Eliminate Customer Service (REBBA, 2002)

Journey to America

There is no point to customer service at all. Most people don’t understand it and with increased concerns for consumer protection, it should simply be eliminated.

It serves no useful purpose and it causes problems. It also creates a false sense of security for those consumers who “buy into it”.

Historically – Why do we have Customer Service?

Going back to the early 1990’s, all agents represented the Seller, and no one represented the Buyer. These were the days of “sub-agency”. The Co-operating Brokerage with the Buyer was being compensated in full by the Seller. So, as a sub-agent, the Co-operating Brokerage owed its allegiance and its fiduciary duties to the Seller who was “paying the bill”.

That seemed strange. So, that was changed. Many buyers were “tricked” by that.

Then, the commission was offered to the Buyer as part of the deal. The commission could only be collected by a real estate Brokerage, but, still that meant that the Buyer was now paying his own agent directly from funds “received” from the Seller. The documentation actually provided that the commission would be re-directed to the Buyer’s Brokerage.

This made it all clear that the Buyer employed, engaged and contracted his own Agent to act on his own behalf.

Who is the Agent anyways?

Large Brokerages were concerned about their identity and their role. They didn’t want to be the Staples, Business Depot, Fed Ex, or the Kinkos of the real estate business. They wanted to be THE “Agent”. That was where the money was, not “back end” services for sales people. They fought against their individual sales people being the actual “agents” in law. The Brokerages would all be the agents!

However, that led to an internal conflict. If a Brokerage had 500 agents and they focused in one geographical area, the chance of a conflict would be quite high.

The Brokerages wanted to act on Both Sides of a Deal

The reason is quite simple: there are now, two commissions payable!

This proposition was sold to the real estate industry as an accommodation. Two agents for the same Brokerage, each acting for their own clients, as Buyers and Sellers, there was an “artificial conflict”. In reality, the conflict simply arose due to the fact that the Brokerage was the legal agent.

One way to avoid this would be to have the second person in (usually the Buyer) opt for a lower level of service. This also helped out the Listing Sales person who now could “double-end” the deals themselves. This arrangement suited everyone except the poor Buyer who was stuck with customer service.

The appropriate changes to create “customer service” were implemented by the National Association of REALTORS® in the US. This arrangement was followed elsewhere including Ontario.

Customer Service doesn’t exist in other Agency Businesses

“You’re here, but we don’t owe you any fiduciary duties” doesn’t exist elsewhere. For lawyers, everyone is a client, for accountants, everyone is a client, for doctors, everyone is a patient (client). There is no lower standard in any other profession. You’re either a client or you’re not. There is no “step down” from “first class” to steerage”.

Customer Service is Difficult to Explain

Most people don’t understand it, let alone be able to explain it to anyone else. It’s a confusing term. It offers a lower class of services to the consumer for the same price.

It works against buyer’s interests and against the consumer.

It was only necessary because the Brokerages were the “legal agents”. If you have the salesperson as the “designated agent”, then the problem is solved: everyone can be a client.

Naturally, the essence of consumer services is the fact that fiduciary duties are not owed to the consumer.

Customer Service

The solution to the problem would be to eliminate the reference to “customer service in the Act and the Regulations. It simply doesn’t exist anymore. There are no longer second class citizens!

Going forward, the elimination of customer service should take place when the Regulations under the new Act are proclaimed, but, that could be years.

Brian Madigan LL.B., Broker


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