Consumer advocates call California Realtors’ buyer rep agreement ’unreadable’

A report released Tuesday by the Consumer Federation of America (CFA) found that the California Association of Realtors’ (CAR) buyer representation and broker compensation agreement is “virtually unreadable.”

The release notes that the CFA sent this analysis to the Department of Justice (DOJ) two weeks ago. Additionally, the CFA stated that California Realtors have obtained a copy of the analysis.

CAR has since announced to its members that it is delaying the release of its 21 standard forms related to the business practice changes outlined in the  National Association of Realtors’ (NAR) nationwide commission lawsuit settlement agreement due to a “formal inquiry” by the DOJ.

CAR was previously slated to release these standard forms on Tuesday, along with all of the other new and updated forms it promulgated.

The analysis of the buyer representation and broker compensation agreement was done by Tanya Monestier, a law professor at the University of Buffalo. Under the terms of NAR’s settlement agreement, agents will be required to have a signed buyer representation agreement prior to taking a buyer on a home tour. This requirement goes into effect Aug. 17.

In her analysis, Monestier wrote that “no layperson will be able to understand and appreciate the terms they are agreeing to.” She added that CAR’s agreement seems to “disguise the obligation of the buyer to pay his agent” and that it “telegraphs how Realtors plan to circumvent the NAR Settlement.”

Her analysis also notes problematic provisions in CAR’s contract related to dispute resolution, dual agency, commissions owed and buyer cancellation.

According to the release, the CFA has been told by a “reliable industry source” that CAR has made changes to its form, but it has not shared this with the CFA.

In contrast to CAR’s buyer representation agreement, the CFA found that the buyer broker representation agreement released by eXp Realty is “much simpler, clearer, and pro-consumer than the CAR agreement.”

“The contrast between the CAR and eXp contracts could not be sharper,” Stephen Brobeck, a CFA senior fellow, said in a statement. “The eXp contract is written with the buyer in mind. The CAR contract is written with the interests of the Realtor in mind.”

The CFA noted that it has sent copies of eXp’s agreement to the California attorney general, as well as the attorneys general and real estate regulators of other states, as a model of a pro-consumer buyer contract.

This is not the first time the CFA has taken issue with buyer representation agreements. In February, the organization published a critique of more than 40 buyer contracts, identifying many perceived anti-consumer provisions in almost all of them.