BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
In 2024, the National Association of Realtors (“NAR”) entered a settlement providing that compensation cannot be paid to a buyer’s agent unless a valid buyer representation agreement (“BRA”) exists and that a buyer’s agent may not receive compensation in excess of the amount the buyer agreed to pay the buyer’s agent.
The current version of the CAR purchase agreement forms does not require a buyer’s agent to provide the seller or their agent a copy of the compensation portions of the BRA. So, some buyer’s agents are refusing to share any information from their BRA with the seller.
As a result, Broker Risk Management (“BRM”) has concerns that a listing agent may have a fiduciary duty to the seller to confirm that the buyer’s agent is entitled to the compensation being requested. Without receiving relevant portions of the BRA, that confirmation cannot occur.
To avoid this potential issue, BRM recommends that listing agents advise sellers that the seller issue a counter-offer requiring that the buyer provide a copy of relevant compensation portions the BRA.
BRM has created the attached Advisory advising sellers of their right to request a copy of the BRA, and recommending that sellers consider issuing such a counter-offer. By providing the seller with this Advisory, the seller is made aware of the issue, and the seller can decide whether to issue a counter-offer to a buyer requiring that a copy of the BRA be delivered to the listing agent with the signed counter-offer. If a seller elects to include that term in the counter-offer, agents can use the following language:
“Seller’s acceptance of Buyer’s offer is subject to Buyer providing Seller, along with a signed copy of this counter-offer, a copy of the compensation portion of buyer representation agreement showing that, as of the date this counter-offer is signed, that agreement is: (1) valid; (2) covers the Property; and (3) provides for compensation for no less than the amount requested in Buyer’s offer.”
PRACTICE TIPS:
- If a listing agent does not advise the seller that the seller should confirm the buyer’s agent’s entitlement to compensation under a buyer representation agreement, the listing agent may be exposed to liability or claims by the seller.
- To avoid this liability, BRM is suggesting that listing agents use the attached Advisory.
- If a seller elects to include a condition in the seller’s counteroffer requiring that a buyer provide a copy of the BRA, BRM suggests using the language set forth here in.
Attachments:
Advisory Regarding Verifying the Buyer’s Representation Agreement
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management LLP. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices