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Fiduciary Duty: The Rule Real Estate Loves to Talk About—and Hates to Follow · Dishin' Dirt with Gary Pickren

0:00
SPEAKER_01: I am going to start today's show with seven words that I hope every real estate agent doesn't only know, but they understand them and can apply them to their practice.
0:11
SPEAKER_01: Of course, I'm talking about loyalty, obedience, disclosure, confidentiality, reasonable care, diligence, and accounting.
0:18
SPEAKER_01: Your old car duties.
0:20
SPEAKER_01: If you're a real estate agent in South Carolina, you have heard these words thousands of times.
0:25
SPEAKER_01: You heard them in real estate school.
0:27
SPEAKER_01: You saw them on your exam.
0:28
SPEAKER_01: You've seen them in continual education.
0:30
SPEAKER_01: You've heard the real estate commission talk about them.
0:32
SPEAKER_01: You heard the Realtors Association talk about them.
0:35
SPEAKER_01: And I hope that maybe your broker has even talked about them at your meetings.
0:41
SPEAKER_01: But today I want to ask you a much harder question.
0:44
SPEAKER_01: Does the real estate industry actually believe these words?
0:48
SPEAKER_01: Do they practice this?
0:49
SPEAKER_01: Because I don't think our problem is that agents don't know what fiduciary duty means.
0:54
SPEAKER_01: We've talked about it quite a bit here on Dish and Dirt.
0:57
SPEAKER_01: I think our problem is that this industry has spent decades talking about fiduciary duty while simultaneously building business practices that oftentimes conflicts with it.
1:08
SPEAKER_01: And now today they try to find workarounds to fiduciary duty.
1:11
SPEAKER_01: So throughout today's show, I'm going to constantly ask you one simple question: who benefits?
1:17
SPEAKER_01: When a seller guarantees compensation to a buyer's agent before there's even a buyer, before the house has been shown, before there's a contract, who benefits?
1:27
SPEAKER_01: When an agent can see what they're going to get paid before deciding which houses to show, who benefits?
1:34
SPEAKER_01: When a seller's house is marketed privately, pocket listing, inside one brokerage before the entire market can see that house, who benefits?
1:45
SPEAKER_01: And when the same brokerage gets an opportunity to represent both sides in the transaction, who benefits?
1:51
SPEAKER_01: Now I'm not saying the answer can't ever be the client, but you should be able to explain why the client benefits.
1:58
SPEAKER_01: Not why it's good for the brokerage, not why it's good for your commission, not because everybody's always done it that way, and that's how we do it.
2:06
SPEAKER_01: Why is it good for the client?
2:09
SPEAKER_01: Because fiduciary duty is very easy when your interests and your client's interests align and they're identical.
2:15
SPEAKER_01: But the real test comes when they don't align, when they're not identical.
2:19
SPEAKER_01: And I think we're entering into a period in real estate where consumers, regulators, and particularly plaintiff's lawyers are going to ask that question much more aggressively.
2:29
SPEAKER_01: We've already got one enormous warning.
2:31
SPEAKER_01: It's called Sitzha Burnett,$1.5 billion verdict against our industry for something we've always done that way.
2:39
SPEAKER_01: But instead of learning a lesson from Sitzzer Burnett, I worry that parts of our industry have spent the last several years trying to figure out how to recreate the same economic incentives by simply using different paperwork and different explanations.
2:53
SPEAKER_01: So today on Dish and Dirt, we're going to talk about whether fiduciary in real estate has become something we just simply say rather than something we actually practice.
3:04
SPEAKER_00: This is Dish and Dirt with Gary Pickering, South Carolina's only podcast dedicated to the real estate agent craft.
3:11
SPEAKER_00: And now the host of Dish and Dirt, Gary Picker.
3:16
SPEAKER_01: I'm your often opinionated, but rarely wrong host, Gary Picker, coming to you from the beautiful downtown Columbia, South Carolina offices of Blair Cato Pickering Castellan, this, the first week of October 2026.
3:26
SPEAKER_01: Now I want to get something straight from the beginning of this episode.
3:29
SPEAKER_01: Sitzer Burnett was not technically a fiduciary duty lawsuit.
3:33
SPEAKER_01: It was an antitrust lawsuit.
3:36
SPEAKER_01: But I believe the compensation system that was challenged in Sitzer exposed a fundamental tension between how this industry compensates itself and the duties that the real estate agents supposedly owe to their clients.
3:49
SPEAKER_01: Let's talk about how the old system worked.
3:52
SPEAKER_01: When a listing went into the MLS, the listing brokerage offered compensation guaranteed to the cooperating buyer brokerage.
4:00
SPEAKER_01: Compensation couldn't change once somebody brought a contract.
4:04
SPEAKER_01: And the buyer agent could see it and they could sort properties based on that, which is just absolutely mind-blowing.
4:10
SPEAKER_01: I want you to think about that.
4:12
SPEAKER_01: I'm supposedly representing the buyer.
