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The Sitzer | Burnett verdict has changed the way our industry practices real estate for the foreseeable future. Resulting practice changes required us to unlearn the old way of doing business and relearn an entirely new way of doing business.
We’ve been inundated with a plethora of trainings on how to complete buyer representation agreements, compensation agreements, listing agreements, addendums, amendments, cancellation and termination agreements along with lease agreements as they relate to working with buyers, sellers, landlords and tenants.
Here are seven things to watch when working with our new forms in the post-Sitzer | Burnett era:
Buyer representation
Working with buyers or prospects with a properly documented business relationship is everything in a post-Sitzer | Burnett world. There are various options for buyer representation agreements, from exclusive agreements to limited touring agreements to single property showing agreements.
Make sure you select the agreement that best fits the relationship you have with the consumer and, if the agreement is not exclusive, that you can transition to an exclusive agreement should you both desire to do so.
Make sure you complete all fields and leave nothing blank that could jeopardize your ability to get compensated as follows:
Term: Ensure you are completing the term in compliance with any state time limits (if applicable) or a term that both you and the buyer are comfortable with. For example, California law now requires that a buyer representation agreement cannot exceed more than three months.
Pay close attention to timing if the agreement expires while the buyer is making an offer, goes under contract, or closes. Make sure you and the buyer understand what happens in the agreement. Does it automatically extend until one of the above activities ceases, or do you need to amend it to put an extension in place, for example?
Type of property: Make sure you have completed this in a way that accurately reflects the search with regards to areas, type of properties, price range and other criteria. You want to make sure you don’t make it too narrow; you may jeopardize your ability to be compensated.
At the same time, you don’t want to make it so broad that it is hard to really determine what the search was (for example, the entire state) unless you were truly involved in a property search covering that.
Agency relationships: Ensure you understand what this section says in your buyer representation agreement and whether it references a separate agency disclosure that needs to be given to the buyer to sign.
Some states, like Florida, have different representation agreements depending on the kind of representation that is being entered into such as transaction brokerage, single agency and no representation buyer agreements. Make sure you understand the differences when figuring out the right agreement for the business relationship with the buyer and whether you can transition to a different kind of agency relationship, if applicable in your market.
Compensation: Make sure you complete this in the way you plan to request compensation from the buyer whether that is a percentage of the sales price, hourly rate, flat fee, etc. If you are working with a limited representation or touring agreement, make sure you thoroughly understand what those agreements say if compensation is owed or if you must address it through a separate addendum.
You must strategize ahead of time with regard to the fee you plan to put in the agreement. Generally, best practices call for putting in an amount that will allow you to come down if needed without doing an amendment. However, if you need to go up, you will need to prepare an amendment accordingly.
It can be hard to know if that will be needed until the buyer decides on a property, so make sure you understand the forms required in that situation and discuss the possibility of this with the buyer ahead of time so that they are not blindsided. This is particularly the case with regard to builders who may be offering higher commissions and/or selling bonuses, particularly in a higher interest rate market climate.
Specific or multiple properties buyer agreements: If you are going to be working with one of these kinds of agreements, make sure you get as specific as possible with the properties you are going to be working with the buyer to see so you can document those in the buyer representation agreement and/or any related addendums.
Listing agreements
In our new world, the seller no longer has to offer compensation to a buyer’s agent if they don’t want to, and, for the most part, it is no longer being offered through revised form listing agreements.
These agreements continue to evolve; there have been some iterations that allowed options as to whether the seller wanted to offer compensation and if so, how much the seller, not the listing brokerage, was offering to the buyer’s agent.
There has been a lot of emphasis on not including any compensation to the buyer’s agent through the listing agreement at all, and this practice change has been widely adopted.
As a listing agent, ensure you complete the field whereby compensation will be paid to you for handling the listing side of the transaction. Should a buyer want to go through you as a listing agent, consider the fee you will charge for handling the buyer side of the transaction, if necessary, and how you will account for this in the listing document.
