Showing Instructions Should Require Buyer Broker Agency Agreement Today

Nosalek v. MLS PIN, Burnett/Sitzer v. National Association of Realtors (NAR), and Moehrl v. NAR are delivering a "rethink" moment for the real estate industry. Our duties as consultants include researching our client's position in the market, meeting with numerous board of directors and other stakeholders, and making suggestions and developing improvement plans.

The two customer bodies that we represent are brokers and MLSs. Buyer broker agency agreements exist in every real estate market across America. They are part of the forms packet you get with your MLS or association membership; they are either required or optional. The MLS, association of REALTORS® and state regulators have done their job – implementation is up to the broker.

Every broker may require it of their buyer's agents today. I seriously doubt that an agent will leave your brokerage because you require the agreement. The real question revolves around when it's required. Even in states where it is required, common practice is to have the buyer agency agreement signed at closing. Yikes. Brokers, require your agents to have a buyer broker agreement signed the moment that they establish a procuring cause with the client.

Showing Effectiveness for Brokers

I was recently at a dinner with a number of brokers and top agents during a state REALTOR association meeting. I proclaimed that I would never allow a lockbox, and I would require the listing agent to be present at every showing when they list my house. You would think that I dropped a bomb in the room. I was shocked to learn that my requirement was over the line, and an excessive ask. My retort, "Then don't take the listing." It's called a "showing" for a reason. From my perspective, the buyer's agent knows very little about my house, and the listing agent should be present to field any questions the buyer's agent might have.

I have a new demand for my listing agent: Do not show the house to a buyer's agent who does not have a buyer broker agreement with the client.

As far as I am concerned, the buyer is unrepresented if they show up without an agreement in place with their agent (I know this is not the way it works, but this is a suggestion for positive change). I am not a big fan of MLSs dropping the requirement to offer compensation to a buyer's agent in the MLS. As a seller, I would have a discussion with my listing agent that the buyer's broker compensation should be offered, but we should have a conversation about the buyer's broker compensation. Is it a percentage? Is it hourly? Is it flat? Is it based on a list-to-sell price ratio? What happens to compensation when the list price is discounted? Is the buyer a cash buyer? What are the contingencies?

Today, the MLS already accommodates the request that the buyer's broker have an agency agreement in place before scheduling a showing. Listing agents can require it in the showing instructions. It's simple.

Make the offer of compensation a blank optional field in the MLS

Real estate is going to change as a result of these cases. If your MLS does not have the "offer of compensation" field as optional, I believe that you need to discuss it at your next MLS board meeting.

Quietly Quit Clear Cooperation Policy

We believe that these cases make it self-evident that the Clear Cooperation Policy was a mistake. It triggered the litigation. I believe that MLSs have an opportunity to "soft quit" the CCP. Drop it from your rules and don't tell anyone. Even without CCP, there is a participation agreement that already states that all listings must be submitted to the MLS. It is a basis of unilateral cooperation. MLSs are the marketplace for trading real estate. It's a bad decision to withhold a listing from the MLS without some mitigating circumstances. MLSs will win with participants and subscribers by delivering a valuable service, not by overreaching regulatory practices. MLSs need to drop the enforcement agency attitude and adopt a high-touch service attitude.

To view the original article, visit the WAV Group blog.