Report on Buyer Representation Agreements Post NAR Settlement

TANYA J. MONESTIER

Professor of Law

Report on Buyer

Representation Agreements

Post NAR Settlement

TERMS BUYERS

SHOULD BE AWARE OF

University at Buffalo School of Law

August 2024

Executive Summary

In the wake of the National Association of Realtors’ settlement, state and local realtor

organizations and private brokerages have revamped their forms—in particular, their buyer

representation agreements and seller listing agreements—to reflect the changes effected by the

settlement. I have reviewed several dozen of these new forms. By and large, they are all very

complicated and will not be understood by the average buyer and seller. Many of these contain

terms that would come as a surprise to a buyer or seller, and terms that signal how realtors plan

to circumvent the NAR Settlement. This report is intended to shine light on some of the terms in

buyer representation agreements that buyers should be aware of, or that warrant additional

scrutiny in light of the NAR Settlement.

I have reviewed all forms I was able to get my hands on—either because they are publicly

available, have been made accessible online through videos, or have been sent to me privately.

These include forms drafted, promulgated or used by the following associations:

California Association of Realtors

Texas Realtors

Florida Realtors

NC Realtors (North Carolina)

New Mexico Association of Realtors

Northwest Multiple Listing Service

Colorado Real Estate Commission

Tennessee Realtors

Western New York REIS

Georgia Association of Realtors

Oklahoma Real Estate Commission

Pennsylvania Association of Realtors

Minnesota Realtors

Oregon Real Estate Forms

Northern Virginia Association of Realtors

Rhode Island Association of Realtors

Massachusetts Association of Realtors

Utah Association of Realtors

All forms or portions thereof on file with author.

South Carolina Realtors

Most of these forms are kept under strict lock-and-key, which means there are few

opportunities for meaningful scrutiny and for buyers to understand pitfalls they may encounter

when presented with these forms. I do not claim that the forms are a representative sample of

all the forms out there

—but have reviewed enough of them to be able to identify patterns and

problems.

Leaving aside the substance of the forms for a moment, it is important to make the same

observation I made with respect to the California Association of Realtors’ (CAR) forms earlier

this summer: most of these forms are not understandable to the average home buyer or seller.

You should not need to hire a lawyer to understand a listing agreement or buyer representation

agreement.

In response to my earlier report lamenting the complexity of the forms, CAR issued a press

release stating, in part:

“The assertion that the agreement is overwhelming and unlikely to be read or

understood by the average seller underestimates the capabilities and

responsibilities of both sellers and their real estate agents.”

“The complexity of the agreement reflects the complexity of California real estate

transactions. The agreement is designed to cover various scenarios and provide

clear guidelines, which ultimately benefit the seller by ensuring that all potential

issues are addressed upfront.”

“Sellers are not left to navigate these complexities alone; their real estate

professional is there to guide them through each provision, ensuring they fully

understand the terms before agreeing to them.”

CAR has apparently taken down its original press release, perhaps because it realized it was

foolish to suggest that a contract that a law professor had trouble understanding was

nonetheless accessible to everyday consumers. It was even more foolish to suggest that real

estate agents—i.e., non-lawyers—could guide buyers through every provision.

These forms do not need to be this complicated. Lawyers and realtor groups have made them

this complicated. They then claim that it’s the buyer’s or the seller’s responsibility to read the

forms and that consumers are fully capable of figuring out the terms. Assertions like this fly in

the face of common sense and everything we know about consumer contracting.

In this report, I identify contractual provisions that buyers should be aware of when they are

signing these buyer representation agreements. Specifically, I discuss:

1. Provisions that require buyers to pay compensation to their agent if a transaction does

not close due to the buyer’s breach. This could mean that a buyer faces a double

whammy: losing their earnest money deposit and having to pay an agent for a house they

didn’t buy.

Nor am I certain that these forms have been officially promulgated. I have used my best judgment based

on source and timing to identify what I believe to be current versions of the agreements.

https://www.inman.com/2024/07/02/listing-agreement-slammed-as-cfa-resumes-california-realtors-

probe/.

2. Provisions that contemplate the possibility of agents and buyers modifying an agreement

upward to allow the agent to get more compensation than agreed to in the buyer

representation agreement. I do not believe this is permitted by the NAR Settlement.

Moreover, if there is extra money “on the table,” so to speak, why should it go to an agent

who has already freely negotiated his fee?

3. Provisions that allow agents to collect “bonuses” from sellers. Certain sellers—

particularly sellers of new home construction—offer very enticing bonuses to agents to

get buyers to purchase their properties. One builder in Florida recently advertised an 8%

bonus! Again, I do not believe this is permitted under the NAR Settlement. Moreover,

allowing agents to collect these bonuses means that they will continue to steer their

clients to these bonus-eligible properties.

