The New Buyer Broker Requirements
The recent lawsuits against NAR have brought about significant changes in the requirements for showing and selling homes. While Utah has always been largely compliant with these changes, some changes impact buyers and could lead to a negative buyer experience.
As a buyer: When you'd like to see any property, whether it's exploring your options or if you're ready to buy—you must sign a Buyer Broker Agreement. In Utah, it is common to request a buyer-broker agreement. This agreement ensures that if the buyer makes a purchase, the agent will be compensated for their time and work. While some agents require this contract to be signed upfront, most agents have it signed after the initial meeting. According to Utah law, all agents must sign the agreement before writing an offer.
What's the Problem?
Signing the form prior to viewing any home eliminates the opportunity to get to know the agent before committing to that agent. Agents will likely have buyers sign an Exclusive Buyer Broker Agreement, which locks the buyer into working exclusively with that agent.
Depending on the terms the agent writes—the buyer may be locked in long-term (6-12 months or longer), and it can apply to ANY home they purchase. Also, if the buyer purchases a home with another agent while under contract with a different agent, the buyer may be obligated to pay BOTH agents.
Agents have abused buyers by locking buyers into an Exclusive Buyer Broker Agreement. Locally, some agents may receive inquiries from buyers who found a home on Zillow. The buyer usually believes they are contacting the listing agent because they clicked the box "schedule a showing," but they were sent to an agent who pays Zillow for leads (not the listing agent). The agent (or agent's representative) will meet the prospective buyer at the home they wanted to see and tell the buyer they have to sign the form before showing without any real explanation of what the buyer is signing. Buyers did not realize the signed contract had locked them in with that agent (sometimes for six or more months).
Because of this nationwide change, ALL agents will now have conversations with buyers, requiring them to sign an agreement before showing any property. Most agents will use the opportunity (since it's a requirement by law to have it signed) to lock that buyer into an exclusive agreement.
Many buyers see homes with agents, only to decide they don't like the agent, either personally or due to lack of experience or attentiveness dedicated to the buyer. Buyers want to be able to trust their agent, and the first agent they meet may be different from the agent they are comfortable with long term. It's equally essential for the agent to connect with the buyer. No agent wants to continue to work with a buyer they don't get along with or who becomes hostile, abusive, or inappropriate.
Imagine going to an auto mechanic for advice on an issue you're having with your car, and the shop tells you, "Sign this form agreeing to do business with me no matter what I do or what I advise you." Would you commit to that auto mechanic? Probably not. I wouldn't. I want to see what they know, how they treat me, and whether they're honest.
I'm deeply concerned that this upfront buyer broker mandatory requirement will significantly burden the buyer. Unscrupulous agents (and unfortunately, there are many) may take advantage of this requirement, potentially leading to unexpected and substantial costs for the buyer.
What Can Buyers in Utah Do?
First and foremost, pay attention to what you're signing. BUYERS HAVE OPTIONS!
Are you signing an EXCLUSIVE Buyer Broker agreement (the word EXCLUSIVE will be at the top)?
DURATION: How long do you agree to work with this agent? YOU CAN CHOOSE SHORT TERM; one day or one week is allowable. You may have to sign an extension, and of course, that can be longer (to avoid repetitive extensions).
PROPERTIES OR LOCATION: Are you signing with the agent specific to COUNTY or CITY --or— are you signing specifically to the ONE property (the exact address of that property will be written)?
Buyers have options on the terms (you CAN request a one-day or ONE PROPERTY agreement).
Our Washington County Board DOES offer a non-exclusive contract. If you meet an agent at an open house and they offer to show you the home down the street, which is also listed--you will be asked to sign a buyer-broker agreement. If you sign that, you must ensure it's specific only to THAT property --or-- the agreement duration is short term --or-- demand a NON-EXCLUSIVE contract that does NOT bind you to THAT agent.
WHAT ARE YOU AGREEING TO PAY?
The most significant change in the lawsuit is that sellers may not offer to pay a buyer's agent. If they do NOT pay a buyer's agent, the BUYER will be responsible for the commissions to their buyer agent. If you find a home you want to make an offer on, and you only have $20,000 to put down, if the seller refuses to pay the buyer agent commission, the buyer will now pay their buyer's agent. Imagine if the commission was $6,000. This will significantly impact your ability to purchase that home. It's critical to have an agent confirm what the seller is willing to pay and that you and your prospective agent have communicated exactly what you'll be able to pay. An experienced agent should be able to negotiate the fees so that the buyer will not be obligated to pay commissions (as it has been in the past). However, I also suspect some sellers may try to take an opportunity to push the fees onto the buyer, and I also suspect some buyer agents will not negotiate properly in advance. The agent needs to address who is paying the commission BEFORE an offer is accepted. If the agent doesn't properly negotiate compensation, the buyer can be impacted.
Experience matters, and trust matters. Buyers should have the opportunity to meet an agent and determine whether they want to work with that agent for the duration of their property search. Work with an agent who will educate you through the process. I'm Paula Smith, and I look forward to working with you.
I am Paula Smith, Associate Broker with RealtyPath of St George. I have been a licensed, full-time real estate agent in Southern Utah since 2006. I have been selling residential real estate during all of the changes in the market and witnessing our St George area become one of the fastest-growing cities in America. I keep my finger on the pulse, paying attention to market conditions. If you're ready to buy or sell, I will make it happen.
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