Assistance from Legal Counsel

Posted by on in | 60 Views

As part of our proactive approach to the settlement, we have engaged the use of a national legal firm to help us and our members navigate the changes we face today and in the future.  One of the resources they have just provided that we have the opportunity to share with our brokerage community is guidance on creating proper buyer agreements if you are considering adding or adopting alternative agreements for your firm moving forward. Perhaps not “new news” for those that have been paying attention, it’s nice to have it in one easy list!

Best Practices for Written Buyer Agreements

Purpose: This document discusses best practices for brokers to satisfy the MLS requirement for a written agreement with a buyer before touring a home. This document does not constitute legal advice and may not address requirements under state and local law. Please seek competent legal counsel to advise you about your specific agreement.

Minimum requirements: The agreement must include:

  • A conspicuous statement that: broker commissions are not set by law and are fully negotiable.
    • You may consider making the statement conspicuous with BOLD ALL CAPS. (This may be required by law.)
  • The compensation you will receive – stated specifically, conspicuously, and in an objectively ascertainable and not open-ended form.
    • For example, it can’t say “We get paid whatever the listing broker offers us.”
  • A statement that you may not receive compensation from any source that exceeds the amount specified in the agreement.
  • An explanation of the type of relationship you have with the buyer. Consult your legal counsel about the legally available options and which you want to offer to buyers.

Best Practices: Agreements with a buyer should address your services and compensation, be easy to understand, and focus on consumer choice and optionality. The following are best practices and are not required for MLS compliance.

  • Describe compensation and the type of representation at the outset of the agreement.
    • Be specific about the services you will provide to the buyer.
    • State law may limit the types of representation/relationships available to you and the buyer.
  • Offer the buyer various options for compensation.
    • For example, in addition to or in lieu of compensation in the form of a percentage of the sale price, consider adding an option for an hourly rate, a flat fee, or some combination.
    • A fill-in-the-blank field provides flexibility for the parties to agree on customized terms.
  • Discuss contractual terms only and not extra stuff.
    • The agreement should focus on the terms most important to the buyer (like compensation and the type of representation).
    • Do not include background information on the MLS or other items in the body of the agreement.
  • Minimize any references to documents outside of the agreement.
    • You may reference exhibits attached to the agreement, but avoid referencing other agreements or forms that are not part of the agreement.
    • For example, you may attach any applicable agency disclosures as exhibits.
  • Use plain language and avoid legalese.
    • For example, instead of saying “Prospective buyer shall pay to Broker in an amount equal to XYZ,” you can say “Buyer will pay Broker XYZ.”
  • Use paragraph headings to guide the buyer.
    • For example, when discussing compensation, use the heading “Compensation”.
  • Use defined terms consistently.
    • For example, if you define the broker as “Broker,” use only the term “Broker” (not “agent,” “broker,” “brokerage firm,” or your firm’s name).

 Additional Resources: