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For less than full service, pay less

The head of the Consumer Federation of America has some blunt advice for home sellers that is guaranteed to drive real estate agents up the wall: Don't pay full commission if you're not getting full representation.

Don't pay 6 percent, in other words, if the agent selling your house isn't working exclusively on your behalf. If your agent is functioning under one of the rapidly spreading "alternative" forms of sales representation _ as a disclosed dual agent, a facilitator or transaction broker _ cut the commission to fit the reduced service level.

In a report released this week , Stephen Brobeck, executive director of the consumer group, warns that sellers and buyers this fall need to focus on what they're not getting when they work with agents using non-traditional representation.

For example, many homeowners who list their property for sale find themselves with a potentially confusing new decision to make: Should they agree in advance to allow the listing firm's sales associates to function as dual agents? Dual agents purport to represent both the sellers and the buyers in the transaction but without the full fiduciary responsibilities of a traditional, exclusive agent.

Dual agency arises frequently in situations where the purchasers in a transaction are represented by a "buyer's agent" working for the same realty firm that has listed the seller's home. The conflict of interest is inherent. Both agents owe loyalty to the same brokerage firm, yet both agents are supposed to be working for the best interests of their firm's clients on opposite sides of the table.

In the words of the standard home listing agreement used by Realtors in northern Virginia, when sales associates of the same brokerage firm seek to represent buyer and seller simultaneously, "there is a limitation on the (firm's) ability to represent either party fully and exclusively."

One possible conflict, the listing form goes on, involves the traditional "confidentiality" of information shared by the seller or the buyer to their respective agents.

Under a traditional representation format, not only the listing agent but the selling agent _ the one who brings the buyer to the table _ owe their loyalty to and are working for the seller exclusively. Key tactical information divulged to the selling agent by the buyers about how much they're willing to pay or how quickly they need to move must be shared with the sellers. It's the law.

In a disclosed dual agency format _ with the buyer's agent and the listing agent working for the same brokerage firm _ the seller couldn't expect the same loyalty, nor could the buyer, for that matter.

What to do? Brobeck and the Consumer Federation of America recommend that, when you get less, pay less. Spring for up to 6 percent for exclusive representation, but drop to 4-4{ for non-exclusive dual agency.

Beyond that, Brobeck says, sellers should agree to pay only 2{-3 percent when the listing agent not only doesn't represent you in the deal _ this is typical in so-called facilitator or transaction broker arrangements _ but also doesn't share the commission with any other agent. This would occur where the facilitator goes out and finds the buyer on his or her own and pockets the full commission.

"There's no way anybody in their right mind should pay 6 percent for that," says Brobeck.

Not surprisingly, Brobeck's views on commissions are considered anathema by real estate brokerage industry leaders.

One of the National Association of Realtors' experts on the subject, Sharon Millett, an Auburn, Maine, realty broker, says that claims that consumers receive lower levels of service when they use non-exclusive forms of brokerage representation "are just not in touch with the realities of the marketplace. It's a theoretical sort of textbook argument."

"Look," she says, "I don't make a cent in commissions until I bring the seller the price and terms that the seller considers to be satisfactory. The same is true for the buyer. There's no deal if we don't give each side what (it) wants."

When both buyer and seller agree that they have gotten the best deal possible, Millett argues, it shouldn't matter what the agents called themselves, and the agents should be paid the full commission negotiated with the seller at the time of listing.

Jo Ann Johnson, a Falls Church, Va., broker, makes another point about alternative representation arrangements. Where large realty firms offer both buyer-representation and seller-representation options, consumers who decline to agree to dual agency "cut themselves off from what can be a very significant pool of potential buyers or sellers," those consumers who are represented by other agents of the firm.

The economic costs of brokerage _ from advertising to office rents and transportation _ are no less because a firm offers both buyer's agent and exclusive seller representation, argues Johnson, "so commission levels shouldn't be tied to who you work for but whether you got the transaction completed successfully."

The bottom line for consumers: Whether it's for full representation or something less, all realty commissions are negotiable. It never hurts to ask.