4:14
SPEAKER_01: I'm supposed to help my buyer find the property that best fits that buyer's needs.
4:19
SPEAKER_01: But sitting right there in this MLS was information telling me how much I might make, depending on which house I brought my client.
4:27
SPEAKER_01: And I could search houses that way.
4:29
SPEAKER_01: I could search for the highest commission and only show my client those houses.
4:34
SPEAKER_01: And this wasn't an imaginary concern.
4:36
SPEAKER_01: The Department of Justice specifically challenged the ability of the buyer brokers to filter listings based on compensation.
4:44
SPEAKER_01: I still can't believe that this was ever allowed in this system.
4:48
SPEAKER_01: In other words, show me the houses that my clients might want, but only if I get paid enough.
4:54
SPEAKER_01: How does that square with your loyalty to your buyer?
4:58
SPEAKER_01: Now let's look at it from a seller's perspective.
5:00
SPEAKER_01: For years, we essentially told sellers, you need to agree in advance that some portion of my commission that you're going to pay me is going to compensate the brokers representing the buyer, the adversarial party.
5:12
SPEAKER_01: Before we knew who the buyer was, before we knew what the offer was, before we knew whether we had multiple offers, and before we even knew if the buyer needed compensation for their commission, why was that automatically in the seller's best interest every single time without fail?
5:31
SPEAKER_01: We negotiated purchase prices, we negotiated closing costs, repairs, closing dates, earnest money, financing contingencies.
5:40
SPEAKER_01: We negotiated almost every economic component of every transaction.
5:46
SPEAKER_01: But somehow, real estate compensation, commissions for the person representing the other side needed to be predetermined, automatic, and guaranteed.
5:56
SPEAKER_01: There's only one explanation for that was protecting the other agent.
5:59
SPEAKER_01: But one of the explanations was essentially if you don't offer enough compensation, buyers' agents might not show your house.
6:07
SPEAKER_01: Okay.
6:08
SPEAKER_01: If that's true, what exactly are we admitting?
6:12
SPEAKER_01: We're admitting that some buyer agents might allow their compensation to influence which houses their clients see.
6:22
SPEAKER_01: Guys, that is not a defense to the system.
6:25
SPEAKER_01: That is an indictment of the system.
6:28
SPEAKER_01: Good grief, are we this thick-headed?
6:30
SPEAKER_01: Apparently we still are, because there's still communities along the coast where this is still the system and this is still exactly what they said.
6:37
SPEAKER_01: There's one top agent down at the coast who, every time I understand, tells his seller clients, if you don't give me enough money to pay the buyer's side this exact amount, they won't show your houses.
6:48
SPEAKER_01: You're indicting everyone in our entire industry, and you need to stop it.
6:54
SPEAKER_01: If I'm representing the buyer, my client's needs should determine which property I recommend, not my paycheck.
7:02
SPEAKER_01: NAR has argued that cooperative compensation benefits consumers, particularly buyers who might not have enough cash to pay the representative directly.
7:09
SPEAKER_01: That is a legitimate issue, and I'm not saying that the seller cannot pay the buyer's agent commission.
7:15
SPEAKER_01: But it doesn't eliminate the fiduciary.
7:18
SPEAKER_01: Why is this particular compensation structure good for this particular client?
7:23
SPEAKER_01: That's the question we should have been asking all along.
7:25
SPEAKER_01: We didn't ask that question all along, and it resulted in a$1.5 billion verdict against the Realtors Association and hundreds of millions of dollars in settlements from other brokerages to this plaintiff class.
7:38
SPEAKER_01: Now, after the NARS settlement, things did change.
7:42
SPEAKER_01: Offers of compensation came out of participating MLSs.
7:45
SPEAKER_01: Compensation-based filtering through the MLS has obviously disappeared as well.
7:48
SPEAKER_01: Buyer agreements have become mandatory.
7:50
SPEAKER_01: We've always had that in South Carolina.
7:52
SPEAKER_01: And compensation remains and will always remain negotiable.
7:56
SPEAKER_01: It's not set by law.
7:57
SPEAKER_01: There's no set fee.
7:58
SPEAKER_01: Government, state law, Realtors Association, no one sets compensation.
8:03
SPEAKER_01: It's fully negotiable.
8:05
SPEAKER_01: South Carolina's even gone further because in South Carolina, our Realtors Association, through tremendous leadership, removed broker-to-broker compensation from its standard forms and changed how compensation is structured.
8:18
SPEAKER_01: So understand what I'm trying to say here.
8:20
SPEAKER_01: I'm not saying seller-authorized buyer-broker compensation is automatically illegal.
8:25
SPEAKER_01: It's not.
8:26
SPEAKER_01: What I'm asking you is why are you still recommending it?
8:29
SPEAKER_01: That's the fiduciary duty question.
8:32
SPEAKER_01: Is your standard listing presentation still essentially saying you pay me X and I'm going to guarantee some portion of X to whoever eventually represents the buyer?
