I’ve recently come across a brokerage firm that set off all the alarms in the ethics department of my concious. Yes there have been “limited representation” brokerage firms for a number of years, and truth be told, I really don’t have a huge problem with this business model. It serves a purpose in the marketplace, and at the very least includes some of the FSBO data in RMLS that would normally be left out.

What is limited representation? This form of representation equals no representation at all. A brokerage firm takes a small fee (typically $300-$500) to place your listing in RMLS, and sometimes supply you with forms and a bit of advice. Then the rest is up to the homeowner. There’s very little assistance from the brokerage firm, but you are only paying out about half the normal commission. As a broker representing a buyer, it is more work for me and exposes me to a lot more risk, but I just document everything and represent my buyer diligently. If anything gets sticky, there is always the seller’s brokerage, a local company, to go to, who can usually be massaged into helping out.

This new outfit, Iggy’s House, is offering free inclusion in RMLS, Realtor.com and some online classified sites. But how, you may ask? Well, according to their website they can offer this free service because their sister company, Buy Side is doing so tremendously well. Buy Side is, you guessed it, a limited representation for buyers, where your buyer’s agent will rebate 75% of the commission back to the buyer. By offering Iggy’s House, they hope to attract more buyers to Buy Side. Basically, they use listing services as bait.

Being curious, I started looking into Iggy’s House. They offer a nice property page for their clients on their site. But searching through their listings, I could only find one out of several that were actually listed in our local MLS. I looked up the company in our MLS directory, they are located in Nebraska. A few pages into their website, they very explicitly relieve themselves of any obligation to the homeowner, as the service they offer is strictly for marketing purposes.

So, if I get this straight, they may or may not include your home in RMLS (which will exclude Realtor.com and other sites by default), they definitely are not supplying any forms, and they offer no representation what so ever. Oh, and by the way, there is no Buy Side brokerage in Oregon, because it is illegal in the state of Oregon for a broker to offer any sort of incentive what so ever, especially kick-backs. Checking the state department’s directory, Iggy’s House has been here almost 18 months. They’ve had eight sales; not exactly the record they were hoping for, I’m sure.

Something they are really hedging around as well is the fact that in order to be a subscribing member to RMLS, they must first be a member of the National Association of Realtors (NAR). To be a member of NAR, each broker must sign a lengthy Code of Ethics, that states that the broker will represent their clients ethically and diligently, with their interests first, and the broker’s interests secondary.

If things go sideways, either during or after the sale, you are legally responsible for your representations to the buyers. Yes our laws are written “buyer beware”, and it is the buyer’s burden to discover conditions to the property and title, but the seller cannot knowingly withhold information. If the seller withholds information about the property that may negate a sale, and the information is discovered afterward, then everyone get’s to take a trip to court to sort it all out. Often times, it is the brokers involved that end up paying out. No broker involved, then the seller is left holding the bag. I explain this scenario first because it does occur, and secondly because well intended sellers with no representation could very well find themselves in very hot water only because they did not fully understand all of their legal obligations to their buyers.

Sellers, if you are considering selling by owner, and would like to use a limited representation service, please do your homework. Understand fully what your legal obligations are, and how much your limited rep broker is going to contribute to the transaction. Don’t be dazzled by fancy websites that seem too good to be true, because they probably are.

If you have more questions about limited representation, please don’t hesitate to contact me at 503.351.7462, or email at michelle@michelleberry.com . I’m always happy to answer questions and consult with you on your next transaction.

Opinions expressed in this article are the opinions of author, and not to necessarily the opinions of Meadows Group Inc.
All rights reserved on all original content, non-original content is given credit | Michelle Berry | 2009