4. Provisions that allow the agent to charge an extra fee if the seller is unrepresented (i.e.,

For Sale by Owner (FSBO)). A buyer likely will not understand what this term is all about

and what a fair number would be.

5. Provisions that allow for the buyer’s agent not to credit the amount sought from the seller

to the amount of compensation owed by the buyer. In effect, buyers could inadvertently

be committing themselves to paying full compensation to their agent and permitting their

agent to collect cooperating compensation as well.

6. Holdover provisions which are opaque and very difficult to figure out. It is reasonable

for buyers’ agents to extend their right to compensation for a period of time. But many of

these holdover provisions are a choose-your-own adventure muddle. This means that

buyers may not fully understand when they are still obligated to pay their former agent.

7. A provision in one form that essentially creates a range of compensation—a minimum

amount guaranteed by the buyer up to a maximum extra amount to be provided by the

seller.

8. A provision in one form that appears to allow the buyer’s agent to collect whatever is

being offered by the seller’s agent. The provision is confusing and seems on its face to

violate the NAR Settlement by allowing for the possibility of collecting an amount

exceeding the agreed-to fee.

9. Provisions that are designed to scare buyers into action or inaction.

10. Other provisions that tend to appear in these buyer agreements; and one provision that

tends not to appear in these agreements (a statement that the agent may or will receive

compensation for referrals to third-party service providers).

CONTRACT PROVISIONS IN BUYER REPRESENTATION

AGREEMENTS

There are going to be hundreds (if not thousands) of different versions of buyer representation

agreements floating around post-NAR Settlement. It is likely that most will be drafted using

legalese and in ways that maximize benefits to brokerages. Many buyers will not be able to read

and understand these documents. The New Mexico Association of Realtors buyer’s agreement,

for example, is seven single-spaced pages. So too is the North Carolina Association of Realtors

buyer agreement. Buyers who try to read these agreements will likely not be able to fully

understand all their terms.

And they will not be attuned to the ways that agents might try to

circumvent some of the provisions of the NAR Settlement, something that ultimately harms

consumers by keeping commissions high. Below, I outline provisions that buyers should be

aware of as they enter into these agreements.

COMMISSION OWED EVEN IF TRANSACTION DOES NOT CLOSE

The vast majority of buyer representation agreements I reviewed require the buyer to pay full

commission if the transaction does not close due to the buyer’s breach. But this obligation is

often buried in fine print and written in legalese.

Here are examples of this provision:

Tennessee Realtors: Broker’s fee is earned at the signing by both parties of an

agreement to purchase, lease, exchange or the exercise of an option for any

property(ies) as described above and is due at the closing of any such transaction

or upon possession of property unless otherwise stated herein. In the event that

Buyer defaults on performance of a valid contract for sale, lease, exchange

or exercised option, Broker’s fee shall be due on the date of default. Buyer

agrees to pay all reasonable attorney’s fees together with any court costs and

expenses which real estate firm incurs in enforcing any of Buyer’s obligations to

pay compensation under this Agreement. The parties hereby agree that all

remedies are fair and equitable and neither party shall assert the lack of

mutuality of remedies as a defense in the event of a dispute.

(emphasis added).

New Mexico Association of Realtors: 7. COMPENSATION EARNED AND DUE.

Unless otherwise provided in Paragraph 6(A), Buyer owes Broker compensation

upon the occurrence of any of the following: A. DURING THE TERM.

Compensation is earned by Brokerage upon Buyer, or any other person acting on

behalf of Buyer, entering into an agreement to Purchase and is due to Brokerage

upon the closing of any property subject to this Agreement during the term of this

Agreement, whether or not Buyer sought the assistance of Broker. If any such

Almost every one of these contracts is full of real estate jargon and legal jargon. The average buyer will

not understand the many terms used in these agreements: broker, brokerage, licensee, agent, listing

agent, dual agent, designated agent, sub-agent, facilitator, etc.

The Tennessee forms also bury the buyer’s requirement to pay attorneys’ fees in legal proceedings in

the compensation section.

transaction fails to close because of a default by Seller, compensation

otherwise earned and due will be waived, if because of a default by Buyer,

compensation earned and due under this Agreement will not be waived.

“Closing” is defined as a series of events by which Buyer and Seller satisfy all of

their obligations under a Purchase Agreement, including, but not limited to,

Seller’s transfer of legal title or in the case of a Seller Financing - Real Estate

Contract, equitable title to the Buyer. (emphasis added).

