Key Details:
- Today, the Consumer Federation of America released its “Proposed Criteria for Evaluating Home Buyer Contract Forms.”
- The document includes four criteria for understandable contracts and 11 criteria to ensure fairness to homebuyers.
The Consumer Federation of America (CFA) has been all over real estate media headlines lately—namely, for its critical reports of C.A.R’s proposed buyer agreement and seller listing agreement forms ahead of August 17th industry practice changes.
Tanya Monestier, a professor of law at the University at Buffalo Faculty of Law and author of the reports, found C.A.R’s buyer agreement form “virtually unreadable.” Regarding C.A.R’s proposed seller’s agreement, Monestier noted, “No seller will read this monster of a document – much less be able to understand it…”
Upon seeing the reports authored by Monestier, MLSs and brokers contacted the CFA requesting recommendations to improve consumer contract forms.
Today, the consumer watchdog released its “Proposed Criteria for Evaluating Home Buyer Contract Forms,” which includes four criteria for understandable contracts and 11 criteria to ensure fairness to homebuyers.
CFA Criteria for a Readable and Understandable Form
To ensure consumers can fully understand the forms they will be required to sign in order to tour houses with an agent, the CFA recommends the following:
- Length: “The contract should be written solely for home purchasers (excluding renters). It should not include marginal provisions designed solely to protect the interests of the broker. And the agency agreement should be in a separate document.”
- Type size: “Most courts recommend 12-point. Any size smaller will be difficult for some people to read.”
- Organization: “The most important information, including compensation arrangements, should be at the beginning of the document and clearly labeled.”
- Plain Language: “The contract should be written so that it can be understood by home buyers. It should not contain words and language that can be understood only by lawyers.”
CFA Criteria to Ensure Fairness to Home Buyers
In addition to creating a form that is easy to understand, the CFA recommends including the following to ensure the contract is fair to home buyers:
- Length of Contract
- Termination of Contract
- Compensation, Disclosure
- Compensation, Commission
- Compensation, Fees
- Compensation, When Owed
- Compensation, Continuing Obligation
- Seller Concessions
- Dual Agency
- Conflict of Interest
- Buyer Remedies
For the complete set of CFA recommendations, read the consumer watchdog’s “Proposed Criteria for Evaluating Home Buyer Contract Forms.”
