What You Need to Know About the New NAR Written Buyer Agreements: the New Real Estate Rules in 2024

The real estate industry is undergoing significant changes, and both realtors and homebuyers need to stay informed to navigate these new waters effectively. Starting on August 17, 2024, the way real estate transactions are conducted will shift, with written buyer agreements becoming mandatory before touring a property. Whether you’re a realtor looking to comply with the latest regulations or a homebuyer aiming to make informed decisions, understanding these new requirements is crucial.

Written buyer agreements are designed to enhance transparency, clearly outline services, and define compensation, ensuring that both parties are fully aware of their roles and obligations in the transaction. In this comprehensive guide, we’ll explore what these changes mean for you, how to prepare, and why they are essential for a smoother, more transparent home-buying process.

What Is a Written Buyer Agreement in Real Estate?

A written buyer agreement is a formal contract between a homebuyer and a real estate agent that outlines the services the agent will provide and the compensation they will receive. This agreement is pivotal in fostering clear communication and mutual understanding between the buyer and the agent. Beginning August 17, 2024, the National Association of Realtors (NAR) mandates that all MLS (Multiple Listing Service) Participants must have a written agreement in place with their buyers before any property tours, whether in-person or virtual, can occur.

For realtors, this new requirement emphasizes the need for clear documentation and adherence to legal standards. For buyers, it means having a clear understanding of what to expect from their agent, ensuring that there are no hidden surprises during the home-buying journey.

Why Are Written Buyer Agreements Important?

Written buyer agreements serve as a critical tool for both consumers and real estate professionals. For buyers, these agreements provide a transparent view of the services they will receive and the associated costs. This clarity helps prevent misunderstandings and ensures that buyers are fully aware of their financial commitments. For realtors, written agreements safeguard their interests by formalizing the relationship with the buyer, outlining their responsibilities, and detailing how they will be compensated.

The transparency provided by written buyer agreements is especially important in the real estate industry, where large financial transactions and legal obligations are involved. Realtors benefit from a clear framework that protects them from potential disputes, while buyers gain confidence knowing exactly what they are signing up for.

What Are the Mandatory Provisions in the New NAR Written Buyer Agreements?

Under the new NAR settlement agreement, written buyer agreements must include specific provisions designed to protect both buyers and real estate professionals. These provisions are essential for ensuring that all parties are on the same page and that the transaction proceeds smoothly. Here’s what the agreement must include:

1. Compensation Disclosure: The agreement must clearly state the amount or rate of compensation the MLS Participant will receive from any source. This amount must be objectively ascertainable and cannot be open-ended, ensuring that buyers know exactly what they are paying for.

2. Non-Exceedance Clause: The agreement must include a statement that the MLS Participant may not receive compensation from any source that exceeds the amount or rate agreed upon with the buyer. This provision protects buyers from unexpected costs.

3. Negotiable Commissions: It must be disclosed that broker commissions are not set by law and are fully negotiable. Buyers need to understand that they have the right to negotiate these terms to suit their financial situation.

4. Legal Compliance: The agreement must include any provisions required by state or federal law to ensure that it is legally binding and enforceable.

These mandatory provisions ensure that written buyer agreements are comprehensive and transparent, benefiting both buyers and realtors by setting clear expectations from the start.

What Should Realtors and Buyers Consider When Creating a Written Buyer Agreement?

While the mandatory provisions lay a solid foundation, there are additional factors that real estate professionals and buyers should consider to create a comprehensive and effective written buyer agreement. These considerations help tailor the agreement to the specific needs of both parties and ensure that it covers all necessary aspects of the transaction.

1. Format and Clarity: The agreement should be well-organized, written in clear and understandable language, and presented in a readable font size. Realtors should avoid pre-filling key terms like the length of the agreement or compensation amounts without first discussing them with the buyer. For buyers, this ensures that they fully understand the terms they are agreeing to.

2. Types of Representation: Depending on state law, there are various types of buyer agreements, such as limited service, agency, non-agency, and transactional agreements. Realtors should consider which type best suits the buyer’s needs and ensure the agreement reflects this choice. Buyers should be aware of the different representation options and select the one that aligns with their goals.

3. Broker Services: The agreement should clearly outline the services the MLS Participant will provide, including any limitations or special conditions. This could range from home showings to negotiation support and contract management. Realtors need to be specific about what they will offer, and buyers should ensure they understand the services they will receive.

4. Consumer Protection: The agreement should also include disclosures about the buyer’s obligations, confidentiality duties, and the Equal Housing Opportunity statement. It’s advisable to include warnings about common real estate scams, such as wire fraud, and inform buyers about the possibility of video or audio recording during home tours. Realtors should prioritize consumer protection by including these elements, and buyers should appreciate these safeguards in their agreement.

5. Term and Termination: The agreement should specify its duration and under what conditions it can be terminated by either party. This section may also address whether there is a carryover period during which compensation may still be owed to the MLS Participant if the buyer purchases a property shortly after the agreement ends. For realtors, clear termination terms protect against potential disputes, while buyers benefit from understanding their exit options.

6. Compensation and Fees: Besides the mandatory compensation provisions, the agreement may include details about retainer fees, whether these fees are refundable, and how they factor into the total compensation. Realtors should ensure that all financial terms are clear and agreed upon, and buyers should be diligent in reviewing these details.

7. Conflicts of Interest: It’s important to address how the MLS Participant will handle potential conflicts of interest, such as representing multiple buyers interested in the same property. Ensure that any conflicts are disclosed, and consent is obtained from the buyer. Realtors must manage conflicts transparently, and buyers should expect full disclosure.

8. Dispute Resolution: Consider including provisions for alternative dispute resolution methods, like mediation or arbitration. Additionally, the agreement may include clauses that waive the right to a jury trial or class action in the event of litigation. Both realtors and buyers should agree on a fair process for resolving disputes, should they arise.

How Will the New NAR Policy Affect Realtors and Buyers?

The new NAR policy, effective August 17, 2024, marks a significant shift in how real estate transactions are conducted. By requiring written agreements before home tours, the policy emphasizes the importance of transparency and accountability in the buyer-agent relationship. Realtors must adapt by ensuring their agreement forms are compliant with the new requirements and tailored to the specific needs of their clients. Buyers, on the other hand, gain more control and clarity in their real estate transactions, allowing them to make informed decisions with confidence.

This policy empowers consumers by providing them with detailed information about their obligations and the services they will receive. It also reinforces the importance of negotiating the terms of the agreement, from compensation to the duration of the contract. For realtors, this means updating their practices and staying ahead of regulatory changes to maintain compliance and client trust.

Are You Prepared for the New Standards of the NAR Changes?

As the real estate industry evolves, staying informed and adapting to new regulations is essential for both consumers and professionals. Written buyer agreements are more than just a formality—they are a vital tool for ensuring transparency, protecting interests, and fostering trust in real estate transactions.

For realtors, now is the time to review and update your agreement forms to comply with the new NAR policy. For homebuyers, understanding the terms of your agreement and negotiating them to fit your needs is key to a successful transaction. The new standards set forth by the NAR are designed to make the home-buying process more transparent and fair for everyone involved. Are you ready to embrace these changes and ensure a smooth, successful real estate experience?