Hello, my name is Laura Perez, and I’m excited to discuss a timely and significant topic: buyer broker agreements. This discussion is particularly relevant given the recent developments within our industry.
Changes in Broker Commissions
On March 15, 2024, the National Association of Realtors (NAR) announced a proposed settlement agreement to end class action litigation related to broker commissions. This settlement has led to several crucial changes that need to be implemented by August 17, 2024. Two key points stand out: the prohibition of offers of compensation on the multiple listing service (MLS) and the requirement for written buyer agreements before touring a home.
Prohibition of Offers on MLS
NAR’s new guidelines prohibit using MLS to communicate offers of compensation. However, buyer brokers can still be compensated through other means, just not via MLS.
Mandatory Written Buyer Agreements
The second major change requires written buyer agreements before buyers tour properties. These agreements must include specific disclosures about compensation, ensuring transparency between brokers and buyers.
Key Elements of Written Buyer Agreements
The settlement outlines essential components for these agreements:
- A clear disclosure of the compensation amount or rate the broker will receive and from which sources.
- The compensation amount must be objectively ascertainable and not open-ended.
- A clause prohibiting brokers from receiving compensation exceeding the agreed amount.
- A conspicuous statement that broker fees are negotiable and not set by law.
Touring Properties
Before a buyer can tour a property, whether in person or virtually, they must sign a written agreement with the broker. This ensures that both parties are clear about their obligations and rights.
Determining if You Are “Working With” a Buyer
It’s crucial to distinguish between simply marketing your services and actively providing broker services to a buyer. If you’re only representing the seller, no agreement with the buyer is necessary. However, if you are facilitating tours, negotiations, or offers for a buyer, a written agreement is required.
Flexibility in Agreement Terms
The settlement does not dictate specific terms like agency relationships or the duration of the agreement. These details are left up to the parties involved. The goal is flexibility in structuring compensation and services provided.
Exclusive Buyer Broker Agreement Form
Realtors should update their forms to comply with these new regulations. One such form is the Exclusive Buyer Broker Agreement (EBBA). This form has been used for years but now includes updates to meet settlement requirements.
Using the EBBA Form
If you choose to use this form, make sure you select the most current version from the forms library. The form details various aspects of your relationship with the buyer, including:
- Parties involved in the contract
- Duration of the agreement
- Type of property being sought
- Broker’s obligations
- Consumer’s obligations
- Compensation structure
- Protection period and conditional termination clauses
- Dispute resolution options
- The brokerage relationship as defined by statute
Final Thoughts
The latest version of the buyer broker agreement aims to incorporate settlement elements while offering flexibility for both parties. As we navigate these changes, we will continue providing resources and answers to your questions to ensure a smooth transition.
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