As of August 17, 2024, a significant change will impact how MLS Participants and buyers interact. Starting this date, all MLS Participants “working with” a buyer must have a written agreement in place before any home tours occur, including in-person and virtual tours. This development emphasizes transparency and clarity, benefiting both real estate professionals and their clients. Here's a detailed guide to help you navigate and optimize these agreements effectively.
Why Written Buyer Agreements Matter
Written buyer agreements clearly outline the services an MLS Participant will offer and the compensation they will receive. This clarity fosters trust and ensures both parties are on the same page from the outset. The new requirement, rooted in the NAR settlement, aims to enhance transparency and consumer protection in real estate transactions.
Mandatory Provisions in Written Buyer Agreements
According to paragraph 58(vi) of the NAR proposed settlement agreement, every written buyer agreement must include the following:
- Compensation Disclosure: Specify the amount or rate of any compensation the MLS Participant will receive from any source.
- Ascertainable Compensation: Ensure the compensation amount is objectively ascertainable and not open-ended.
- No Excess Compensation: Include a statement that the MLS Participant may not receive compensation from any source exceeding the agreed amount with the buyer.
- Negotiability of Commissions: Conspicuously disclose that broker commissions are not set by law and are fully negotiable.
- Legal Provisions: Include any other provisions required by law.
Additional Considerations for Buyer Agreements
While the mandatory provisions are crucial, there are additional factors and contractual elements that MLS Participants, associations, and MLSs should consider when creating or updating buyer agreements:
- Format: Use clear, readable terms and avoid pre-filling key terms without legal advice. The agreement should be easy to understand for all parties involved.
- Types of Representation: Consider various types of written buyer agreements permitted by state law, such as short form, limited service, agency, non-agency, and transactional agreements.
- Broker Services: Clearly outline the MLS Participant's services to the buyer.
- Consumer Protection: Disclose all contractual obligations of the buyer, and duties of confidentiality, and include warnings regarding wire fraud and video/audio recording by sellers.
- Term and Termination: Define the duration of the agreement and include provisions for termination with and without cause. Consider including a carryover period for compensation.
- Compensation and Fees: Discuss potential retainer fees and how they are handled within the total compensation.
- Conflicts of Interest: Address how potential conflicts of interest will be resolved, including disclosure and consent for representing other buyers on the same property.
- Dispute Resolution: Consider including alternative dispute resolution methods, such as mediation or arbitration, and potentially waiving trial by jury and class actions.
Flexibility in Agreements
It's important to note that the NAR policy does not dictate the type of relationship, the term of the agreement, the services provided, or the type or amount of compensation charged. This flexibility allows MLS Participants and buyers to negotiate terms that best suit their needs, within the boundaries of state law and the mandatory provisions.
Conclusion: Enhancing Transparency and Trust
By implementing written buyer agreements, real estate professionals can provide a transparent, clear framework for their services, enhancing trust and efficiency in the home buying process. As these agreements become a standard part of working with buyers, it's essential to stay informed and ensure your agreements are comprehensive, clear, and compliant with the latest regulations.
Stay ahead of the curve and ensure your clients are well-informed and confident in their real estate transactions. Let's connect and discuss how we can continue to uphold the highest standards of professionalism and transparency in our industry.
