BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
On April 1, 2024, Broker Risk Management (“BRM”) held a webinar to discuss updates regarding the NAR settlement and take a “deep dive” into CAR’s buyer representation agreement. The following are questions and answers from the webinar which BRM was not able to answer during it:
QUESTION: Does the settlement include all brokerages?
ANSWER: No. The settlement covers NAR and all brokerages with sales revenues of less than $2,000,000,000 per year.
QUESTION: I thought sellers cannot pay commissions directly to a buyer’s agent. I thought commissions were paid to the buyer and the buyer has the option to pay the agent.
ANSWER: Your assumption is incorrect. Once the NAR settlement is finalized, sellers can pay buyer’s agents pursuant to a commission agreement. (CAR form Single Party Compensation Agreement – form SC – can be used for this purpose.) Commissions should be paid through escrow and should be set forth on the settlement statements.
QUESTION: What happens with listings signed prior to the effective date of the settlement agreement? Do they have to be rewritten?
ANSWER: Listing agreements signed prior to the effective date will need to be amended. CAR is currently working on an addendum for its June 2024 forms release.
QUESTION: Can the seller refuse to pay a buyer’s agent unless the buyer offers a sales price above the listing price?
ANSWER: Yes. A seller can decline to pay a buyer’s agent unless the buyer’s offer or subsequent negotiations meet the seller’s demands. However, all buyer payments must be the subject of a written agreement with the buyer.
QUESTION: Is the commission being paid to the buyer’s agent an actual dollar amount or a percentage of the sales price?
ANSWER: It can be either, but the seller must give prior written approval before it is offered or paid to the buyer’s agent.
QUESTION: How will the requirement prior to “touring” be governed?
ANSWER: It will be a requirement of the Multiple Listing Service. It will be governed in a similar manner to all other requirements of the MLS. If an agent breaches that provision, a complaint can be made before the local Association or MLS board and the agent could face sanctions or potentially, suspension of the agent’s membership in the MLS.
QUESTION: If you are a Realtor, are you required to have a written agreement before touring a home?
ANSWER: You must have a signed buyer representation agreement before touring a home with a buyer. If you are touring a home by yourself or on a broker’s tour without a particular buyer, you do not need a buyer representation agreement.
QUESTION: Does the settlement affect commercial properties?
ANSWER: It appears to apply to residential properties, but CAR is working on getting a definitive answer from NAR.
QUESTION: If I am a listing agent and hold a home open, how do I manage buyers visiting to see the property? I will not have a buyer representation agreement with these prospective buyers, but they will be touring the property. How do I handle this situation?
ANSWER: This is a struggle the parties are having with the settlement agreement. CAR is currently working on a short form buyer representation agreement for listing agents to use at open homes. That form is scheduled to be released with the June CAR forms release unless that issue is resolved by NAR in the meantime. If CAR does not release the form, BRM will issue a form for its clients to use.
QUESTION: I am a listing agent. At open houses, what questions should I ask of a buyer?
ANSWER: Ask the buyer if they are represented by another agent. If the answer is yes, ask the buyer if they have a written buyer representation agreement or agreements. If so, request a copy. If you have any questions as to whether you can proceed to work with that particular buyer, discuss it with your manager or broker.
QUESTION: Can buyers’ agents charge their buyers a flat fee?
ANSWER: Yes, they may.
QUESTION: I understand under the new settlement that listing agents may not post the commission being offered to a buyer’s agent on the MLS. However, can the listing agent communicate that proposed commission through other media, marketing and advertising platforms.
ANSWER: Listing agents may post the proposed commission in other advertising such as websites, marketing flyers, or other media marketing. However, listing agents should avoid participating in private or closed groups, such as on social media where compensation to buyer’s agents is posted and shared.
QUESTION: If a buyer’s agent questions a listing agent on the amount of the commission being offered to the buyer’s agent, will there be a form so that the listing agent does not subsequently change it to offer a lower amount?
ANSWER: A seller must agree to the commission being offered to a buyer’s agent in writing, which should prevent this from happening.
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.