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Designated Agency is Dangerous Agency

Posted on 12/10/2015 by David M. Dion

On December 1, 2015 the Vermont Real Estate Commission enacted a new rule that will affect consumers in the real estate marketplace in ways they do not realize. Before December 1st all real estate agents within a real estate brokerage company owed a fiduciary responsibility to each and every client of that company. (A "client" is anyone who signs a real estate contract to be represented by that company). As a result, if a client's property was listed for sale by any agent of the company then none of the agents of that company could represent a Purchaser of that property. Otherwise there would be a conflict of interest. Those agents could still work with a buyer and a seller in the same transaction, but the brokerage company's fiduciary responsibility would be limited to the one client who signed a contract to be represented by that company. This was based on simple logic that was easy for any consumer to understand.

That has all changed. As of December 1, 2015 real estate brokerage companies in Vermont may now elect to practice what is being referred to as Designated Agency. This allows different agents within the same real estate brokerage company to represent the buyer and the seller in the same transaction. A real estate agent for a seller's property may not also represent the purchaser, but another real estate agent within the same office can represent the purchaser.

Unless there are extra-ordinary circumstances in a real estate transaction Mad River Valley Real Estate will not practice Designated Agency for one very simple reason: We do not believe two real estate agents in the same office can truly represent both a buyers interests and a sellers interests simultaneously. In fact, in our opinion Designated Agency does not benefit the buyer nor the seller. Instead Designated Agency only serves to benefit the real estate brokerage firm. And this cannot possibly be in the best interests of the consumer.

Most Vermont real estate brokerage companies are expected to embrace Designated Agency as an easy way to control both sides of a real estate transaction (seller and buyer). The obvious result will be to increase company profits in the short term. But in the long term we can all expect increased litigation by confused and angry consumers. In our opinion this will far outweigh short term profits. Besides it's just plain wrong. Real estate brokerage firms have a fiduciary obligation to put their clients best interests first and not the company bottom line. And that's the bottom line.

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