Colorado Real Estate Commission: 7.1.1.3. When Earned; When Payable –

Purchase. The Success Fee is earned by Brokerage Firm upon the Purchase of

Property and is payable upon closing of the transaction. If any transaction fails

to close as a result of the seller’s default with no fault on the part of Buyer, the

Success Fee will be waived. If any transaction fails to close as a result of

Buyer’s default, in whole or in part, the Success Fee will not be waived; such

fee is payable upon Buyer’s default, but not later than the date that the closing

of the transaction was to have occurred.

Oklahoma Real Estate Commission: 8. Failure to Close. If Seller fails to close

with no fault on the part of Buyer, the Compensation shall be waived. If the

transaction does not close due to a breach of Contract of Sale by the Buyer,

the Compensation shall NOT be waived and shall become immediately due

and payable. (emphasis added).

North Carolina Association of Realtors: (c) The compensation shall be deemed

earned under any of the following circumstances: (i) If, during the term of this

Agreement, Buyer, any assignee of Buyer or any person/legal entity acting on

behalf of Buyer directly or indirectly enters into an agreement to purchase,

option, and/or exchange any property of the type described above regardless of

the manner in which Buyer was introduced to the property; or (ii) If, within

_________ days after expiration of this Agreement (“Protection Period”), Buyer

enters into a contract to acquire property introduced to Buyer during the term of

this Agreement by Firm or any third party, unless Buyer has entered into a valid

buyer agency agreement with another real estate firm; or (iii) If, having entered

into an enforceable contract to acquire property during the term of this

Agreement, Buyer defaults under the terms of that contract. (d) The

compensation will be due and payable at distribution of proceeds from sale of

the Property by the closing attorney or upon Buyer’s default of any purchase

agreement. If Buyer defaults, the total compensation that would have been due

the Firm will be due and payable immediately in cash from the Buyer. No

assignment of rights in real property obtained for Buyer or any assignee of Buyer

or any person/legal entity acting on behalf of Buyer pursuant to this Agreement

shall operate to defeat any of Firm rights under this Agreement. (emphasis

added).

Several standard forms are even more anti-consumer and say that commission is earned when

the buyer signs the agreement for purchase and sale, or if the buyer breaches the buyer

representation agreement. For example:

Florida Realtors: 7. COMPENSATION: Broker’s compensation is earned

when, during the term of this Agreement or any renewal or extension, Consumer

or any person acting for or on behalf of Consumer contracts to acquire real

property as specified in this Agreement or defaults on any contract to acquire

property. This compensation is for Broker’s services for Consumer.

Compensation received by Broker, if any, from an owner or owner’s broker for

services rendered to Consumer will reduce any amount owed by Consumer per

this paragraph. (emphasis added).

Texas Realtors: C. Earned and Payable: Broker’s compensation is Earned

when: (1) Client enters into a contract to buy or lease property in the market

area; or (2) Client breaches this agreement. Broker’s compensation is Payable,

either during the term of this agreement or after it ends, upon the earlier of: (1)

the closing of the transaction to acquire the property; (2) Client’s breach of a

contract to buy or lease a property in the market area; or (3) Client’s breach of

this agreement. If Client acquires more than one property under this agreement,

Broker’s compensation for each property acquired are Earned as each property

is acquired and are Payable at the closing of each acquisition. (emphasis added).

Pennsylvania Association of Realtors: The balance of Broker’s Fee is earned

if Buyer enters into an agreement of sale during the term of this Contract,

whether brought about by Broker, Broker’s Licensee(s) or by any other person,

including Buyer. If Buyer defaults on the terms of an agreement of sale, Broker’s

Fee will be paid by Buyer to Broker at that time. (emphasis added).

A buyer contracts to purchase real property at the time they enter into a purchase and sale

agreement, even if that agreement is subject to contingencies. Some of these forms can be read

to require the buyer to pay their agent even if the transaction does not proceed owing to failed

contingencies. This may not be what was intended. But the wording of the provision can be a

powerful weapon for unscrupulous actors to obtain payment where a buyer justifiably backs

out of a purchase agreement.

I am not saying that it is unfair or inappropriate to include a provision that obligates a buyer to

pay commission if they breach an underlying contract to purchase real estate. However, it is

very unlikely that a buyer will contemplate that a provision like this exists in the contract.

Accordingly, there must be some requirement on the part of the agent to make sure the buyer

understands exactly what they are agreeing to. Most buyers understand that if they breach a

contract for purchase and sale, they will forfeit their earnest money deposit; they do not

anticipate that they will also have to pay tens of thousands of dollars to their agent. An obligation

of this magnitude should not be buried in the fine print.

BUYER CONTRACT SAYS THAT AGREEMENT CAN BE “MODIFIED” TO INCREASE

BUYER AGENT COMPENSATION

A number of contracts provide that the representation agreement can be modified to give the

buyer’s agent more compensation than originally agreed to—just by signing an addendum or

modification agreement.

