First of all, I am not an attorney. And none of the following is any form of legal advice.
BUT using what we laypeople (what the CFA calls anyone without a legal degree), describe as common sense, here are some of my thoughts on the California Association of Realtors Buyer Representation and Broker Compensation Agreement.
We are now officially 45 days away from August 17th, the implementation date of NAR’s practice changes, and so far, we are seeing an epidemic of incompetence from the boards that get their direction from NAR—either by completely missing the opportunity in front of them or by scrambling in silence.
CFA’s Report on the CAR Buyer Representation Agreement
The California Association of Realtors (C.A.R.) released updates to its buyer representation agreement and has been getting rightfully ripped to shreds by almost everyone who has taken the time to review their new buyer agency agreement. This includes a full report and press release from the Consumer Federation of America.
The reason everyone is up in arms about the revised agreement is because it has created a cascade of confusing compensation provisions to the public and to the agents they serve.
Rob Hahn’s recent Notorious ROB Substack, “Copy eXp’s Buyer Agency Agreement,” lays it out beautifully.
The provisions dealing with broker compensation are scattered throughout the Buyer Representation Agreement:
- Section 2. D., D.(1), D.(2), D.(3)
- Sections 4., 4.A., 4.B., 4.B.(1), (2), (3), 4.C., 4.D., 4.E., 4.F., 4.G., 4.H.(1), (2), (3)
- Section 5
- Section 7
- Section 9
- Section 14.A., 14.B., 14.C.
- Section 16
Hahn goes on to say “That’s simply bad drafting. Spreading things out all over the place is trying to obfuscate, not clarify.”
CFA Senior Fellow Stephen Brobeck was quoted in its press release saying “The CAR contract is written with the interests of the Realtor in mind.”
Why the Form Won’t Work for Buyers
That said, I highly doubt a value-driven real estate professional would want to subject buyers to this form. And that is going to become more obvious the closer we get to August 17th.
The CFA press release also highlighted a full evaluation of the CAR contract by Tanya Monestier, a professor of law at the University at Buffalo Faculty of Law, who found the form “virtually unreadable,” and added, “No layperson will be able to understand and appreciate the terms they are agreeing to.”
Referring specifically to the compensation provision in the CAR contract, Monestier said it seems to “disguise the obligation of the buyer to pay his agent” and that it “telegraphs how Realtors plan to circumvent the NAR Settlement.”
Monestier’s detailed critique also highlights “problematic provisions” related to dual agency, dispute resolution, commissions owed, and buyer cancellation (among other issues).
Her recommendation is to “jettison the contract in its entirety” and “truly pursue a buyer-friendly agreement that enables home purchasers to understand their rights and obligations.”
Enter the eXp “Buyer Broker Representation Agreement” and buyer agency toolkit, both of which are examples of how it should be done.
Notorious ROB summed up his recommendation in his title and subtitle: “Copy eXp’s Buyer Agency Agreement” and “Do NOT use the C.A.R. form if you are in California.”
Brobeck didn’t hold back, either:
The contrast between the CAR and eXp contracts could not be sharper. The eXp contract is written with the buyer in mind…
Nicole White and I provide a deeper breakdown on this topic in this week’s episode of The Real Word podcast.
So agents, my simple take is I think CAR’s four-page document of legal jargon and confusing provisions is setting us back 40 years. And whoever wrote it should have their laptop confiscated.
But I care more about what you think…
Do you feel more or less confident that before August 17th your board is going to equip you with the tools to help consumers understand what the hell they are signing? And why—or why not?
Head over to Instagram and let me know in the comments.
