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NAR clarifies details on buyer broker agreements

As the July deadline for the implementation of the business practice changes outlined in the National Association of Realtors’ (NAR) commission lawsuit settlement agreement approaches, the trade organization is looking to iron out some details about buyer broker agreements.

Under the terms of the settlement agreement, agents will have to have a written agreement with a client in order to work with them as a buyer’s agent.

NAR recently published an FAQ page related to the settlement agreement where it clarifies that the phrase “working with” is meant to “distinguish MLS participants who provide brokerage services to a buyer from MLS participants who simply market their services or just talk to a buyer.”

Examples of broker-provided services include identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, or presenting offers by the buyer. Conversely, a broker who is ”providing an unrepresented buyer access to a house they have listed” is an example of someone who is not ”working with” a buyer.

Additionally, the FAQ states that an agent is not working with a buyer if they are working only as an agent or subagent of the seller, or if the MLS participant is only performing ministerial acts without the expectation of being paid for these acts.

Under these circumstances, the agent or MLS participant would not need a written agreement with the buyer. But if the agent is representing both the buyer and the seller in the transaction — also known as dual agency — a written buyer broker agreement is needed.

NAR also noted in the FAQ that a written agreement between an agent and a buyer would be necessary prior to that agent taking the buyer on any home tours, unless state law requires that the agreement be signed earlier in the process.

The FAQs noted, however, that if an MLS participant hosts an open house on behalf of their seller and an unrepresented buyer comes to look at the house, the listing agent hosting the open house would not need to have a written agreement with that buyer since the agent is not working with them.

In addition to clarifications on when a buyer representation agreement is necessary, the FAQ also addressed how agreements may define an agent’s agreed-upon compensation. It notes that the compensation must be “objectively ascertainable and not open-ended.”

“For example, the range cannot be ‘buyer broker compensation shall be whatever amount the seller is offering to the buyer,’” the FAQ page states.

NAR also addressed how agents should deal with listings and transactions that may occur right before or after the policy changes are implemented.

According to the FAQ page, buyer agreements entered into before the MLS policy changes are implemented should be amended to remove any provisions that authorizes the buyer broker to keep any offers of compensation exceeding the amount of compensation agreed upon with the buyer.

Additionally, NAR noted that if the sales contract is signed after MLS policies are changed, even if the listing originally offered compensation, the offer will not be valid. In these cases, the parties will have to include the offer of compensation in the sales contract, if the seller is still open to covering the buyer agent’s fees.

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