8:41
SPEAKER_01: Why are you doing that?
8:43
SPEAKER_01: Why are you still doing that in light of the fact that the real estate commission says you shouldn't be doing that and the Realtors Association says you shouldn't be doing that?
8:50
SPEAKER_01: How are you going to answer that question?
8:52
SPEAKER_01: Imagine if you're sitting at a seller's kitchen table and the seller says, I'm willing to pay you to represent me.
8:59
SPEAKER_01: Great.
9:00
SPEAKER_01: You negotiate your fee.
9:01
SPEAKER_01: And then you say, now I want you to authorize compensation for whoever represents the person negotiating against you.
9:08
SPEAKER_01: They're our adversarial party.
9:09
SPEAKER_01: We don't know who they are.
9:10
SPEAKER_01: We don't know what the offer is.
9:12
SPEAKER_01: We don't even know if they need compensation.
9:13
SPEAKER_01: But I want you to go ahead and authorize every single real estate agent under the sun who might represent a buyer.
9:20
SPEAKER_01: I want you to guarantee this amount of compensation.
9:22
SPEAKER_01: Any seller with a brain ought to ask you why.
9:25
SPEAKER_01: And you better have a very client-centered answer.
9:29
SPEAKER_01: Because that's how we've always done it.
9:31
SPEAKER_01: Ain't an answer.
9:33
SPEAKER_01: Everybody in this market does it this way, isn't an answer.
9:36
SPEAKER_01: And this one certainly should never ever come out of your mouth because otherwise, buyer agents might not show your house.
9:43
SPEAKER_01: If that's your explanation, you just describe the exact incentive problem we're supposed to be trying to fix, post-its of Burnett.
9:51
SPEAKER_01: You just indicted our entire industry as looking out for their commission over the fiduciary duty to the client.
9:59
SPEAKER_01: Now, there may absolutely be circumstances where offering compensation expands a buyer pool.
10:04
SPEAKER_01: Maybe buyers have limited cash.
10:05
SPEAKER_01: Maybe they don't have the financial ability to pay the commission and buy the house.
10:08
SPEAKER_01: Maybe the sellers believe offering compensation makes the property more accessible to more buyers.
10:12
SPEAKER_01: That is fine.
10:13
SPEAKER_01: Explain that.
10:14
SPEAKER_01: Explain the alternatives.
10:15
SPEAKER_01: But it is not done by guaranteeing the comp before an offer, before the house is shown, before we know whether there's multiple offers.
10:24
SPEAKER_01: Sellers can inform the buyers that they are open to buyer agent compensation without guaranteeing a specific amount.
10:32
SPEAKER_01: It looks exactly like it did prior to Burnett, that you're trying to set a commission rate and protect that commission rate.
10:39
SPEAKER_01: What concerns me is when an option becomes a default.
10:43
SPEAKER_01: And in certain parts of South Carolina, particularly down the lower part of the coast, that's exactly what it's become.
10:48
SPEAKER_01: It's the only place I know of in South Carolina that is still doing broker-to-broker compensation because apparently it's just easier for them.
10:56
SPEAKER_01: Never in mind that everybody else in South Carolina has moved away from broker to broker because your Realtors Association and your real estate commission have both told you it's not good practice and it probably breaches the fiduci duty to your client.
11:07
SPEAKER_01: But you don't care.
11:08
SPEAKER_01: Just wait for the lawsuit or the grievance, and when you have to answer the question of why you're doing something that the Real Estate Commission and the Realtors Association both said is not good practice.
11:17
SPEAKER_01: The industry constantly asks, can I do this?
11:19
SPEAKER_01: But the fiduci duty question asks, should I recommend this to my client?
11:24
SPEAKER_01: Those are very different questions.
11:25
SPEAKER_01: South Carolina law requires, as I said, loyalty, obedience, disclosure, confidentiality, reasonable care, diligence, and accounting.
11:34
SPEAKER_01: When representing a seller, the statute requires the agent to promote the best interest of the seller, the seller's interest.
11:41
SPEAKER_01: So let's talk about an example here.
11:43
SPEAKER_01: Let's say we have a$600,000 listing.
11:45
SPEAKER_01: One approach is for the seller to authorize compensation in advance.
11:49
SPEAKER_01: Guarantee you X percent.
11:51
SPEAKER_01: Guaranteed you're going to pay whatever buyer's agent shows up X amount of dollars before you know who the buyer is, before you know what the offer is, before you know what their terms are, before you even know whether they need compensation.
12:03
SPEAKER_01: Another way of doing it is waiting and negotiating it.
12:06
SPEAKER_01: Buyer submits an offer.
12:07
SPEAKER_01: I'll pay you$600,000 for the house, and I'm requesting$15,000 toward my brokerage compensation.
12:12
SPEAKER_01: Now the seller can evaluate everything: the price, financing, the due diligence, the closing date, the concessions, the commission, compensation, and they can decide whether that works.
