If it were up to the Consumer Federation of America to write the new buyers agents contract, the document would be in clear language stating how much brokers are being paid at the very top.
“Understandable agreements have the ability to empower buyers and transform their relationship to agents,” said Stephen Brubeck, a senior fellow at the Consumer Federation of America in Washington. “CFA has already shown that some revised contracts are very anti-consumer while others are much fairer to buyers.”
A class action settlement agreement made by the National Association of Realtors will go into effect on Aug. 17, which will require homebuyers who wish to work with a real estate agent to sign an agreement with the agent before seeing a property.
As part of the settlement, buyers agents are no longer guaranteed payment from sellers. Homebuyers will have to pay for their own agents going forward and all brokers’ fees will be fully negotiable.
While the real estate industry is creating new contracts to ensure that buyer agents get paid either by commission or fees, the CFA has evaluated dozens of them and determined that most are written in favor of the broker and some are practically unreadable.
In Pennsylvania, many real estate brokers will use contracts based on a model contract created by the Pennsylvania Association of Realtors.
A spokesperson for the Harrisburg-based trade organization said Pennsylvania brokers have the freedom to create their own contracts. The organization publishes a library of standard real estate forms that members can choose to use.
The CFA has described Pennsylvania’s buyers agent model contract as “not the worst, but still not great,” pointing out that in Pennsylvania’s contract, homebuyers have no ability to sue a real estate agent and buyers are unable to get out of agreements if they want to.
To help guide buyers, the CFA has proposed 15 criteria for consumers to use when evaluating buyers’ agent contracts, which include buyers having the same right as brokers have to terminate the contract at any time.
Other criteria include:
• The broker’s fee being clearly stated at the top of the contract as a dollar figure or hourly rate.
• Buyers agents should not have a financial incentive to be paid more the higher the sales price.
• Any additional fees should always be deducted from the commission paid in a sale.
• Any seller concessions, including a willingness to help pay buyer agent compensation, should be approved by and paid to buyers not brokers, then used by buyers as they see fit.
• There should be no limitation on buyer remedies. Buyer contracts should not include mandatory mediation or arbitration clauses.
“These contracts will reveal how buyers agents are compensated and how buyers can negotiate this compensation,” Mr. Brobeck said.
Tim Grant: tgrant@post-gazette.com or 412-779-5834
First Published: July 17, 2024, 2:17 p.m.
Updated: July 17, 2024, 7:52 p.m.
