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The first is the buyer’s agreement. Now, consumer watchdog group the Consumer Federation of America is taking a look at home sellers’ listing agreements.
A new listing agreement drafted by the California Association of Realtors following a settlement of a NAC lawsuit is “confusing,” “substantially unfair” to sellers and threatens to undermine the intent of the settlement, according to a report commissioned by the watchdog group and was released on Tuesday.
After the National Association of Realtors reached a proposed settlement, the Court of Final Appeal issued a second report examining the transaction form drafted by CAR. The main change in the agreement is that listing brokers will no longer be able to submit multiple listings to buyer’s brokers. Provide pre-emptive compensation services.
The first report looked at CAR’s new buyer agreement, while the second examined the trading group’s new seller listing agreement, which the CFA noted was seven pages long, single-spaced in size 11 font, and included Nearly 7,000 words, at least 75 single characters.
Tanya Monestiel | University at Buffalo
“No seller will read this massive document, let alone be able to understand it,” wrote Tanya Monestier, a University at Buffalo contract law professor who authored the first report. “The author, a tenured law professor who has taught contract law for fifteen years, had difficulty reading this document.”
“There is no reason why residential listing agreements have to be so complicated and confusing,” Monestiel added. “The best course of action is for the California Association of Realtors to completely abandon this listing agreement and start from scratch.”
CAR general counsel Brian Manson told Inman in a statement that the CFA report was based on “an early draft of the agreement, which is still a work in progress, and a significant amount of time has been spent reviewing the grammar of the earlier draft , format and design”. form. “
“Claims that the agreement is overwhelming and unlikely to be read or understood by the average seller underestimates the power and responsibility of sellers and their real estate agents,” Manson added.
“The complexity of the agreement reflects the complexity of California real estate transactions. The agreement is designed to cover a variety of scenarios and provide clear guidelines that ultimately benefit the seller by ensuring all potential issues are addressed upfront.
“Sellers cannot navigate these complex issues alone; their real estate professional will guide them through each provision and ensure they fully understand it before agreeing to it.
CAR disputes the report’s assertion that the form contains too much information about what sellers can expect when marketing their homes.
“Instead, we believe information about the MLS and the offer process can help educate sellers and make the form more consumer-friendly,” Manson said.
In June, CAR delayed the release of the new form due to a U.S. Department of Justice investigation. In a statement on Tuesday, the Court of Final Appeal outlined its role in facilitating the investigation. The nonprofit said it wrote a letter to the Justice Department in April criticizing CAR’s new seller agreement that “appears to allow for the inclusion of provisions in nearly all current listing contracts requiring broker commission sharing,” which “would appear to allow real estate It’s easier for brokers to continue with problem-solving practices.” commission”.
The nonprofit recommended that “these contracts should be amended to remove all references to broker commission sharing,” and in May urged the Justice Department to issue a civil investigative request, a type of administrative subpoena, to CAR to obtain information about the forms. On June 10, the CFA sent a copy of the Monestier form report to the Department of Justice, which the regulator has now publicly released.
The report doesn’t mince words, calling the franchise area a “blatant attempt to circumvent the terms of the NAR settlement, which prohibits compensation from being provided to MLS.”
“Interestingly, the franchise area specifies percentage Purchase price as first choice,” the report said. “It’s not surprising to see the numbers ‘2.5 percent’ or ‘3 percent’ pop up frequently in this space.”
The report adds: “When a California MLS recently announced this new commission area, brokers on online forums admitted it was a ‘new commission area’ and appeared to be a ‘loophole’ that would subject NARs to further legal review.
The report also said some terms of the listing agreement were “substantially unfair” to sellers.
“For example, the listing agreement authorizes the selling agent to attempt to contract with an unrepresented buyer who attends an open house or other property showing,” the report states.
“In other words, the purpose of the listing agreement is to preauthorize the real estate agent’s potential conflicts of interest. Plan creation. The NAR Settlement Agreement facilitated these form changes, but it did not foresee selling brokers using the ‘requirements’ of the Buyer Representation Agreement to their own advantage in order to acquire clients.
The report also outlines “other problematic features” in the contract: “It directs the seller to offer compensation to the buyer’s agent, and it specifically asks if the seller is willing to consider designating a percentage of the list price as a ‘concession’ (thus making the ‘concession’ New Realtor Compensation Field), it does not explicitly list compensation options, it has a field that offers additional compensation to the agent if the buyer is not represented, and it includes the commission “may be negotiable” instead of “is completely Negotiable.
Manson said the CFA report “contains some wild speculation that brokers using CAR forms will try to circumvent NAR settlement agreements. CAR supports the goals of the settlement and is committed to helping members have clear conversations with sellers about compensation options.” .
“For decades, CAR forms have been the best in the industry for a variety of reasons, from transparency to compliance,” Manson added. “CAR will continue to work hard to create new formats that continue this tradition.”
The CFA noted that while CAR has delayed the issuance of a new seller’s contract, the form is representative of the type of document being developed by other real estate agents associations, and said the CFA and Monestier will continue to review any new such agreements issued by real estate trade groups.
Stephen Brobeck
“For some industry groups, the new listing agreement is intended to limit changes to litigation settlement offers,” CFA senior fellow Stephen Brobeck said in a statement.
“These agreements also represent the industry’s ongoing efforts to prevent the Department of Justice from establishing a more price-competitive market.”
The CFA offers the following advice to homebuyers:
- “Ask for seller consent during the first communication with the listing agent.
- Make sure you spend enough time understanding the agreement, perhaps with the help of an attorney, and then discuss the contract with the agent, especially how the agent will be paid.
- Try to negotiate a reduction in the listing agent’s commission from the current typical 2.5-3.0%.
- Resist the listing agent’s suggestion to offer specific compensation to the buyer’s agent, but consider showing the buyer that you will consider helping them cover this cost in exchange for a higher list price.
- If you do agree to compensate the buyer’s agent, make sure any excess is returned to you and not the listing agent.
- If the contract is not satisfactory, refuse to sign it. Talk to other agents or consider selling the property yourself with the help of an attorney you retain.
reading report:
Editor’s note: This article has been updated with comments from CAR and the final version of the CFA report.
Send an email to Andrea V. Brambila.
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