Texas Realtors: Additional Compensation: In addition to Broker’s Fee specified

under Paragraph 7A, Broker is entitled to the following compensation. . . . In

addition to Broker’s Fee specified under Paragraph 7A, seller, landlord, or their

agent may offer Broker other compensation, such as a bonus, if Client

purchases or leases certain properties. Broker will disclose the specific amount

of other compensation offered to Broker. Broker may not receive other

compensation unless authorized by Client in writing. Client authorization

may be made by amending this agreement (use TXR 1505). (emphasis added).

North Carolina Association of Realtors: “(i) Firm may seek the Fee from a

cooperating listing firm or from the seller, and Buyer agrees that Firm shall be

entitled to receive same in consideration for Firm’s services hereunder, provided

that any compensation paid by a cooperating listing firm or seller shall not exceed

the amount of the Fee, unless otherwise agreed.” (emphasis added).

New Mexico Association of Realtors: IMPORTANT NOTE: Buyer’s Brokerage

cannot receive from one source of multiple sources . . . more than the Brokerage

Compensation set for herein. While Buyer and Buyer Brokerage may agree to

adjust the amount of the Brokerage Compensation set forth herein at any

time . . . neither Buyer, nor the Buyer Brokerage, is obligated to change the

amount of compensation established in this Agreement once this Agreement has

been signed by all parties. (emphasis added).

Colorado Real Estate Commission: 7. COMPENSATION TO BROKERAGE FIRM.

In consideration of the services to be performed by Broker, Brokerage Firm 118

will be paid as set forth in this section, with no discount or allowance for any

efforts made by Buyer or any other person. Unless approved by Buyer, in

writing, Brokerage Firm is not entitled to receive additional compensation,

bonuses, and incentives paid by listing brokerage firm or seller. (emphasis

added). . . .

Buyer Will Pay. Buyer is obligated to pay Brokerage Firm’s Success Fee.

Brokerage Firm is NOT entitled to receive additional compensation, bonuses

or incentives from listing brokerage firm, seller or any other source unless

agreed to by Buyer in writing.

Western New York Real Estate Information Services MLS: . . . REIS MLS

MEMBERS OR PARTICIPANTS MAY NOT ACCEPT CMOPENSATION FROM

ANY SOURCE THAT EXCEEDS THE AMOUNT OR RATE AGREED TO WITH

THE BUYER, UNLESS THE BROKER AND THE BUYER AGREE TO SUCH

ADDITIONAL COMPENSATION IN WRITING. (bold in original, underline

added)

Northwest MLS: COMPENSATION. Buyer acknowledges that there are no

standard compensation rates and the compensation in this Agreement is fully

negotiable and not set by law. Firm may not receive any compensation for

https://www.ncrealtors.org/legal-ethics/forms-contracts/document-library/.

brokerage services provided to Buyer from any source greater than the amount

set forth in this Section 5 or any subsequent amendment hereto. (emphasis

added).

In my view, the NAR settlement prohibits realtors from receiving this excess compensation.

The NAR Settlement Agreement states that the compensation figure may not exceed that which

is agreed to in “the agreement with the buyer.”

This refers to the agreement in Section H.58.(vi)

that the realtor has already “enter[ed] into . . . before the buyer tours any home.”

This provision

clearly contemplates that the agreement that sets the cap on broker compensation is the one

already entered into prior to the buyer touring the home—not a subsequently modified contract.

To be clear, even if the buyer representation agreement does not refer specifically to

modification, this does not mean that agents will not attempt to engage in this practice. For

instance, the California Association of Realtors’ (CAR) draft buyer representation agreement

from May 2024 (since superseded) provided:

California Association of Realtors: “Broker shall not receive any amount in

excess of paragraph 2D(1) unless that amount is modified in a subsequent

written agreement between Broker and Buyer at the time the overage amount is

known.” (emphasis added).

The latest version of CAR’s Buyer Representation Agreement now omits specific reference to

buyers’ agents modifying an agreement upward once the compensation is known. However,

CAR President Melanie Baker has indicated that she believes “renegotiation” is a viable option

to increase a broker’s level of compensation beyond that originally agreed to.

And brokerages

To its credit, Pennsylvania Association of Realtors has also warned against this practice.

