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With just over two weeks to go until a key deadline, a consumer advocacy group has unveiled a new set of guidelines for seller contracts intended to help protect consumers and ensure full compliance with the NAR settlement requirements.
The Consumer Federation of America (CFA) on Wednesday released its proposed criteria for seller contracts, which are largely consistent with guidance the group issued on buyer contracts earlier this month.
The organization also provided to Inman a copy of an eXp Realty seller contract that is currently being distributed to eXp brokers and agents. This contract is an example of a document that the CFA says is largely consistent with its criteria.
“These criteria will assist regulators, consumer groups, and the industry itself in evaluating the fairness of new seller contracts,” CFA senior fellow Stephen Brobeck said in a statement. “Recent CFA research has shown that these contracts have the potential to harm or help home sellers depending on their clarity and content.”
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Among other provisions, the eXp seller contract includes language that spells out explicitly that the buyer may request a seller concession that would cover a variety of costs, including the “buyer’s broker fee.” It also states that all seller concessions are negotiable, and are not required or fixed by law.
CFA described the eXp contract as “understandable and fair to consumers.” However, the eXp document did appear to depart from some of the CFA standards in a few meaningful ways.
While CFA proposes the seller’s commission “should always be stated as a dollar figure or hourly rate,” the eXp contract provides options to define the seller’s commission in terms of a dollar value, a percentage of the sale price, or an empty “other” field that can be filled in by the broker or client.
Read the CFA’s full list of criteria for evaluating brokerage homeseller contract forms below.
Form: Is the contract readable and understandable?
- Length: The contract should not include marginal provisions designed solely to protect the interest of the broker, and the agency agreement should be in a separate document.
- Type size: Most courts recommend 12-point. Any size smaller will be difficult for some people to read.
- Organization: The most important information, including compensation arrangements, should be at the beginning of the document and clearly labeled.
- Plain language: The contract should be written so that it can be understood by homesellers. It should not contain words and language that can be understood only by lawyers.
Content: Is the content of the contract fair to home sellers?
- Length of contract: The contract should clearly state when it will end.
- Termination of contract: Brokers have the right to terminate contracts at any time; sellers should have the same right with no fees charged.
- Compensation, continuing obligation: A seller can be obligated to compensate a broker who showed a home that was purchased after termination of the contract. But this obligation should last for a reasonable period of time, no more than 60 days.
- Compensation, disclosure: The contract should state prominently that the broker fee is not set by law and is fully negotiable.
- Compensation, commission: The listing agent’s commission should be completely separate from any concession to a buyer that may include funds used to compensate the buyer’s agent. This commission should always be stated as a dollar figure or hourly rate.
- Compensation, fees: In a home sale, any additional fees should be deducted from the commission.
- Compensation, when owed: Only upon successful closing of the sale.
- Seller concessions: Concessions should never include a dollar figure representing buyer agent compensation. Instead, the contract should simply indicate whether the seller is prepared to consider negotiating concessions.
- Unrepresented buyers: Unrepresented buyers must be shown the property. The contract can include a provision for a modest administrative fee (expressed in dollars) if a buyer is unrepresented and does not cover this cost. This provision should be initialed by the seller.
- Buyer offers: The contract should state that all written offers from buyers will be shown to and decided on by the seller.
- Dual agency: Dual agency should not be pre-approved by the contract. If a dual agency situation arises—e.g., a buyer wants to purchase a listing of the seller’s broker—written seller approval should be secured at this point.
- Seller remedies: There should be no limits on seller remedies. Sellers should not be required to submit first to mediation or arbitration to pursue a grievance.
Read the full eXp seller contract language at this link.
