BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
NOTE: Some provisions in the forms related to the NAR Settlement Agreement do not become mandatory until August 17, 2024 (or earlier if your MLS makes the required changes sooner) including the elimination of offers of compensation from the MLS, and the requirement for buyer agents to have a written buyer representation agreement with their buyer client. However, it is the recommendation of CAR that agents start using the new and revised forms upon their release on June 26 to become familiar with using them in their daily practice.
- NEW AND REVISED FORMS RELATED TO THE NAR SETTLEMENT AGREEMENT
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- NEW FORMS RELATED TO THE NAR SETTLEMENT
BCA Broker Compensation Advisory
VALUABLE AND USEFUL NEW ADVISORY TO USE ON ALL RESIDENTIAL TRANSACTIONS. Paragraph 1 discusses the seller-side of the transaction and payments to listing brokers and possible payments to buyer brokers. Buyer representation agreements: Discusses the obligation to have a compensation agreement with a buyer and how it impacts representation.
¶3 discusses the four payment options for buyer’s brokers.
BFPI Buyer Financial and Personal Information
Form designed to be used with BRBC. This form helps a buyer agent assess the buyer’s qualifications for the property the buyer wants to purchase. Information on the form is confidential and never shared with listing agent or seller.
BIPP Buyer Identification of Preferences and Priorities
It is essential that buyer agents take the time to LEARN the preferences and priorities of their buyer clients. The BRBC sets minimum requirements to establish a broker’s right to compensation. The BIPP helps the buyer’s agent LEARN what is important to a buyer such as price range, number of bedrooms and baths, single story v. multi-level property, school district, “green” features and accessibility features. Information in the form is confidential, is never shared with the listing agent or seller, and may change over time. Ensure the form is updated if buyer’s information changes. The BIPP replaces the C.A.R. Buyer Material Issues form.
DM-BR Disclosure and Modification to Buyer Representation Agreement
This form is used to modify a buyer representation agreement in effect before June 2024. It informs the buyer that the broker can no longer accept compensation that exceeds the amount specified in the BRBC once a NAR proposed settlement is implemented in August 2024. Brokers who entered a BRBC with the expectation of collecting any overage from the listing broker will have to either modify the compensation term using an MT-BR form or work for less than previously anticipated. The form also addresses what will happen if the BRBC contained a term allowing excess compensation to be paid to the buyer.
DM-LA Disclosure and Modification to Listing Agreement
This form is used to modify a listing agreement in effect before June 2024. It informs the seller that offering compensation through the MLS will be prohibited once the NAR proposed settlement is implemented in August 2024. The form should be used prior to the August 2024 implementation date. There is no need to use the form for listings taken after the release of the revised RLA in June.
OHNA Open House Visitor Non-Agency Disclosure
One of the terms of the NAR proposed settlement is that agents “working with” a buyer need to have a buyer representation agreement prior to “touring” a property. NAR has clarified that this form is not required for an open house agent associated with the listing broker. However, if a discussion between the listing agent and the buyer turns to a discussion of the listing agent possibly representing that buyer, the LPRBC would be required. (Please remember to have an Agency Disclosure and Possible Representation of More Than One Buyer or Seller forms signed.) If the visitor already has another broker working on their behalf, the listing agent would want to know the identity of the other agent to avoid conflicts and to allow the listing agent to follow up without violating the Code of Ethics.
LPRBC Limited Property Representation and Broker Compensation Agreement
One of the terms of the NAR proposed settlement is that agents working with a buyer must have a buyer representation agreement prior to showing a property. The LPRBC is a limited purpose buyer representation agreement. It is only available as a nonexclusive agreement, meaning it may be cancelled by either broker or visitor at any time, and it has a maximum representation period of 30 days. Further, if the form is used by the listing agent it is only valid for the open house property. The form may also be used by a buyer’s agent, but unlike the BRBC, the LPRBC is limited to a maximum of three properties. Warning language appears at the top of the first page of the form advising the visitor that signing the form is not a requirement for entry into the open house. Agents should consider bringing unsigned copies to any open house or have them available electronically.
(NOTE: MT Modification of Terms is withdrawn and replaced by MT-LA and MT-BR)
MT-LA Modification of Terms – Listing Agreement
This form should be used to document a change in the listing agreement. Preprinted language already allowed for changes to price and expiration date, and new preprinted language allows for compensation to be changed.
