The Industry Has Changed.
We are now seeing the precise effects on the industry following the major National Association of Realtors lawsuit and settlement which I have previously written about. The first major change in the Florida real estate landscape is the creation and implementation of Buyer Agreements, which will soon be required when a buyer hires a Realtor for assistance with purchasing Florida real estate.
The requirement for these written agreements is intended to be a shift towards consumer transparency, an issue that was at the heart of the litigation. These new Buyer Agreements are a direct result of the NAR Settlement, and this blog post unpacks what this new requirement should mean for both realtors and homebuyers.
What is a Written Buyer Agreement?
Effective August 17th, 2024, real estate agents who are “MLS Participants” working with buyers in Florida must have a written agreement in place with the buyer before showing properties. This includes both in-person and live virtual tours. This written agreement is known as a Buyer Agreement and is intended to clarify the terms of the working relationship between the agent and the buyer, ensuring clear expectations for both parties.
What must written Buyer Agreements include?
Pursuant to paragraph 58(vi) of the NAR proposed settlement agreement, written buyer agreements must:
- Specify and conspicuously disclose the amount or rate of any compensation the MLS Participant will receive from any source;
- The amount of compensation must be objectively ascertainable and may not be open-ended (e.g., “buyer broker compensation shall be whatever amount the seller is offering to the buyer”);
- Include a statement that MLS Participants may not receive compensation from any source that exceeds the amount or rate agreed to with the buyer;
- Disclose in conspicuous language that broker commissions are not set by law and are fully negotiable; and
- Any other provisions required by law.
What should written Buyer Agreements include?
In addition to the terms required under the NAR settlement, Buyer Agreements should include the below terms.
- Commission: The traditional fee paid to the realtor, typically a percentage of the final sale price.
- Flat Fee: An alternative compensation structure where the realtor charges a fixed amount upfront, regardless of the final sale price.
- Scope of Services: Details the specific tasks the realtor will perform, such as property searches, negotiations, and market analysis.
- Term: Defines the duration of the agreement, meaning how long the realtor and buyer will be working together.
- Termination Clause: Explains the conditions under which the agreement can be terminated by either the realtor or the buyer.
A New Normal.
Real Talk – These Buyer Agreements are a complete 180° from how everyone has operated for literally decades. With any change, there will always be resistance and negativity.
However, this is the new normal, and so let’s embrace this change by focusing on the positive effects that it will bring. Written Buyer Agreements will be a valuable tool to streamline the realtor-client relationship. By clearly outlining expectations from the outset, these agreements foster trust and transparency, creating a solid foundation for a successful home buying journey. Let’s explore the benefits these agreements offer for both realtors and buyers.
Benefits for Realtors
- Solidifies Working Relationship: A written agreement provides a formal foundation for the collaboration between realtor and buyer.
- Clear Communication of Services: The agreement outlines the specific services the realtor will offer, preventing misunderstandings later.
- Transparent Compensation: The agreement clearly states the realtor’s commission structure, whether it’s a flat fee, a percentage of the sale price, or another agreed-upon arrangement.
Benefits for Buyers
- Transparency in Costs: The agreement ensures clear understanding of how the realtor will be compensated, avoiding confusion about commission structures.
- Defined Scope of Services: Buyers know exactly what kind of support to expect from their realtor throughout the buying process.
- Clarity on Termination: The agreement outlines the process for ending the agreement if necessary, providing peace of mind for both parties.
Moving Forward.
Written buyer agreements are a positive development for both realtors and buyers in Florida. For realtors, they provide a clear framework for working with clients. For buyers, they offer increased transparency and a more informed approach to the home buying journey. By understanding the key terms and expectations outlined in the agreement, both parties can navigate the real estate process with greater confidence.
If you need the assistance of a Florida Bar Board Certified Real Estate Lawyer, don’t hesitate to contact the firm.
Additional reading & resources for Realtors, from the National Association of Realtors.
