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A consumer watchdog group sent notices to real estate brokerage groups on Tuesday and said it is contacting state and federal regulators about rules and documents it says favor brokers and disadvantage buyers.
The report comes as state and local groups across the country are updating forms governing the real estate industry following landmark lawsuits in recent months. These include a Buyer Representation Agreement, which will soon need to be signed before an agent can tour a home with a buyer.
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The Consumer Federation of America, a watchdog group that has long advocated for real estate industry reform, said many of the draft updates to the forms are “anti-consumer.”
The Court of Final Appeal issued a statement on Tuesday saying it was in contact with the Justice Department and the unspecified attorney general’s office over what it called the new anti-consumer form.
“The Consumer Federation of America (CFA) has been evaluating industry buyer contracts over the past several months,” the CFA said in a statement on Tuesday. “It is understood that many contracts are anti-consumer but a contract has been found that is understandable and fairer to everyday buyers.”
Tanya Monestiel | University at Buffalo
The CFA commissioned a report dated June 9 from University at Buffalo contract law professor Tanya Monestier and shared it publicly on Tuesday. In the report, Monestier analyzed a draft buyer representation agreement released on May 9 by the California Association of Realtors.
The draft appeared to “obscure the buyer’s obligation to pay its agent,” Monestiel wrote.
“It was almost unreadable,” Monestiel wrote. “A layperson cannot understand and appreciate the terms to which they actually agreed.”
The Buyer Representation Agreement is one of the key contracts that will soon be at the center of real estate transactions for the first time in much of the United States.
According to the terms of the settlement agreement National Association of Realtorsagents must sign a Buyer Representation Agreement before visiting a home later this summer. The form will specify how much the buyer’s agent will be compensated.
Seller compensation offers will also be removed from multiple listing services, driving agent compensation in the Buyer Representation Agreement Center moving forward.
car response
CAR hit back at criticism from the CFA, saying the report was based on an outdated version of its buyer representation agreement, calling the criticism “misleading” and “ridiculous”.
The group said the latest version of the form, which it declined to share with Inman, addressed “many of the issues” identified in the CFA report.
“For example, the CFA article stated that the form was inconsistent with NAR’s settlement agreement. This is false,” CAR General Counsel Brian Manson told Inman in a statement. “The reviewed draft and the most recent draft forms are consistent with the NAR Settlement Agreement and all practice changes required by California law.”
“A diligent buyer’s agent is entitled to compensation from their client based on the terms of the agreement,” Manson continued.
CFA disputed Manson’s statement and said CAR may make changes to its proposed buyer representation agreement in response to reports from Monestier and CFA.
“While CAR clearly does not like her views, that does not mean they are not worthy of consideration,” CFA told Inman.
The CFA report is just the latest form of scrutiny of the nation’s second-largest state real estate brokerage organization
Inman reported Friday Central African Republic has delayed the release of nearly two dozen updated documents after receiving inquiries from the Justice Department, which has been keeping a close eye on the industry amid ongoing litigation and calls for reform.
It was unclear at the time whether the updated Buyer Representation Agreement was among the late-filed forms. On Tuesday, after Inman requested an update to the buyer’s representation agreement, which Manson said addressed much of the CFA’s criticism, a CAR spokesman said, “Because release of the form has been delayed, we are unable to provide a copy.”
Pay attention to the Buyer Representation Agreement
James Dwiggins
NextHome CEO James Dwiggins told Inman these agreements are one of the major issues in the real estate industry right now. Of interest are buyer representation agreements that are unfair to buyers and favor agents.
“This is a big problem that’s going to happen, especially in states that haven’t done this yet or have state regulations that require it,” Dwiggins said.
About 16 states already mandate that brokerage firms enter into buyer representation agreements when agents work with clients. This means that more than half of the country’s districts have tables in place for the first time.
In its report, the CFA noted a new version of the Buyer Representation Agreement, which eXp’s attorneys told Inman they began using this month.
“The contrast between CAR and eXp contracts couldn’t be starker,” said CFA senior fellow Stephen Brobeck. “The eXp contract is made with the buyer in mind. The CAR contract is made with the interests of the real estate agent in mind.
Holly Mabery, vice president of brokerage at eXp, echoed the praise in the CFA report, saying the company developed the Buyer Representation Agreement in an effort to increase clarity and transparency.
“These forms are part of our ongoing effort to simplify the real estate process for consumers and agents,” Marbury said. “We believe in providing clear expectations and simple agreements to empower our clients.”
Mabery said eXp will release a standardized listing agreement next month, although she did not clarify what changes would be included in the update.
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