MT-BR Modification of Terms – Buyer Representation Agreement
This form should be used to document a change in the buyer representation agreement. Preprinted language allows for changes to expiration date and compensation. This form could be used in addition to the DM-BR if the broker believes that a previous BRBC was entered into at too low of a compensation rate.
- REVISED FORMS RELATED TO THE SETTLEMENT
RLA Residential Listing Agreement – Exclusive 12/23 version
Compensation: Compensation for seller’s broker and buyer’s broker unbundled (2C (1)). Optional paragraph for cooperation with the buyer’s broker (2C (2)). Optional paragraph for compensation to seller’s broker if buyer unrepresented (2C (3)). Possibility of changing compensation if same agent represents both buyer and seller (2C (4)). Optional paragraph if seller willing to advertise openness to concessions (2D). Explanation of seller concessions in paragraph 5. Bundled with new form, Broker Compensation Advisory (C.A.R. Form BCA) (3A). The form addresses showing properties which could lead to dual agency or nonrepresentation (14C (2) and 14D).
NOTE: The following listing agreements were conformed to address changes to the RLA, where applicable:
- Business Listing Agreement (BLA)
- Commercial and Residential Income Listing Agreement (CLA)
- Residential Listing Agreement Seller Reserved (RLASR)
- Residential Listing Agreement – Open (RLAN)
- Vacant Land Listing Agreement (VLL)
NOTE: Regarding the VLL – In addition to conforming to other listing agreements, in an attempt to minimize fraudulent transactions ¶12B was added to give broker the right to cancel listing, if seller cannot provide proof of identity to assure ownership.
ABCD Anticipated Broker Compensation Disclosure 12/22 version
Section 1 of the revised form is a disclosure and the only section that requires a signature. Expanded grid allows agents who use the form to identify more properties than were on the previous version. With no compensation fields in the MLS, the ABCD might be used more often.
BRBC Buyer Representation and Broker Compensation Agreement 12/22 version
Property to be acquired: Defaults to single family home, condo or mobile with options for multi-family and other types (2B (1)). Price range removed. Options for city or county remain (2B (2)). Buyer preferences can be specified in paragraph 2C by attaching Buyer Identification of Preferences and Priorities (BIPP). Third party payments: Broker not allowed to receive any overage unless BRBC amended at later time (2D (2)). Financial/Personal Info.: Can identify if buyer lacks funds to pay or is not allowed to pay broker (2F) and explanation in referenced paragraph 9B of consequences. Warning about signing multiple agreements: Buyer advised of risk of signing different representation agreements with different brokers (7). Confirmation of Compensation: Reassert compensation obligation on same page as buyer signature so only last page of BRBC is needed to provide to seller as proof in case buyer asks seller to pay buyer’s broker in purchase agreement (15).
CBC Cooperating Broker Compensation Agreement 6/21 version
All reference to MLS offers of compensation and membership with a MLS have been removed. The form should be used to document an agreement between a listing broker and buyer’s broker to avoid confusion about who agreed to pay how much to whom.
SPBB Seller Payment to Buyer’s Broker 6/23 version
The revised form is simplified. ¶1A identifies the amount buyer is asking seller to pay. ¶1B limits the amount if seller’s broker makes a payment to buyer’s broker. ¶1B also makes explicit that if there is no buyer representation agreement, seller has no payment obligation. ¶3 allows buyer’s broker, not just escrow, to reveal compensation to seller. The last page of the revised BRBC can be used to satisfy the obligation. ¶4 makes buyer’s broker a third-party beneficiary of the seller’s agreement to pay buyer’s broker which should give broker a right to pursue the seller if payment is not made. ¶5 gives seller the full credit that would be paid to a separate brokerage firm even if seller’s broker offers a compensation discount to a dual agent broker.
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- OTHER NEW AND REVISED SALES FORMS
- NEW FORM
WBSA Wooden Balcony, Stairs and Other Elevated Elements Addendum
New form to address law beginning January 1, 2025 requiring structures with 3 or more units to have inspections and repairs of wooden balconies, stairs, decks if above ground-level. Seller is obligated to deliver a copy of the inspection report to buyer with other seller documents.
- SIGNIFICANT REVISION TO FORMS
RPA Residential Purchase Agreement
¶3L(4) and 8D added Insurance as a separate contingency. ¶Q(2) renamed “Optional Wildfire Disclosure Report” to be provided by named source. ¶7B(iii) added that seller not responsible for holes from pictures, etc. ¶11N for qualifying properties, seller must deliver to buyer form WBSA re balconies, etc. ¶14B(3) buyer reminded not to remove review of documents until after documents are delivered. ¶19D Escrow Holder at COE must provide seller and buyer with amount of compensation to both parties.
AVID Agent Visual Inspection Disclosure
Inspection date and time, weather conditions, and other persons present at the inspection has been moved from top of page 1 to real estate broker signature block. Language added to the second broker signature section to make clear that the last signature on the page is for agent who did not complete the form but did receive it. Adds space for another bedroom and bathroom.
NCOA Non-Contingent Offer Advisory
Added language to ¶2A making explicit that even if lender is at fault, buyer does not have a contractual right to cancel if there is no loan contingency and the loan does not fund. Added ¶2D to advise about making an offer without an insurance contingency.
SIP Seller License to Remain in Possession Addendum
¶3A placing responsibility for maintenance on seller modified to excuse seller if problem caused by latent defect or outside control of seller. Buyer, as new owner, should have insurance to protect itself from such losses.
SPQ Seller Property Questionnaire
Added question 6K to address new law that requires inspection and repairs on balconies, stairways and other elevated wood structures on buildings with 3 or more units. ¶¶7E added language to ask if lead-based paint renovation conducted in accordance with EPA rules. ¶7F added to address law requiring “flipper” owners to disclose list of improvements made by contractors and the name of such contractors. ¶8B added to address solar power systems. ¶8E added to clarify if dwelling units have separate meters and if they are permitted as ADUs. ¶18 D and E added to have seller identify if property is currently tenant occupied or previously tenant occupied, and if the latter, how did unit become vacant. Material facts general question was given its own numbered paragraph.
SPRP Seller’s Purchase of Replacement Property
The form was previously modified to identify reasons buyer or seller may cancel. ¶6C was added to make explicit that if seller cancels, buyer is entitled to return of the deposit, and if the box checked, buyer also entitled to out-of-pocket expenses which can be limited. SPRP language consistent with new language added to CC.
TDS Real Estate Transfer Disclosure Statement
A note was added below question II C(5) addressing room additions reminding seller to use SPQ if property acquired in last 18-months and renovations made.
WOO Withdrawal of Offer
Form modified to apply to offers and counter offers, but also Requests for Repairs or Amendments to Existing Agreements. ¶3 added to indicate if a withdrawn offer is being replaced with a multiple counter offer, a new counter offer or a new offer. Previously, only replacement option was with a multiple counter offer.
- MINOR REVISIONS TO FORMS
AOAA Assignment of Agreement Addendum
Paragraph 3 defaults to buyer not receiving any compensation for an assignment.
BHIA Buyer Homeowners’ Insurance Advisory
Language added to ¶2 to remind buyers that insurance difficulties affect HOAs, as well.
BHAA Business Purchase Agreement and Joint Escrow Instructions
Language was added to ¶4 to discuss the applicability of the wood balcony and stairs inspection law to condominium buildings. Language was added to paragraph 6 to advise the parties that insurance difficulties affect homeowner associations.
CA Compensation Agreement
Title changed from Commission Agreement. Subtitle added: should only be used only when there is no other signed listing, buyer representation or single party agreement. MLS and Images language added to be consistent with other listings. Signature block allow entity signers.
CC Cancellation of Contract, Disposition of Deposit and Cancellation of Escrow 6/23 version
On page two, in the cancellation of escrow section, optional language added to the paragraph where seller agrees to release the full deposit to buyer to also obligate the seller to pay for buyer out-of-pocket costs.
COBR Cancellation of Buyer Representation
An optional box was added to ¶2 to allow both buyer and broker to mutually agree to cancel.
COP Contingency for the Sale of Buyer’s Property
Language added to ¶1C, contingency for the close of escrow of buyer’s property, to allow the buyer to indicate when the other property is supposed to close escrow pursuant to that contract.
CR-B Buyer Contingency Removal
New language added to 2D and 3 to address stand-alone insurance contingency in revised RPA.
DCE Demand to Close Escrow
Note to seller modified to clarify that if seller does not close buyer may cancel and then sue.
DEDA Designated Electronic Delivery Address
This form was changed to reflect that purchase agreement automatically allows for electronic delivery to the address specified in the RPA. A different or alternate electronic delivery address may be added by using this form. If the person signing does not want electronic delivery to be effective when sent, optional ¶4 can be checked.
