How Did Buyer Agency Come to Be?
Did you know that buyer’s used to not use a real estate agent to represent them? Buyer’s agents are a relatively new thing in the world of real estate. In this article we are going to explore the history of real estate agency and how things came to be.
In the beginning…
The real estate industry traces its origins back to the Industrial Revolution. The early 20th century saw things begin to take shape and the National Association of REALTORS was born in 1908. For the first several decades buyers had to go from one office to another to see each agency's listings. Other than that the only way to see what was for sale was to drive around town and look for “For Sale” signs. This was a very inefficient way to shop for homes. It required more time and energy on behalf of the buyer and the brokerage could only sell a home if their listing was the right property for the buyer.
The Birth of the MLS
Back in the olden times, also known as the the early 1960’s, the National Association of REALTORS, or NAR, began the Multiple Listing Service in order to foster cooperation between brokerages. The MLS allowed brokerages to share their listings with one another. Originally all the local listings would be put in a book and a copy would be delivered to each office. New books would be delivered every month or maybe twice a month in larger cities. This situation was great for everyone. Now buyers no longer had to go from office to office to see what was for sale and sellers would get more exposure for their listing. Agents benefited by having twice the opportunity to sell homes represented by other offices.
In addition to this, brokerages agreed to share the commission paid by sellers. This allowed agents who were not representing the seller to sell the property. These agents were known as sub agents as they were sub contracted by the listing brokerage to sell the home. This meant that the sub agents legally represented the seller and owed the seller fiduciary duty even though they might not have ever met the seller. So the agent showing you properties had a legal obligation to protect the seller’s best interests rather than yours. This led to a lot of confusion and disenfranchised a lot of buyers. Kind of a crazy system but it is what existed for several decades more. In 1983 a FTC study revealed that 72% of buyers mistakenly believed the agent showing them homes represented their best interests.
Coming Out of the Dark Ages
It wasn’t until the early 1990’s that buyer’s agency was established. With this for the first time agents represented the buyer’s best interest. No longer was there confusion and buyers being taken advantage of, well at least we hope not. Sub agency didn’t completely die out but it no longer has the prevalence that it once had. Check out our article on the different types of agency.
With the internet, MLS’s moved online allowing agents to move the most up to date and accurate information. Not to mention all the trees and ink saved by not printing those books all the time. The internet continues to change the industry and there are more changes on the horizon. Only time will tell where we go.
If you are thinking about buying or selling a home, or if you just have questions we would love to talk to you.