Is there a paragraph that addresses this in your listing agreement, or will you need a separate addendum? There are many variations depending on the forms you are using, whether they are your brokerage or state association forms, etc.
Just like a buyer representation agreement, you will want to fill in the term for the listing agreement, and include any other relevant information that your agreement requires such as legal description, what items on the property convey and/or are excluded, whether the seller wants to be listed in the MLS or excluded, coming soon status, etc.
You will also want to review the protection clause with respect to any buyers and/or prospects who want to buy the property once the listing agreement has expired and determine the timeframe in which you will be protected past the expiration date. Should this happen, you may need to follow this up with further details on the prospective buyers to protect yourself.
Purchase agreements
Just when you think you’ve mastered the purchase agreement used in your area or state, it changes. On top of the continual changes, these agreements have been revised to reflect our brave new world of the buyer’s agent requesting compensation from the seller as part of their offer.
The mechanism for requesting compensation will vary depending on the form used, but make sure you know where this is in your purchase agreement. It may involve a box to check (and by doing so you represent that you do have a buyer representation agreement signed with the buyer you are making an offer on behalf of), an accompanying compensation form and/or writing in the request for compensation in the additional terms and conditions of the listing agreement.
Compensation agreements
These will vary depending on the forms used by your association and/or brokerage. In some cases, a compensation agreement will be needed to accompany an offer (as mentioned above). Some associations and/or brokerages have compensation forms that indicate a listing broker can provide a form showing the compensation a seller is willing to offer a buyer’s agent before showing the property or making an offer.
Make sure you know what compensation forms are available for you to use, and ensure you understand how they should be completed and when is the appropriate use for them. You will also want to note if any seller offer of compensation forms are considered non-binding if there is language noted to that effect.
Amendments and addendums
Having the ability to modify or change buyer representation and/or listing agreements is key to handling any changes that arise. Make sure you review the options available to you and how you can use these forms and the timing involved, etc.
Cancellation and termination notices
What kinds of forms are available to you with respect to cancellation of the buyer’s agreement? Are these mutual cancellation forms signed by both the buyer and you (and/or your manager)?
With regard to a termination agreement, what kinds of forms are available to you here? Is it a mutual termination agreement or one that is brokerage-initiated by you? Who must sign on your behalf: you or your manager?
Is there a protection period in the event that the buyer buys a property where there was “broker involvement” — meaning you had shown it, introduced them to it, written a prior offer or found out information to assist them — so that you are covered on compensation in the event it’s canceled?
Rental representation and lease agreements
If you work with leases in your market, you’ll need to be aware of tenant representation agreements as well as lease listing agreements in the post-Sitzer | Burnett world.
Tenant representation agreements: Just like buyer representation agreements, you will want to select the appropriate representation agreement to document your business relationship with the customer. Is that an exclusive tenant representation agreement or a limited tenant representation agreement?
You’ll need to define the terms of the agreement, what it covers in terms of specific properties and/or the property search, and the compensation that you will be charging. Some tenant representation agreements discuss that the tenant may request the landlord/property owner to compensate the tenant’s agent, which may reduce or eliminate the tenant’s obligation to pay their agent.
Be mindful of the compensation amount you are putting into the agreement and how you may need to modify that if the compensation offered is more than what you are charging.
Additionally, you will want to pay attention to provisions concerning when compensation is owed whether the tenant placement agreement is exclusive or non-exclusive. You will also want to be aware of what defines broker involvement with respect to assisting the renter with securing a property to rent.
With a lease listing agreement, you need to be aware of how to handle compensation to the tenant’s broker: Is that a separate addendum or compensation form? You will also want to stipulate how you will be compensated should you as the listing agent procure the renter in the listing agreement.
As real estate continues to evolve in a post-Sitzer | Burnett era, contract documents are likely to be refined and modified to reflect current trends. We will need to continue to remain flexible and adaptable to new forms and procedures as we transact real estate in an ever-dynamic and changing landscape.
Cara Ameer is a bi-coastal agent licensed in California and Florida with Coldwell Banker. You can follow her on Facebook or on X, formerly known as Twitter.