IOA Interim Occupancy Agreement
Conformed to lease agreement (RLMM) by changing landlord to housing provider and adopting one-month maximum security deposit rule per California law.
MCA Market Condition Advisory
New language was added to make the form consistent with the RPA’s insurance contingency.
MH-PA Manufactured or Mobile Home Purchase Addendum
New ¶11C was added to advise buyers to get an inspection to make sure the home meets the minimum standards, even if sold as-is.
NBP Notice to Buyer to Perform
Paragraph added for seller to ask buyer to remove inspection contingency.
PA-PA Probate Agreement Purchase Addendum
Language added to ¶1C to write in other type of probate proceeding. Language added to ¶4 to give buyer a right to return of deposit if bid is not confirmed for a reason other than buyer fault.
PLA Probate Listing Addendum
Language added to ¶1 to write in other type of probate proceeding.
RLAS Residential Lease After Sale
Language added to security deposit paragraph, number 5A, to default to one month security deposit. Reference added to new form Security Deposit Exemptions Disclosure and Addendum (C.A.R. Form SDDA) which can be used to document if owner exempt from one month security deposit law or tenant is service member thus making one-month law apply even if owner exempt.
SELI Seller Instruction to Exclude Listing from the Internet
¶2 instructs that submission to MLS must be made within 1 day of any public marketing.
SBSA Statewide Buyer and Seller Advisory
Language added to ¶B 12 on page 8 to notify buyers that a previously tenant-occupied property may pose problems for subsequent owner if tenancy not terminated properly. ¶F10 added to disclose the need to have exterior wood balconies and stairs inspected for building with 3 or more units, including condominium buildings.
SOLAR Solar Advisory and Questionnaire
New ¶6A(9) added to ask if seller is aware of any transfer fees exist. ¶6A(10) added to ask if there is a maintenance agreement for the system. ¶6B(1)(B) added to ask about monthly payments on financing.
SP Single Party Compensation Agreement
Agency ¶(2) and images ¶(3) added to conform single party to listing agreements.
SWPI Septic Inspection, Well Inspections, Property Monument, and Propane Tank Allocation of Costs Addendum
Propane paragraph modified to default to position that propane remaining in tank given to buyer, with an option for measurement to be taken and buyer to reimburse seller.
TOPA Tenant Occupied Property Addendum
Added language to ¶1B which, if checked, would limit buyer’s recovery of out-of-pocket expenses to a maximum amount if seller cannot deliver the property vacant as agreed.
VP Verification of Property Condition
Language modified to add a date and time on which verification made, and to allow for recognition that someone other than the buyer conducted the verification.
WCMD Water-Conserving Plumbing Fixtures and Carbon Monoxide Detector Advisory
¶1C to reminds buyer to investigate the cost to bring any noncompliant fixture into compliance.
VARIOUS PURCHASE AGREEMENTS – Minor changes have been made to:
- ABSPA Already Built Subdivision Purchase Agreement
- CCSPA Condominium Conversion Subdivision Purchase Agreement
- NCPA New Construction Purchase Agreement
- NODPA Notice of Default Purchase Agreement
- VLPA Vacant Land Purchase Agreement
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- NEW AND REVISED LEASE DOCUMENTS
SDDA Security Deposit Exemptions, Disclosure and Addendum NEW
New form created to document if owner exempt from one-month security deposit law or tenant is service member thus making one-month law apply even if owner exempt.
PMA Property Management Agreement
¶3I(2) added determine if property managed is exempt from one month security deposit limitation. Default is that rental property owner is exempt from limitation. Paragraph 15B added to include an option to attach Rental Property Owner Questionnaire.
RLMM Residential Lease or Month-to-Month Rental Agreement
Security deposit ¶4, modified to explain that maximum security deposit is the equivalent to one month’s rent unless an exemption applies and new form Security Deposit Exemptions Disclosure and Addendum (Form SDDA) is added which can be used to document if owner is exempt from one-month security deposit law or tenant is service member thus making one-month law apply even if owner exempt.
STRA Short-Term Rental Agreement
To be consistent with California law, ¶8A added to instruct that an occupant can cancel a short-term rental within 24 hours and have a deposit refunded, unless cancellation is within 72 hours of the commencement of the rental.
STRA-SA Seasonal Addendum to Short-Term Rental Agreement
Deposit paragraph modified to limit security to one-month’s rent unless an exemption applies, which should be documented by form SDDA
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