Practice Tip: There have been questions about whether buyer brokers can renegotiate

buyer agency fees based on what a listing broker and/or seller are willing to contribute –

e.g., renegotiating up if the seller side is willing to offer more than the negotiated fee (so

the broker can collect more), or down if the seller side is offering less (to avoid a buyer

potentially having to pay at closing). Brokers should be exceedingly cautious about this

approach. The terms of the NAR settlement agreement say that buyer broker fees must

be “objectively ascertainable” and may not be open-ended (e.g., “buyer broker

compensation shall be whatever amount the seller is offering to the buyer”). Any buyer

broker fee practice should be judged against this standard. If a buyer broker occasionally

renegotiates a contract with terms that work better for the buyer and broker based on

special circumstances, that may be acceptable. If a buyer broker regularly tells buyer

clients something like, “we’ll just put a number in here as a placeholder then renegotiate

a different number once we figure out how much we can get from the listing broker and/or

seller” then that would likely be seen as a violation of the settlement terms.

PAR Standard Forms Update 2024.

Id. (emphasis added).

Id.

https://www.youtube.com/watch?v=keB-Uua0zZ8 (“The NAR settlement prohibits a buyer’s broker

from receiving any compensation in excess of what was specified in the buyer broker agreement, right? .

. . So, Neil, follow on question, we talked a little bit about this yesterday . . . you’ve worked with the buyer

for three months and you’ve established a good relationship and hopefully at this point, there’s a trust

in California are training their agents on the fact that a modification is permissible to increase

compensation.

CAR has even created a new form to allow for an increase in buyer agent

compensation:

It is important to understand the dynamics at play here and why the requirement that these

modifications be in writing is insufficient to ensure voluntariness on the part of buyers.

built up. Let’s just say, because we’re kind of new at this that I didn’t feel like I negotiated very well with

the buyer, can I go back to the buyer and say, “okay I'd really like to renegotiate my compensation with

you now because I feel like I've established this trust”? And what’s a more appropriate timing for doing

that rather than doing it at the time they see listings that may offer a little bit more? [Answer:] . . . I see

what you’re saying, and I’ll start off with you’re not necessarily going to know what the seller is going to

agree to pay and you’re not going to see an offer of compensation through the MLS so you’re not

necessarily going to know if the listing broker is willing to pay anything, right? So, you may not know that.

To me the best time to have that discussion with the buyer client is before an offer is written. While you

are working with the buyer after you’ve established that that trust and say, “you know what it looks like

my value to you really exceeds what we agreed to before and so there’s always the possibility of

renegotiating that agreement.”).

See, e.g., Keller Williams Training on New CAR forms,

https://www.youtube.com/watch?v=SE995TU2Ckc (“[Per the settlement, an] agreement term allowing

broker to retain any excess compensation offered by a third party shall be unenforceable. [T]hat is one of

the terms that we’re going to be bound to in this settlement. If, let’s just say for example, . . . your buyer

representation agreement says that you get three apples the seller offers four apples, the most you are

allowed to get are three apples. Now, what you can do, though, is you can do a modification of your buyer

representation agreement to change that . . . If they’re willing . . . to sign off on that that would be fine,

but you probably should also explain to the buyer that by taking that higher amount it might affect the

offer that they get accepted . . .”).

The fact remains that regardless of whether buyers consent, these modifications run afoul of the NAR

settlement.

almost all cases, a buyer will be all too happy to sign a modified agreement after a guarantee of

payment for the buyer’s agent has been secured. After all, it’s: a) not his money; and b) failing to

sign a modification could lead to an awkward or acrimonious relationship with the agent going

forward. With respect to (b), it’s important to realize that the agent’s request for a modification

to the compensation comes at the same time the agent is submitting and negotiating an offer for

the buyer. Why would a buyer want to alienate his agent at this pivotal moment in the process?

Any statement in the form that the buyer is not obligated to agree to the modification doesn’t

really mean anything in the real world because it ignores the not-so-subtle pressure on buyers

to sign the modification.

The buyer likely would also not fully appreciate the personal or broader implications of signing

a provision allowing his agent to receive more compensation than originally agreed to. If an

extra 1% is on the table, why should that money go to the agent? Practices like this where

realtors scoop up “excess” funds result in the maintenance of the commission structure that

the NAR Settlement was intended to dismantle.

VARIATION: BUYER BEING ASKED TO AGREE TO SELLER-PAID BONUSES

A variation of the “let’s modify the agreement” theme is found in provisions that allow the

buyer’s agent to collect bonuses from sellers (apparently, there is a belief that a bonus is distinct

from compensation). Again, I do not believe this is permitted by the NAR Settlement. Buyers’

agents are permitted to only collect the amount listed in their buyer representation agreement,

whether characterized as commission, a fee, a bonus, or anything else.

