BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Considerations When Meeting with a Seller to List the Property Post-NAR Settlement
Before the NAR settlement, listing appointments generally involved a discussion between a listing agent and a seller regarding marketing strategies and sales price. Agents may bring and present comparable market analyses and other documents relating to strategies for selling a property. In today’s post-NAR settlement world, discussions with sellers when listing the property are likely to involve many other legal issues. The following is a discussion of issues a listing agent should discuss with a seller in light of the NAR settlement and the removal of offers of commissions to buyers’ agents from the Multiple Listing Services.
Discussion Regarding the Payment of a Buyer’s Commission
When a property is being listed, it is recommended that a listing agent discuss whether a seller is willing to consider paying a buyer’s agent a commission. A listing agent should prepare for this discussion in advance of the meeting with the seller. The agent should be prepared to discuss the market and whether it would be advantageous for a seller to offer to pay a buyer’s agent. For example, is the property in a starter home market, where it is unlikely that buyers would have extra funds to pay their agents? If so, a seller may consider paying a buyer’s agent to incentivize buyers to purchase the property. Another consideration is the market. If it is a buyers’ market, a seller may be more inclined to offer compensation to a buyer’s agent. Agents should consider these issues before meeting with a seller and be prepared to discuss them.
If a seller is inclined to consider offering a commission to a buyer’s agent, agents should use Broker Risk Management’s “Seller Authorization For Seller’s Broker to Offer Compensation to a Buyer’s Broker and Concessions to Buyer.”
Please be reminded that a seller’s obligation to pay a commission is dependent on the acceptance of an offer within the seller’s sole discretion. That point should be emphasized tothe seller.
Buyer Concessions
A listing agent should discuss with a seller as soon as practicable whether a seller is willing to pay buyer’s concessions. A buyer concession can be a closing cost, such as title insurance, escrow, lender fees, etc. This discussion should be separate from a discussion as to whether a seller is willing to pay a buyer’s agent’s commission.
An agent should be prepared to have this discussion and make recommendations to a seller depending on the property, market, and type of potential buyer. For example, if the property is in a first-time home buyer market and needs work, a seller may consider offering credits to assist a buyer.
If a seller is inclined to consider offering concessions, the BRM’s “Seller Authorization For Seller’s Broker to Offer Compensation to a Buyer’s Broker and Concessions” to Buyer should also be used for this purpose.
Advertising
Listing agents should discuss a strategy for advertising with the seller.A listing agent should alsoexplain to the seller that the Multiple Listing Service no longer offers commissions to buyer’s agents and that separate advertising outside of the Multiple Listing Service can include offers of compensation to a buyer’s agent and concessions to a buyer. A seller should consider whether to authorize a listing agent to advertise a seller’s willingness to pay a buyer’s agent or buyer’s concessions. Agents should not offer any type of buyer’s agent’s compensation or concessions without seller’s written authorization.
Unrepresented Buyers
Unrepresented buyers are starting to write more offers on properties. Listing agents should discuss with their sellers as soon as practicable whether a seller wishes to consider an offer from an unrepresented buyer. Agents are directed to BRM’s tip regarding the risks of unrepresented buyers. It is recommended that agents provide sellers with BRM’s “Seller Advisory Regarding Unrepresented Buyers” as soon as possible. If sellers instruct agents not to present offers written by unrepresented buyers, this exclusion can be included in the listing agreement or as an addendum. Such language can include the following:
“Seller instructs listing agent not to present any offers written by buyers who are not represented by real estate licensees.”
However, even with such an instruction, listing agent should nonethelessadvise the seller of any offers which have been delivered to them.
Open Houses
Listing agents should consider discussing the handling of open houses with sellers. Agents should educate sellers on the advantages of requiring buyers to sign in on the Open House Visitor Non-Agency Disclosure and Sign-in (OHNA).Such refusal can be a security issue. Does a seller want a person whose identity is unknown touring their house?
If a seller instructs a listing agent to prohibit a buyer who refuses to sign the OHNA to enter the home, the following language should be used in the addendum or in an attachment:
“Seller instructs listing agent to prohibit any potential buyer from seeing the property unless the buyer signs an Open House Visitor Non-Agency Disclosure and Sign-in and provides their identity.”
Practice Tips
- Agents should discuss with sellers as soon as practicable whether a seller is willing to pay a buyer’s agent’s compensation and/or buyer concessions. If a seller is willing to consider paying a buyer’s agent’s commission or buyer concession, BRM’s“Seller Authorization For Seller’s Broker to Offer Compensation to a Buyer’s Broker and Concessions to Buyer” should be used.
- Agents should discuss advertising with sellers and obtain the seller’s consent to advertise for a buyer’s agent’s compensation and/or buyer concession before such advertising is placed in the marketplace.
- Listing agents should discuss with sellers the risks of unrepresented buyers as soon as practicable. Listing agents should provide sellers with BRM’s “Seller Advisory Regarding Unrepresented Buyers.” Agents should consider whether to exclude unrepresented buyers from listing agreements.
- A listing agent should discuss the handling of open houses with sellers. Agents should receive instructions as to whether a seller wishes to have a non-identified buyer see their property.
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