12:22
SPEAKER_01: Now another offer might come in and says$590 with no compensation.
12:26
SPEAKER_01: And now they get to compare$600 versus$590 and realize that$590 is actually better than$600 when they're not paying any compensation.
12:32
SPEAKER_01: There might be another offer where they come in and offer$610, but they want$18,000 in compensation.
12:37
SPEAKER_01: Now we have to do the math.
12:39
SPEAKER_01: The seller gets to compare the net economics.
12:42
SPEAKER_01: Why is this controversial?
12:44
SPEAKER_01: It's not.
12:45
SPEAKER_01: Maybe after discussing the option, the seller still wants to authorize compensation.
12:49
SPEAKER_01: That's fine.
12:50
SPEAKER_01: It should be done as part of the negotiation after we've had a fiduciary conversation.
12:56
SPEAKER_01: The problem is when the conversation is sign here, this is how we do it.
13:00
SPEAKER_01: If you don't do it, then the buyers won't show your house.
13:03
SPEAKER_01: If your market continues to rely heavily on broker-to-broker compensation, you should be able to explain why that structure affirmatively benefits the seller.
13:12
SPEAKER_01: But we all know it does not, so please do not gaslight your client.
13:16
SPEAKER_01: Not why is it customary, not merely why it's permissible, why is it good for the client?
13:21
SPEAKER_01: Imagine this deposition I talked about.
13:23
SPEAKER_01: You knew commissions were negotiable, right?
13:25
SPEAKER_01: Not set by law, yes.
13:27
SPEAKER_01: And you knew compensation had been removed from the multiple listing service as a result of a$1.5 billion verdict that was rendered against the Realtors Association, yes.
13:35
SPEAKER_01: And you know that real estate brokerages were also sued and paid hundreds of millions of dollars as well for that exact same thing, yes.
13:41
SPEAKER_01: And you knew that South Carolina Realtors changed its form and no longer offers broker-to-broker compensation, yes.
13:46
SPEAKER_01: And you knew that the real estate commission has also talked about not using broker-to-broker because of the fiduciary duty, yes.
13:52
SPEAKER_01: And you knew that your South Carolina agency duties include duties of loyalty, yes.
13:56
SPEAKER_01: Then explain to me why you recommended that your seller guarantee compensation to the buyer's agent before the house was shown, before you received an offer, before you even knew who the buyer's agent was or what they needed.
14:08
SPEAKER_01: Maybe you have an excellent answer.
14:09
SPEAKER_01: I don't know what it possibly could be, but you better have one because that question's gonna come.
14:15
SPEAKER_01: And the answer needs to begin with because this benefited my client by blank.
14:19
SPEAKER_01: Finish that sentence.
14:20
SPEAKER_01: That's your exercise today.
14:22
SPEAKER_01: Finish that sentence and give me the answer.
14:24
SPEAKER_01: And if it's because that's how I get the buyers to look at my house, that's not an answer that you want to ever go out and say into a court or to a real estate commission.
14:33
SPEAKER_01: And guys, compensation is only the beginning of this discussion because private listings may present an even clearer test.
14:40
SPEAKER_01: I want to talk about office exclusives, private exclusives, listed marketing exposure.
14:43
SPEAKER_01: We talked about them a lot, so we're not gonna spend much time today.
14:46
SPEAKER_01: But let me ask you the question: who benefits?
14:49
SPEAKER_01: Generally, a seller wants the best combination of price, terms, certainty, and timing.
14:55
SPEAKER_01: And what usually creates competition is ready for it?
14:59
SPEAKER_01: Exposure.
15:00
SPEAKER_01: More potential buyers, more opportunities for offer, more competition.
15:05
SPEAKER_01: That's basic economics.
15:07
SPEAKER_01: If you had economics in high school, you understand that the more people that know about your product, the better chance you have to sell it to that product.
15:13
SPEAKER_01: If I owned a product and I wanted to sell it, generally I want more qualified potential purchasers to know about it, not less.
15:20
SPEAKER_01: Why does Coca-Cola advertise?
15:22
SPEAKER_01: So nobody knows about Coca-Cola?
15:24
SPEAKER_01: Why does Apple advertise?
15:26
SPEAKER_01: So no one will buy their product?
15:27
SPEAKER_01: Why does Ford advertise their car?
15:29
SPEAKER_01: So no one will know they have a truck or a car for sale?
15:32
SPEAKER_01: Apparently, all of these massive companies, these Fortune 500 companies, have missed your brand new brilliant marketing strategy, which is don't tell people your product exists.
15:42
SPEAKER_01: Only tell our friends or certain few people we want to know.
15:46
SPEAKER_01: Because that's guaranteed to get my product sold for the highest price.
15:49
SPEAKER_01: That's going to create demand, not telling anybody about it.
15:52
SPEAKER_01: It's absolutely asinine, and it's insulting that people sit out here and try to explain this as if this is good.