The North Carolina Association of Realtors’ form explicitly allows for realtors to collect

bonuses:

Notice the wording: “Firm shall timely disclose the . . . expectation of receiving any such

Additional Compensation and obtain Buyer’s consent . . .” Notably, the consent does not need

to be in writing (though the broker “may” use Form 770 if they wish). So, this is as simple as an

agent saying, “Hey, builder has a policy of giving agents $5,000. Just wanted to let you know.” I

think most buyers would not object to the agent receiving a bonus from the builder so long as

they were not out-of-pocket for it.

Texas forms also reference these bonuses:

Texas Realtors: Additional Compensation: In addition to Broker’s Fee specified

under Paragraph 7A, Broker is entitled to the following compensation. . . . In

addition to Broker’s Fee specified under Paragraph 7A, seller, landlord, or their

agent may offer Broker other compensation, such as a bonus, if Client purchases

or leases certain properties. Broker will disclose the specific amount of other

compensation offered to Broker. Broker may not receive other compensation

unless authorized by Client in writing. Client authorization may be made by

amending this agreement (use TXR 1505).

Texas Realtors have created an amendment form that expressly allows the buyer’s agent to

collect bonuses:

Georgia Association of Realtors forms also allow for bonuses, and Georgia realtors are being

trained to include the bonus amount in the buyer representation agreement.

Georgia Association of Realtors:

The South Carolina Association of Realtors’ forms also refer to additional bonuses:

It is not entirely clear how a bonus amount would be known at the outset of the representation period.

Bonuses are particularly prevalent with new-build construction. Builders do not like

discounting properties because it sets a bad precedent for future sales. Instead, they often give

significant bonuses to agents so that they steer their clients toward the builders’ properties

(something that the NAR settlement was designed to put an end to). One builder in Florida

recently announced an 8% bonus for buyer agents.

Brokerages and state realtor associations are specifically training agents on how to ensure they

get these bonuses. A Texas brokerage recently explained that agents could receive bonuses

exceeding the agreed commission simply by amending the agreement. He referred to this

multiple times as “an escape clause”:

The long form goes on to talk about additional compensation and this is very

important, so let’s talk about this for a moment. Let me just explain: there’s a little

Catch 22 that you don't want to be caught in. The NAR settlement says that you

are entitled to broker compensation through the buyer tenant representation

agreement and you put that amount in the buyer tenant representation

agreement just as we do now. You might say ‘well I want uh 3% or I want $10,000’

or whatever it is. The difference is under the NAR settlement you are not

permitted to earn more than the amount specified in the buyer tenant rep

agreement. So for example let’s say that you put 3% in there and then you take

them to a new home community where they’re offering a $10,000 BTSA [bonus to

selling agent] or it’s a a stale property and a resale listing and the seller has

agreed to offer a $1500 BTSA—well too bad, so sad, you don’t get that money

because you’re not allowed to collect more than is specified in the buyer tenant

rep agreement. Now there’s an escape clause and I’ll cover that in just a moment

Now let’s get to what is really going to come up more often: the final paragraph

notice regarding bonuses and other compensation in addition to broker’s fee

specified under paragraph 7A … The buyer’s broker . . . may not receive other

compensation unless authorized by client in writing. Client authorization

may be made by amending this agreement. Okay, this is the escape clause!

You may have put 3% in there [the representation agreement] and then

discovered they want to buy that new construction and you want that doggone

$10,000 BTSA. You are not locked out from receiving it just because it's not

on the original agreement! You can amend the agreement to extend your

compensation to whatever degree the … selling broker or the seller is

offering okay. So, you can get paid, so don’t ever forget that.

(emphasis

added).

Another Texas brokerage is saying the same thing:

What if a builder is offering a bonus? Can I accept it? Absolutely. So,

remember that the buyer’s representation agreement has to be definitive in what

your fee is. So if you put 3% and the Builder is offering four, you can take it. You

just have to amend that . . . buyer representation agreement. Okay, so that may

https://youtube.com/watch?v=2zJ5Zv0p8vI&si=emqlBjjK1bEec1er.

https://www.youtube.com/watch?v=WlvSaLdUucs.

feel weird, . . . Let’s just get it out there -- so if a builder’s offering you 4%

you’re entitled to that 4%, right? You just have to amend the original buyer rep

agreement. Now you may elect to give back a portion of that to your buyer if you

kind of feel weird about it, because let’s face it, there’s not a lot of heavy lifting

when it comes to new construction as much as there is with a pre-owned home.

So, if you feel bad about taking that extra percent or a bonus, whatever it is,

maybe you give a portion of that to the buyer in exchange for them signing the

amendment.

(emphasis added).

So did another:

[Let’s say] the Builder just so happens to be generous enough to offer you a bonus

or an extra percent in compensation. Can you take it if it is above and beyond 3%?

And the short answer is yes, but you will need to fill out an amendment to the

buyer representation agreement . . . but it is completely possible. Agents do it all

the time and that is the only way to legally get around . . . taking more than

what you have [agreed to].

