Key Details:
- In a letter to Colorado Association of Realtors CEO Tyrone Adams, Marcia Waters, the director for the real estate division within the Colorado Department of Regulatory Agencies, raised concerns about agents requiring consumers to sign a buyer representation agreement before touring a home.
- Waters’ division has received complaints from consumers saying agents have presented the buyer agreement as an insurance document, requiring them to sign it before a home tour and thereby locking them into an agreement to work with that agent.
This is just one argument for raising the bar of entry for real estate agents. But it’s a compelling one.
Real Estate News brought our attention to a letter from Marcia Waters, the director for the real estate division within the Colorado Department of Regulatory Agencies, to Colorado Association of Realtors CEO Tyrone Adams.
The reason for that letter highlights a particular risk involved in mandating buyer agreement forms without clear guidelines for their contents and use. Per Waters’ letter, her division has received complaints from consumers saying agents have presented the buyer representation agreement as an insurance document, requiring them to sign it before a home tour.
Once they signed the form, these consumers were “ensnared in contracts with brokers” they did not want to work with.
Waters states in her letter, “buyer agreements cannot be required.”
As it is, buyer representation forms, even if required for REALTOR® association members, are NOT required for consumers.
This week’s Real Word covers this topic in full, along with a now-deleted social media post on commission changes at eXp:
A Letter to the Colorado Association of Realtors CEO
In her letter, Waters drives home two points:
- Colorado law does not require a real estate license to tour a property.
- A buyer representation agreement is not required to show a property.
In other words, while the new professional standards going into effect on August 17th require REALTORS® to have a signed buyer representation agreement before they can show a property, buyers are not required to sign a buyer agency agreement (or to work with an agent at all) to tour a property.
Presenting the agreement as an insurance document the buyer must sign before they can tour the home is deceptive and unethical. Which is why Waters made it clear that the agents guilty of tricking consumers into binding representation and compensation agreements with them will “see disciplinary action.”
After all, the whole purpose of these soon-to-be mandatory buyer representation forms is to improve transparency and protect consumers while formalizing the agent-client relationship.
In the letter, Waters highlights a Colorado statute (C.R.S. Section 12-10-301) that clearly spells out when a real estate agent or broker is entitled to a commission fee, which is only when a buyer is “ready, willing and able to complete the purchase of real estate” and the seller has agreed.
Buyers who want a broker representing them as a buyer agent do have to sign a buyer representation form with them. But Colorado law does not require buyers to sign an agreement for broker compensation before touring a property.
And since buyers don’t need a real estate license—or a licensed agent—to tour a home, showing a property is “technically not part of the brokerage duties” in Colorado.
From the letter:
“Requiring a consumer to sign a compensation agreement to view a property doesn’t meet the criteria in the statute for when a broker is entitled to a commission, nor does it align with the performance of their licensed uniform duties.
“The Division has significant concerns about these agreements as they do not appear to align with our mission of consumer protection. Consumers should have the opportunity to evaluate the qualifications of a real estate professional before signing a binding agreement with a broker.”
Waters also reiterates that NAR rules only apply to member agents (Realtors) and Realtor-owned MLSs.
As Waters explained to Real Estate News:
“We have about 52,000 real estate brokers in the state of Colorado and those are not all ‘Realtors.’ This is being couched as our entire brokerage population has to comply with this and that’s not accurate.”
Buyer agreements are not always pro-consumer
If you’ve tuned in for The Real Word recently, you know Byron Lazine and Nicole White have discussed buyer agreements, including the recent draft from the California Association of Realtors (C.A.R.), which was torn apart by industry watchdog CFA.
While NAR has promoted the benefits of buyer representation agreements since the announcement of their settlement in March, consumer watchdogs like the Consumer Federation of America (CFA), have been less than impressed so far.
And while some brokerages and boards are facing intense criticism over forms, many others have yet to even release new agreements.
In our little real estate industry bubble, this is not going to stop being the topic of discussion over the next less-than-30 days. Many brokerages across the country haven’t released a form to their agents. Many local boards haven’t released the form. And we are now less than 30 days away. The lack of leadership is so scary.
The ongoing evolution of real estate forms
In sales trainings with his own agents, Byron Lazine has clarified, more than once, that the person required to use these forms is the Realtor—not the consumer.
But the potential for abuse is still there, which is why some smaller brokerages are making changes to their real estate forms in response to CFA critiques or out of deference to the DOJ.
If you go back to last week’s Real Word…the California counsel of the MLS, Ed Zorn, who’s been in a lot of Inman headlines, is saying, ‘Hey, just acquiesce to DOJ now…Go beyond the NAR settlement’ and saying DOJ is going to get their way and so just do what the DOJ wants you to do without their actually having to make this some type of rule or law.
Stay tuned for more developments as August 17th draws nearer.