16:00
SPEAKER_01: I've mentioned before there's some sellers who need privacy, domestic violence, divorce, whatever the situation, but that is a rarity.
16:09
SPEAKER_01: So I'm not saying that private listing should never exist.
16:12
SPEAKER_01: I'm saying they are very rare.
16:13
SPEAKER_01: What I'm asking is why does your particular seller need one?
16:18
SPEAKER_01: Are you selling that, or is your seller coming to you telling you they need it?
16:22
SPEAKER_01: And did the seller understand the trade-off?
16:24
SPEAKER_01: South Carolina Real Estate Commission is focused directly on limited marketing exposure, informed consent.
16:29
SPEAKER_01: We issued a guidance letter and told you to be very careful about this, that this should not be your business practice, as unfortunately I'm seeing here in Columbia, South Carolina, and in Greenville that it is becoming business practice for some of you brokerages.
16:40
SPEAKER_01: But Bright MLS, which is one of the largest MLSs in the country, they just did a study, guys.
16:45
SPEAKER_01: And the research involved more than 100,000 transactions, and it found that office exclusives listings took longer to sell without producing a corresponding price advantage after controlling for property and market characteristics.
16:59
SPEAKER_01: The report difference was roughly 17 additional days.
17:04
SPEAKER_01: That doesn't mean that every private listing took 17 days longer to sell, but on average they did.
17:09
SPEAKER_01: But shouldn't a fiduci discuss evidence like that?
17:13
SPEAKER_01: Mr.
17:13
SPEAKER_01: Seller, you can choose limited exposure or coming soon or all of that stuff.
17:17
SPEAKER_01: But is here what you need to understand about the potential risk in available research?
17:22
SPEAKER_01: Because I know every seller I've ever talked to would rather just wait 17 days so that you can have an opportunity to try to sell the property in-house.
17:29
SPEAKER_01: Now local people are trying to talk you into doing this.
17:32
SPEAKER_01: And I talked to a lot of big name agents in town who tell me about these meetings where the president or vice president or somebody comes down to have these meetings and tell you all, oh, this is a good plan and this is good.
17:42
SPEAKER_01: They never tell you how it's good for your seller.
17:44
SPEAKER_01: And when they do tell you how it's good for the seller, it's all full of gaslighting and nobody believes it.
17:48
SPEAKER_01: Your agents don't believe it.
17:49
SPEAKER_01: So if your agents don't believe it, there's no way your clients are believing it.
17:53
SPEAKER_01: But the question remains: who benefits?
17:56
SPEAKER_01: Show me, informed consent, and show me that private marketing is better for your client.
18:03
SPEAKER_01: Show me how.
18:04
SPEAKER_01: Because the brokerage might have an economic interest in keeping that listing private, and the seller might have an economic interest in exposing it broadly.
18:13
SPEAKER_01: And when those interests diverge, that's precisely when your fiduciary duty kicks in.
18:17
SPEAKER_01: As our often chemically altered favorite poet Bob Marley once said, you can fool some people some of the time, but you can't fool all the people all the time.
18:25
SPEAKER_01: Before you see the light, stand up for your right.
18:28
SPEAKER_01: Sellers need to stand up for their rights here and know what's going on.
18:31
SPEAKER_01: You can't understand private listings without understanding the battle over the real estate data, however.
18:36
SPEAKER_01: Brokerages, MLS, Zillow, Redfin, Homes.com, all the others, they want to control that consumer relationship.
18:41
SPEAKER_01: Why?
18:42
SPEAKER_01: Because consumers' traffic creates leads, leads create transactions, transaction creates opportunities for mortgage title, insurance, referrals, and all that other business.
18:50
SPEAKER_01: I don't fault companies for wanting to make money, but fiduciary duties create a line.
18:55
SPEAKER_01: You don't improve your business model at the expense of your client you're obligated to represent.
19:01
SPEAKER_01: Suppose my company had a private listing network.
19:04
SPEAKER_01: Keeping the seller's property inside that network may mean that our agents get early access.
19:08
SPEAKER_01: Our company can generate leads, get traffic, our agents have better opportunities to participate on both sides, and our competitors don't immediately get that listing.
19:17
SPEAKER_01: But again, who benefits from that?
19:19
SPEAKER_01: Clearly the broker benefits from that.
19:22
SPEAKER_01: But does the seller, maybe, but you got to show me.
19:26
SPEAKER_01: Don't disguise your brokerage economic interests as your client's interests because they're not the same.
19:31
SPEAKER_01: Tell the seller the truth.
19:32
SPEAKER_01: Mr.
19:32
SPEAKER_01: Seller, there may be benefits to this strategy, but there are also many risks.
19:36
SPEAKER_01: And our company may benefit economically from keeping this listing within our network.
19:41
SPEAKER_01: Now let's have an honest conversation.
19:42
SPEAKER_01: And let's remember something when somebody starts talking about our listings and our inventory.