(emphasis added).

BUYER AGREES TO PAY ADDITIONAL FEE IF LISTING IS FOR SALE BY OWNER

(FSBO)

At least two contracts I reviewed enabled the agent to charge an additional fee to a buyer if the

seller was listing their property without an agent. This provision seems intended to discourage

buyers from purchasing property from sellers who have not hired a listing agent.

The Pennsylvania Association of Realtors’ form includes a blank spot for agents to have buyers

pay more for their services if the seller is unrepresented. This provision actually contains blank

spaces for a percentage or a flat fee for a FSBO seller plus an additional blank space for even

more compensation.

Additionally, this form does not seem to allow for the possibility of negotiating a discounted fee

if the agent serves as a dual agent. The provision simply states that if the seller is represented

https://www.youtube.com/watch?v=RbV7IElG-90.

https://www.youtube.com/watch?v=erAIS777xLc.

(either by the agent themselves or someone else) then x% or amount will be paid. This section

also contains an extra blank for even more compensation.

The Northwest MLS form also allows a broker to charge more if the seller is unrepresented:

Worse still, the Northwest MLS form is highly deceptive in that it “auto-fills” provisions in a way

that is contrary to the interests of buyers.

Most buyers reading the first part of the provision (“If the seller is not represented by a licensed

real estate firm, then the Compensation shall be . . .”) would rightfully assume that if they left

the spaces blank, the number would be zero. No reasonable buyer would think that by leaving

a space for compensation blank, they would be agreeing to potentially pay double the

commission. By operation of the language “equal to the amount in subsection 5(a) if not filled

in)” the buyer could be agreeing to a 3% fee for his agent, and an extra 3% fee if the seller is

unrepresented. This is contrary to the expectations of anyone who leaves a provision blank and

is the type of provision that I believe could successfully be challenged as being unfair and

deceptive.

It also does so in its listing agreement, which is very troubling.

BUYER POTENTIALLY AGREEING TO PAYING FULL COMMISSION WITH NO CREDIT

FOR SELLER OFFERED COMPENSATION

At least two sets of standard forms contain a strange compensation provision which could result

in an agent getting full commission from a buyer plus the agent collecting commission from the

seller.

The Minnesota Realtors’ standard buyer agreement contains the following clause:

The Georgia Association of Realtors’ buyer representation agreement contains a similar clause:

If “shall not” is checked, then it seems like the buyer’s agent can collect full commission from

the buyer and top that off with whatever commission the seller or the seller’s agent is offering.

This could mean that the buyer’s agent earns 6% commission! While an honest agent will check

“shall,” the possibility remains for agents to game the system.

BUYER AGREEMENTS WITH CONFUSING HOLDOVER PROVISIONS

The buyer agreements I have seen all contain very complex holdover provisions—i.e.,

provisions that allow an agent to collect compensation from the buyer after the agreement has

ended. Some contracts provide for a specific time-limited holdover period (e.g., 60 days); others

have a time-limited holdover period that can be interrupted if the buyer enters into a contract

with another broker. Some contracts contain requirements that a broker provide a list of

holdover properties, others do not. Some contracts have no endpoint for the holdover period.

In short, it is very difficult for a buyer to understand what they can and cannot do after the

contract expires or the contract is cancelled.

Below are some examples of these holdover provisions:

Colorado Real Estate Commission: 7.4. Holdover Period. Brokerage Firm’s

Success Fee applies to Property contracted for (or leased if § 3.5.2. is checked)

during the Listing Period of this Buyer Listing Contract or any extensions and also

applies to Property contracted for or leased within ___ calendar days after the

Listing Period expires (Holdover Period) (1) if the Property is one on which Broker

negotiated and (2) if Broker submitted its address or other description in writing

to Buyer during the Listing Period (Submitted Property). However, Buyer Will /

Will Not owe the Brokerage Firm’s Success Fee under §§ 7.1., 7.2., 7.3.1. and 7.3.2.

as indicated if compensation is earned by another brokerage firm acting pursuant

to an exclusive agreement with Buyer entered into during the Holdover Period,

and a Purchase or Lease of the Submitted Property is consummated. If no box is

checked in § 7.4., then Buyer does not owe the Brokerage Firm’s Success Fee to

Brokerage Firm.

Florida Realtors:

8. PROTECTION PERIOD: Consumer will compensate Broker if, within ______ (if

left blank, 30) days after Termination Date, Consumer contracts to acquire any

property which was called to Consumer’s attention by Broker or any other person

or found by Consumer during the term of this Agreement. Consumer’s obligation

to pay Broker’s fee ceases upon Consumer entering into a good faith exclusive

buyer brokerage agreement with another broker after Termination Date.

