Starting August 17, 2024, the National Association of REALTORS® (NAR) is implementing a new requirement on its members that will impact home buyers and REALTORS® alike. This new rule mandates that REALTORS® must have a written agreement with buyers before showing them any homes. This change is required as part of the settlement agreement of multiple massive class-action lawsuits where NAR was accused of anti-competitive practices. The settlement aimed to increase transparency and fairness in real estate transactions, ensuring that both buyers and agents have a clear understanding of their relationship and obligations. However, there’s a lot of confusion surrounding the new requirement, including some “PSA” messages posted by agents on social media that refer to the required agreement as a “Buyer’s Agency” agreement.
A Buyer’s Agency agreement is used when you wish to engage an agent to represent you as a buyer and establishes obligations upon the agent, including fiduciary duties to put your interests ahead of all others (including themselves). This is certainly the agreement I would recommend buyers use in most cases once ready to commit to an agent. However, while this certainly meets the requirement, it is not the only type of agreement that satisfies NAR’s new rule. In fact, representation is not required at all. Yes, a written agreement is necessary, but it doesn’t have to be a full-blown buyer representation agreement. Any written agreement to show a property will suffice. The intent here is not to complicate the home buying process but to protect buyers and clarify the REALTOR®’s role and responsibilities, including the cost, if any, to the buyer and where the compensation is coming from. It ensures that you understand the services you’re getting and how your REALTOR® will be compensated, making the whole process smoother and more transparent.
Is compensation required under the agreement?
That is, of course, dependent on the agreement itself, but there is no requirement by the NAR settlement that buyers be charged anything to enter into an agreement to be shown a home. Naturally, if the agreement is a Buyer’s Agency agreement where you will, in fact, receive representation, the agent, like every other professional involved in the home buying process, will need to be compensated, and how much and who pays will need to be laid out.
How long does the agreement obligate me?
Again, there is no requirement for the agreement to last any period of time. If it’s simply a showing agreement, it may last long enough for the agent to walk you through the home.
What if the listing agent shows you the home?
If the listing agent is giving you a tour of the home (as the seller’s agent) and not “working with” you, then the agreement may not be required. Personally, though, I think it is still a good idea to use it for transparency so that you, as the buyer, clearly understand whose interest that agent is required to put ahead of yours.
What is required in the “buyer agreement”?
According to the NAR settlement, the following are the only requirements for the agreement that must be signed before showing a home to a buyer they are working with:
- Specify and conspicuously disclose the amount or rate of any compensation the MLS Participant will receive from any source.
- The amount of compensation must be objectively ascertainable and may not be open-ended (e.g., “buyer broker compensation shall be whatever amount the seller is offering to the buyer”).
- Include a statement that MLS Participants may not receive compensation from any source that exceeds the amount or rate agreed to with the buyer.
- Disclose in conspicuous language that broker commissions are not set by law and are fully negotiable.
- Include any provisions required by law.
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