Professor Details Ways Contracts Allow Buyer Agents to Collect More Compensation
In a new report, University of Buffalo contracts law professor Tanya Monestier details ways in which contracts allow buyer agents to collect more compensation than agreed-to with the buyer.
New Transaction Forms Created Post NAR Settlement Incomprehensible to Average Homebuyers
New transaction forms created after the National Association of Realtors’ proposed settlement of multiple antitrust lawsuits are largely incomprehensible to the average homebuyer or seller and contain language that seeks to avoid terms of the settlement, according to a new study released Monday.
Study by Tanya Monestier Highlights Concerns with Buyer Representation Agreements Post NAR Settlement
The study, “Report on Buyer Representation Agreements Post NAR Settlement: Terms Buyers Should Be Aware Of,” authored by University of Buffalo contracts law professor Tanya Monestier, raises concerns about the complexity and potential circumvention of the NAR settlement in new transaction forms.
Revisions to Forms Following NAR Deal Lead to Controversy and Confusion
Under the NAR deal, listing brokers must adapt to new rules regarding compensation to buyer brokers and the necessity of written agreements with buyers before property tours, leading to controversial changes in transaction forms and potential harm to consumers according to the report.
Concerns About Buyer Contracts Allowing Agents to Collect Excessive Compensation
The report highlights issues with buyer contracts that may allow agents to collect more compensation than agreed-to with the buyer, potentially violating the NAR settlement and placing financial interests above client needs.
Analysis of Realtor Association Forms Reveals Issues with Complexity and Understandability
An analysis of forms from various Realtor associations identified patterns and problems, with many forms being overly complex and difficult for average consumers to understand, raising concerns about transparency and consumer protection.
Buyers Beware: Hidden Contract Terms Could Cost You Thousands
According to a recent report, many buyers are unaware of the potential financial consequences hidden in the fine print of purchase and sale contracts. These hidden terms could result in buyers not only forfeiting their earnest money deposit but also being on the hook for tens of thousands of dollars to their agent.
Provisions Allowing Agents to Collect Additional Compensation
Some contracts contain clauses that allow agents to modify agreements to receive more compensation than originally agreed upon with the buyer. This could lead to agents collecting bonuses from sellers, which is not only prohibited under the NAR settlement agreement but also raises concerns about steering clients towards bonus-eligible properties.
Extra Fees for Unrepresented Sellers
Buyer contracts may also include terms that charge buyers extra fees if the seller is unrepresented, such as in a For-Sale-By-Owner situation. These provisions could be misleading and may discourage buyers from purchasing properties from sellers without listing agents.
Compensation Confusion for Buyers
Some contracts have clauses that allow buyer agents to retain compensation from the seller without crediting it towards the amount owed by the buyer. This could result in buyers paying double compensation to their agent and allowing the agent to collect additional cooperating compensation as well.
Unclear Holdover Provisions
Buyers might not fully understand their obligations to pay their former agent due to confusing holdover terms in contracts. These provisions could lead to buyers unknowingly committing to paying agents for extended periods, even if the agent had no involvement in the transaction.
Compensation Range and Confusing Payment Terms
Some contracts create a range of compensation that goes beyond the agreed-upon fee, violating the NAR settlement agreement. Other provisions allow buyer agents to be paid whatever the listing agent offers, leading to confusion and potential payment disputes.
Scare Tactics and Other Problematic Provisions
Contracts may include clauses that use scare tactics to influence buyer actions and prevent buyers from suing in case of disputes. Other potential issues include pre-authorization of dual agency, extra fees like “junk” fees, and extended commitments to agents. Additionally, some contracts lack transparency regarding agent compensation for referrals to third-party service providers.
Overall, the report highlights the need for clearer and fairer contract terms to protect buyers from unexpected financial obligations. Law professor, Monestier, has created guides for buyers and sellers to navigate these complex agreements and understand their rights regarding compensation.
It is crucial for regulators and contract drafters to consider the consumer’s perspective and ensure that contract terms are transparent and easily understood. If these terms would be confusing or concerning to your own family members, then it may be time for a revision of these contracts.