effect, but many real estate professionals still struggle to grasp the fundamentals of buyer brokerage. The National Association of Realtors (NAR) settlement has shed light on this issue, highlighting the importance of understanding true representation and its differences from transaction or intermediary relationships.

    The distinction between a client and a customer is often overlooked, leading to confusion and a lack of transparency. Buyer representation involves fiduciary responsibilities, including loyalty, confidentiality, providing advice and guidance, and acting in the buyer's best interest. In contrast, working with a customer typically involves facilitating a transaction, disclosing material facts, and operating with honesty and reasonable skill and care.

    The NAR settlement requires buyer brokerage agreements but does not specifically require buyer representation agreements. This distinction has received too little attention, underscoring a larger issue: many real estate professionals do not truly understand the meaning of representation.

    Agents working under showing agreements, transaction broker arrangements, or dual agency agreements should clearly communicate their role during initial consultations. A responsible agent in these situations should say: "I don't represent you unless we sign a contract that specifically says I do. My role is to facilitate a transaction between you and the seller as a neutral party."

    State laws can complicate this situation. For example, Florida's default relationship between clients and agents is transaction brokerage, which makes it challenging for brokerages to offer single-agency representation due to potential conflicts of interest.

    Some brokerages have implemented policies to better protect consumers, even in the absence of regulatory requirements. Dual agency is currently permitted in 42 states, but certain brokerages have chosen to prohibit their agents from serving as dual agents to avoid conflicts of interest.

    To prioritize true representation and educate consumers, brokerages and agents must clearly communicate the benefits of expert guidance. This can build trust and enhance the consumer experience, making these practices a competitive advantage in the evolving real estate landscape.