Colonial Period and Early Republic (1600s – 1800s): The Foundations of Real Estate Representation

Kameron Kang, CEO of homebuyerwallet.com

Land Speculation and Agents

During the colonial period in the United States, land ownership and real estate transactions were quite different from what we recognise today. The primary driver of real estate activity was land speculation. This involved purchasing large tracts of land at low prices, often from the government or directly from indigenous tribes, and reselling them at higher prices as settlements expanded.

Role of Agents:

In this context, informal agents facilitated these transactions, often acting as middlemen or brokers. Unlike the professional real estate agents we know today, these early agents primarily focused on connecting landowners or speculators with potential buyers. Their role was to negotiate the sale of large tracts of land, typically for development or agricultural use. Formal agreements or fiduciary duties did not bind these agents; their primary goal was to close the sale and earn a commission or fee for their services.

Speculation and Expansion:

The speculative nature of land deals during this period was driven by the promise of expanding colonial settlements and the potential for significant profits as new territories were developed. Many early land speculators and their agents were influential figures, often involved in politics or connected with colonial governments. The lack of formal regulation meant that these transactions were highly speculative and, at times, risky for all parties involved.

Land Grants and Speculative Ventures:

Colonial governments often awarded large land grants to individuals or groups, who sought to sell or lease portions of this land to settlers. This created a need for intermediaries who could market and sell these parcels to incoming settlers. These agents played a crucial role in promoting and selling these lands, often using exaggerated claims about the fertility and potential of the land to attract buyers.

Notary Publics: The Precursors to Modern Real Estate Representation Regulation

As the colonies grew, the need for more structured legal processes became apparent, leading to the emergence of notary publics in real estate transactions during the 18th century.

Role of Notary Publics:

Notary publics were government-appointed officials whose primary responsibility was to witness the signing of important documents, including those related to real estate transactions. Their role was to verify the parties’ identities and ensure that the transaction was conducted legally. However, unlike modern real estate agents, notary publics did not represent the interests of buyers or sellers. Their function was more about ensuring the legality and proper recording of transactions than advocating for one party over another.

Recording Property Transfers:

The notary public’s role was vital when formal land registries were non-existent or rudimentary. They recorded property transfers in official ledgers, serving as the primary land ownership documentation. This was crucial in establishing clear ownership records, especially as land disputes were common during rapid expansion and settlement.

Lack of Formal Representation:

During this period, the concept of buyer or seller representation as we know it today did not exist. Notary publics were neutral parties, and their involvement in real estate transactions was more about legal formalities than providing advisory or representative services. The absence of a formal real estate profession meant that buyers and sellers were left mainly to navigate transactions independently, often relying on personal knowledge or informal advice.

Summary

The early history of real estate representation in the United States during the colonial period and early republic was characterized by informal and unregulated practices. Land speculation was a primary driver of real estate activity, with agents acting as intermediaries to facilitate these speculative transactions. Notary publics played a crucial role in recording and witnessing property transfers but did not represent the interests of buyers or sellers. The formalization of real estate practices and the development of a professional real estate agent role would come much later, as the US economy and legal system evolved to meet the growing complexities of land ownership and property transactions.

Real Estate Agent Compensation During the Colonial Period and Early Republic

During the colonial period and the early republic in the United States, formal real estate agent commissions, as we understand them today, did not exist. However, agents or intermediaries involved in real estate transactions were compensated in various informal ways, depending on the nature of the transaction and the relationship between the parties involved.

Compensation Methods for Agents

Commission-Based Payment:

Informal Commissions: While the formalized commission structure developed later, early agents often received a commission based on land sales. This commission was typically a percentage of the sale price, though it was not standardized. The percentage varied widely depending on the agreement between the landowner (or speculator) and the agent. These agreements were often negotiated on a case-by-case basis and influenced by the size and value of the sold land.

Barter and Goods: In some cases, rather than cash payment, agents might have been compensated with goods, services, or even a portion of the land they were helping to sell. For example, an agent might receive a certain number of acres from a large tract of land as payment for facilitating its sale.

Flat Fees:

Fixed Payment: Some agents were paid a flat fee for their services, regardless of the sale price. This fee was negotiated in advance and could be paid in cash or goods. Flat fees were more common in smaller, local transactions where the land sold was not part of a sizeable speculative venture.

Land Grants and Shares:

Land as Payment: Particularly in speculative ventures, agents might receive land as part of their compensation. This could involve receiving a portion of the land they helped sell or being granted land in a different location as a reward for their services. In some cases, agents might also be given shares in a land speculation company or venture, tying their compensation to the overall success of the venture.

Promissory Notes: In some instances, agents were paid with promissory notes, essentially promises of future payment. These notes could be based on the expected profits from the sale of land or other future income streams.

In-Kind Payment:

Goods and Services: Payment in kind, where agents were compensated with goods or services rather than money, was also common. This could include livestock, agricultural products, or other valuable goods the agent could use or sell. In frontier areas, where cash was scarce, barter was often a practical solution.

Political or Social Favor:

Influence and Connections: In some cases, agents might be compensated with political favours or social connections rather than direct payment, especially in politically charged land transactions. This was particularly true for agents working for influential landowners or speculators who held power in colonial or early American society.

Lack of Standardization

One key characteristic of this period was the lack of standardization in how agents were paid. Because real estate transactions were largely unregulated and varied widely, the agents’ compensation structure was often highly flexible and tailored to the specifics of each deal. There were no licensing requirements or standardized practices, so the payment terms were typically negotiated individually between the agent and client.

Transition to Formalized Compensation

As the US economy and legal system developed in the 19th and early 20th centuries, real estate transactions became more formalized, establishing standardized commission structures. The formation of real estate boards and the eventual creation of the National Association of Realtors (NAR) helped professionalize the industry, setting the stage for the modern commission-based payment systems that are now the norm.

In Summary:

During the colonial period and early republic, real estate agents were paid through various informal means, including commissions, flat fees, land grants, barter, and political favours. The lack of regulation and standardization allowed for multiple compensation methods, which evolved as the industry became more structured and professionalized.

Primary Historical Documents:

Colonial Land Grants and Deeds: Examining original colonial land grants, deeds, and other legal documents can provide direct insight into the practices of land agents and the role of notaries. These documents are often housed in state archives or the National Archives.

Letters and Diaries of Early Settlers and Land Speculators: Personal writings can sometimes shed light on informal real estate practices and the role of agents. These can be found in historical collections or specialized archives, such as the Library of Congress.