19:47
SPEAKER_01: It's the seller's house, it's not yours.
19:50
SPEAKER_01: The listing exists because a human being owns an asset, you don't own the asset, your brokerage doesn't own the asset, and they've hired you to help them sell it.
19:59
SPEAKER_01: Your first obligation isn't winning the portal war.
20:02
SPEAKER_01: It's not making your broker in charge happy.
20:05
SPEAKER_01: It's not making your manager or your president of your company happy.
20:09
SPEAKER_01: It's none of that.
20:10
SPEAKER_01: It's representing that client.
20:12
SPEAKER_01: If broad distribution best advances the seller's objective, I don't care that Zillow benefits.
20:18
SPEAKER_01: I don't care that another brokerage gets a lead.
20:20
SPEAKER_01: I care that my seller benefits.
20:23
SPEAKER_01: Don't turn your corporate battle into your client's problem.
20:26
SPEAKER_01: And this isn't just about compensation and private listings.
20:29
SPEAKER_01: Potential conflicts happen throughout real estate.
20:31
SPEAKER_01: Take buyer representation.
20:33
SPEAKER_01: House A works beautiful for the buyer.
20:35
SPEAKER_01: House B also works, but house B produces substantially more compensation for you.
20:39
SPEAKER_01: Which do you recommend?
20:41
SPEAKER_01: Whichever's better for the buyer is which one you should be recommending.
20:43
SPEAKER_01: That's an easy answer.
20:44
SPEAKER_01: But when house A is clearly better and House B pays you substantially more, we find out whether you actually believe what you say when you talk about fiduciary duties.
20:53
SPEAKER_01: And then there's dual agency.
20:55
SPEAKER_01: South Carolina permits disclose dual agency when its requirements are satisfied.
21:00
SPEAKER_01: But there's an obvious economic incentive when one brokerage participates on both sides.
21:05
SPEAKER_01: That doesn't automatically make it improper.
21:07
SPEAKER_01: It means that clients need to understand the conflict and what changes in their representation.
21:13
SPEAKER_01: And here's another: you're the listing agent, and you have your own buyer interested in the property.
21:19
SPEAKER_01: Another brokerage represents a better offer for your seller.
21:23
SPEAKER_01: One transaction may make you significantly more money.
21:26
SPEAKER_01: Which one do you recommend?
21:28
SPEAKER_01: That is where your fiduci duty lives.
21:30
SPEAKER_01: And that's where we really get to determine whether we should say these things or we actually practice them.
21:36
SPEAKER_01: Also consider affiliated services, your mortgage that's tied to your brokerage, your title, your insurance, your home warranty, all these vendors that y'all have all these ties with.
21:45
SPEAKER_01: Why are you recommending that company?
21:47
SPEAKER_01: Is it the best option for your client?
21:49
SPEAKER_01: Is it going to provide the best service?
21:51
SPEAKER_01: If so, great.
21:52
SPEAKER_01: Or is it because somebody at your company economically benefits from this ecosystem?
21:58
SPEAKER_01: And here's another one that agents encounter constantly.
22:00
SPEAKER_01: The inspection comes back ugly.
22:02
SPEAKER_01: The buyer gets very nervous and the agent, but the agent only gets paid if that transaction closes.
22:07
SPEAKER_01: This isn't a big deal.
22:08
SPEAKER_01: Every house has issues.
22:09
SPEAKER_01: Don't lose a house over this.
22:11
SPEAKER_01: Maybe that's reasonable advice, but ask yourself Am I helping the buyer evaluate the property and the risk, or am I simply trying to save my commission?
22:20
SPEAKER_01: Sometimes the best thing you can do for your client is kill the transaction.
22:23
SPEAKER_01: You may have worked for six months, driven hundreds of miles, written five offers.
22:27
SPEAKER_01: You're one week from closing.
22:29
SPEAKER_01: You're walking away means you're going to make zero commission.
22:32
SPEAKER_01: And the correct advice may still be don't buy this house.
22:35
SPEAKER_01: That's your fiduciary duty.
22:37
SPEAKER_01: Are you practicing it or are you just saying it?
22:40
SPEAKER_01: Which gives us perhaps the best test in this entire episode.
22:45
SPEAKER_01: If my compensation disappears from this decision, would I give my clients the same advice?
22:50
SPEAKER_01: Remember that question.
22:52
SPEAKER_01: Real estate loves forms.
22:53
SPEAKER_01: We've disclosed it, we've signed it, they've initialed the paragraphs, great.
22:57
SPEAKER_01: But did they understand it?
22:58
SPEAKER_01: Now I want to talk about is signature really informed consent?
23:02
SPEAKER_01: Because real estate loves forms.
23:03
SPEAKER_01: We disclose it, they sign it, they initial a paragraph, everything seems great, right?
23:07
SPEAKER_01: But did they understand it?
23:08
SPEAKER_01: Because there's a huge difference between disclosure and informed consent.
