Short Term Sales Pressures of Public Real Estate Companies Could Produce Fiduciary Breaches
There are only two aspects of perfect agency: No Conflict of Interest and Legal Fiduciary. A client seeking to be represented by an agent in real estate is – in fact and deed – seeking absolute assurance of the highest degree of agency, better known as legal fiduciary. Rarely is a client seeking or agreeable to any watered-down weakness of agency such as is found in dual agency or transaction brokers. And in real estate transactions which require many versions and levels of back and forth negotiations, only the highest level of duty to fiduciary should be brought to bear. It is extremely easy for the imperfect and weak human to violate – either knowingly or inadvertently – this level of fiduciary owed to the principal.
Conflict of Interest is one cause of reduced fiduciary, and conflict of interest can also come in numerous shades and from strange quarters. “Visible” conflict (we’ll call it) comes in the recognizable form of a landlord’s agent simultaneously representing a tenant with his own landlord (while the tenant believes it is the protected party). “Invisible” conflict can come in the form of two agents working together to form a transaction not within the framework decided upon by the principal. And now there is a new conflict player on the field, and it is the most insidious of them all: “Short-Term Sales Pressures”, where typically publicly-traded real estate brokerage companies face ever-increasing demands of stock price performance based on underlying revenues. It is one thing for market pressures to invigorate commodity sales like soda, beer, cars, etc.; it is another thing altogether for market pressures to invigorate revenues (sell more faster) in an environment where fiduciary and agency are the root of the service.