23:11
SPEAKER_01: Let's take private listings.
23:12
SPEAKER_01: Did you explain that limiting exposure means fewer buyers may initially know the property is available?
23:17
SPEAKER_01: Did you explain the potential impact on competition, the alternatives?
23:20
SPEAKER_01: Did you discuss your brokerage may economically benefit from keeping that listing inside its network?
23:25
SPEAKER_01: Or did you simply say, sign here, this allows private marketing of your property?
23:29
SPEAKER_01: One educates the client, the other sells the client.
23:32
SPEAKER_01: Same with compensation.
23:33
SPEAKER_01: Don't merely get the seller's signature.
23:35
SPEAKER_01: Explain the choices.
23:36
SPEAKER_01: Same with dual agency.
23:38
SPEAKER_01: Don't just say it exists.
23:39
SPEAKER_01: Explain what it involves.
23:41
SPEAKER_01: The form should document the conversation.
23:43
SPEAKER_01: It shouldn't replace your conversation.
23:45
SPEAKER_01: And here's another test.
23:46
SPEAKER_01: If your conversation with a client were secretly recorded and played before a jury three years later, would you be comfortable?
23:52
SPEAKER_01: Would you hear, would the jury hear you explain both sides, the risks, the incentives, the alternatives, your own economic interests?
23:58
SPEAKER_01: Or would they simply hear a salesperson simply trying to obtain a signature?
24:02
SPEAKER_01: The job isn't to manufacture consent, the job is to inform it.
24:07
SPEAKER_01: Someone always asks me, however, is this legal?
24:09
SPEAKER_01: And that's important.
24:10
SPEAKER_01: I'm a lawyer and I make a living answering that question.
24:12
SPEAKER_01: But fiduciary have another question.
24:14
SPEAKER_01: Is this in my client's best interest?
24:16
SPEAKER_01: Can we privately market the listing?
24:18
SPEAKER_01: Can we offer compensation outside the MLS?
24:20
SPEAKER_01: Can we do dual agency?
24:22
SPEAKER_01: Can we use an affiliated company?
24:23
SPEAKER_01: Can we represent the buyer on our own listing?
24:25
SPEAKER_01: Can we, can we, can we, can we?
24:27
SPEAKER_01: That's what they always ask.
24:28
SPEAKER_01: Fine.
24:29
SPEAKER_01: But the real question should be, should we?
24:31
SPEAKER_01: And that's where I think the industry oftentimes falls short.
24:34
SPEAKER_01: Compliance isn't necessarily the highest standard.
24:37
SPEAKER_01: It's the very minimum.
24:38
SPEAKER_01: Something can be permissible and still not be the best recommendation for your particular client.
24:42
SPEAKER_01: And perhaps the most dangerous sentence in real estate is, well, we've always done it that way.
24:46
SPEAKER_01: Sisters should have taught us something about that.
24:49
SPEAKER_01: Cooperative compensation was embedded in the system for decades.
24:53
SPEAKER_01: It was ordinary.
24:53
SPEAKER_01: It was built in the MLS, built into presentations, it was in the forms, and consumers eventually challenged it.
25:01
SPEAKER_01: Normal doesn't mean you're immune.
25:04
SPEAKER_01: Custom doesn't automatically equal clients' best interests.
25:07
SPEAKER_01: And everybody in our market does it.
25:09
SPEAKER_01: Isn't an answer.
25:11
SPEAKER_01: Why was it good for your clients?
25:13
SPEAKER_01: I'm not predicting a particular lawsuit or saying that every private listing or compensation arrangement creates liability, but the next lawyers examining these issues aren't starting from scratch.
25:23
SPEAKER_01: The landscape has changed, sits are happened, compensation rules changed, MLS, MLS practices changed, South Carolina forums changed, the Real Estate Commission even addressed limited marketing exposure.
25:34
SPEAKER_01: And research exists concerning private listings.
25:37
SPEAKER_01: The industry is openly debating data in private inventory.
25:40
SPEAKER_01: Now imagine that deposition several years from now.
25:43
SPEAKER_01: You owed your seller loyalty, yes.
25:45
SPEAKER_01: And you knew about the commission guidelines, yes.
25:47
SPEAKER_01: And you knew there were risks associated with limited exposures, yes.
25:50
SPEAKER_01: And you knew your brokerage economically benefited from keeping listings inside this ecosystem, yes.
25:55
SPEAKER_01: Explain to me how limiting the client's exposure benefited the client.
25:59
SPEAKER_01: Not the company, not the team, not your lead generation, this particular client in this particular situation.
26:05
SPEAKER_01: Now imagine the lawyer has an internal brokerage presentation saying that private inventory helps capture buyer leads, which I know some of you all have been actually told.
26:14
SPEAKER_01: Then another presentation telling consumers private listings are for their benefit.
26:18
SPEAKER_01: These two documents are going to go on a computer screen side by side, and the lawyer is going to ask, well, which one of it is true?
26:25
SPEAKER_01: That's why this is bigger than compliance.
26:27
SPEAKER_01: It's culture.
26:29
SPEAKER_01: Is the client actually first?
26:31
SPEAKER_01: Do you actually believe in your fiduciary duty, or are you just simply saying the words?
26:35
SPEAKER_01: Or is client first the external marketing language while the internal conversation is market share, lead capture, double-sided transaction and controlling inventory?
26:44
SPEAKER_01: Eventually those two words are going to collide.
26:46
SPEAKER_01: And when they do, but they sign the form, isn't the defense you think it is?
26:51
SPEAKER_01: Let me finish with one question.
26:52
SPEAKER_01: If my compensation disappeared from this decision, would I give my client the exact same advice?
26:59
SPEAKER_01: If you made exactly the same amount, regardless of which house your buyer purchased, would you recommend the same house?
27:05
SPEAKER_01: If your brokerage made the same amount of money, whether you listed it privately or immediately exposed it to the entire marketplace, would you recommend the same marketing strategy?
27:14
SPEAKER_01: And if you made the same amount, whether the buyer closed or walked after inspection, would your advice change?
27:20
SPEAKER_01: If the answer is yes, you probably have client-centered reasoning.
27:24
SPEAKER_01: But if removing the money changes your advice, then pay attention because you have found the exact moment where your fiduciary duty matters the most.
27:32
SPEAKER_01: The real estate industry has spent decades teaching fiduciary duty as a vocabulary lesson, you know, loyalty, obedience, disclosure, confidentiality, reasonable care, diligence, accounting.
27:43
SPEAKER_01: But fiduci isn't really tested.
27:46
SPEAKER_01: It's tested when you do what's best for your client when it costs you something.
27:52
SPEAKER_01: Something, sometimes it costs you money.
27:54
SPEAKER_01: Sometimes your brokerage loses the buyer.
27:56
SPEAKER_01: Sometimes another company gets the mortgage.
27:58
SPEAKER_01: Sometimes Zillow gets your data.
28:00
SPEAKER_01: Sometimes you don't get both sides.
28:03
SPEAKER_01: Sometimes you work for somebody for six months and make absolutely nothing.
28:07
SPEAKER_01: That's simply the job.
28:08
SPEAKER_01: Sitzr's been a wake-up call.
28:10
SPEAKER_01: Not because Sitzer was a fiduciary duty lawsuit, it wasn't, but because it showed what can happen when an industry builds a system around itself for so long that it stops asking the system whether it actually aligns with the consumer.
28:22
SPEAKER_01: And now private listings might be the next great test.
28:25
SPEAKER_01: Don't tell me restricting exposure benefits the seller.
28:28
SPEAKER_01: Show me.
28:29
SPEAKER_01: Don't tell me guaranteeing compensation benefits the seller.
28:32
SPEAKER_01: Show me.
28:32
SPEAKER_01: Don't tell me that dual agent benefits both clients.
28:35
SPEAKER_01: Show me.
28:36
SPEAKER_01: And don't tell me they signed the form.
28:37
SPEAKER_01: Show me that they understood the alternatives, the risks, the conflicts, and most importantly, show me that when your interest and your client's interests diverged, you chose the client.
28:46
SPEAKER_01: That's fiduciary duty.
28:47
SPEAKER_01: Consumers aren't stupid.
28:49
SPEAKER_01: They have access to lawsuits, guidance, commission, commission guidance, forms, research, and increasingly artificial intelligence can help them analyze it all.
28:58
SPEAKER_01: The days of saying, trust me, this is how real estate works, are disappearing.
29:03
SPEAKER_01: And that's good because great agents should never fear transparency.
29:07
SPEAKER_01: They should welcome it.
29:08
SPEAKER_01: So before your next listing appointment, buyer consultation, your compensation discussion, or private listing presentation, simply ask yourself, who benefits?
29:16
SPEAKER_01: And then ask, if there were no commission attached to this decision, would I give the exact same advice to my client?
29:23
SPEAKER_01: Because your client didn't hire you to protect your paycheck.
29:26
SPEAKER_01: They didn't hire you to protect your brokerage's market share.
29:29
SPEAKER_01: They didn't hire you to protect the private network or their portal.
29:32
SPEAKER_01: And they didn't hire you to protect the data.
29:34
SPEAKER_01: They hired you to protect them and only them.
29:37
SPEAKER_01: And if this industry wants consumers to treat real estate professionals like trusted advisors, then we have to act like trusted advisors when it actually matters, not when fiduciary duty is convenient, when it costs us something.
29:52
SPEAKER_01: All right, that's all the time I have for our show today.
29:53
SPEAKER_01: I hope everybody enjoyed this week's episode edition Dirt.
29:56
SPEAKER_01: I'll come back again next week.
29:57
SPEAKER_01: Don't forget to like us, subscribe to us, and share us with all the other real estate agents.
30:00
SPEAKER_01: Have a great week.