9. CONDITIONAL TERMINATION: At Consumer’s request, Broker may agree to

conditionally terminate this Agreement. If Broker agrees to conditional

termination of this Agreement, Consumer must enter a written agreement to this

effect and pay a cancellation fee of $ _________________. Broker may void the

conditional termination and Consumer will pay the fee stated in the

COMPENSATION Paragraph less the cancellation fee if, from the early termination

date to Termination Date plus Protection Period, if applicable, Consumer

contracts to acquire any property which, prior to the early termination date, was

found by Consumer or called to Consumer’s attention by Broker or any other

person.

Texas Realtors: Protection Period: “Protection period” means that time starting

the day after this agreement ends and Buyer/Tenant Representation Agreement

between Broker/Associate and Client, continuing for ___ days. Not later than 10

days after this agreement ends, Broker may send Client written notice identifying

the properties called to Client’s attention during this agreement. If Client or a

relative of Client agrees to acquire a property identified in the notice during the

protection period, Client will pay Broker, upon closing, the amount Broker would

have been entitled to receive if this agreement were still in effect. This Paragraph

7F survives termination of this agreement. This Paragraph 7F will not apply if

Client is, during the protection period, bound under a representation agreement

with another broker who is a member of Texas REALTORS® at the time the

acquisition is negotiated and the other broker is paid a fee for negotiating the

transaction.

Pennsylvania Association of Realtors: (G) If Buyer enters into an agreement of

sale for a property after the Ending Date of this Contract, Buyer will pay Broker’s

Fee if: 1. The agreement of sale is a result of Broker’s actions during the term of

this Contract, OR 2. The property was seen during the term of this Contract, AND

3. Buyer is not under an exclusive buyer agency contract with another broker at

the time Buyer enters into an agreement of sale.

Oregon Real Estate Forms: Fee. Buyer will pay Firm a fee of (select and complete

one) $ _____ or _______% of the purchase . . . if, during the Term, or during any

extension of the Term, or within ___ (one hundred eighty [180] calendar days if not

filled in) after its expiration of termination, Buyer enters into an Acquisition

agreement regardless of whether Buyer enters into an Acquisition agreement

because of the efforts of Buyer’s Agent . . .

While some of these provisions are reasonable and tailored (to the extent that a buyer could

even understand them), some are unconscionable. Take the Oregon Real Estate Forms

provision, for example. Imagine a buyer being committed to paying an agent for six months after

termination—even if the agent had absolutely no involvement in the process. One could easily

envision a hapless buyer getting stuck in a situation where they owe two commissions.

PROVISIONS THAT GUARANTEE A MINIMUM LEVEL OF COMPENSATION UP TO A

MAXIMUM (RANGES)

At least one state realtor association is structuring their buyer representation agreements in a

way that most certainly violates the NAR settlement. There seems to be widespread agreement

that compensation “ranges” are not permitted in buyer representation agreements. The number

needs to be clearly ascertainable and not open ended. The Georgia Association of Realtors has

crafted a provision where the buyer agrees to a set fee (“three apples”) and then they also agree

that the agent can collect more money (“ten apples”) from the seller or the seller’s agent.

Here are the relevant forms and training materials:

The general counsel of the Georgia Association of Realtors said earlier this summer that:

ANSWER: Since the written agreement between the buyer and broker’s broker

limits the buyer broker’s commission to two percent, this is the total amount that

the buyer’s broker can receive unless the buyer agrees otherwise. Of course, the

buyer’s broker can ask the buyer’s [sic] to amend their agreement, and hopefully,

the buyer will not object to that. The GAR Forms Committee is exploring ways to

get the buyer to pre-agree to a maximum amount paid by the buyer, but where the

buyer’s broker can get an additional pre-agreed amount from the seller or listing

broker.

This provision will almost certainly fail scrutiny. Yet, until the provision is challenged, it

remains in the contracts—enabling buyers’ agents to walk away with outsized commissions.

PROVISIONS WHICH SEEM TO SAY THE AGENT WILL ACCEPT WHATEVER IS

BEING OFFERED BY COOPERATING BROKER

One contract seems to be in direct contravention of the NAR Settlement’s mandate that the

buyer representation agreement sets the maximum level of compensation for the buyer’s agent.

The contract appears to allow the buyer’s agent to collect more compensation than they

negotiated with the buyer.

The Western New York REIS draft buyer agreement includes a convoluted compensation

section which reads:

The draft provision states that for MLS listed properties, the buyer’s agent “will accept a fee or

compensation equal to the fee or compensation offered to a cooperating broker, but in no event

less than the amount stated above as the Commission.” This presumably allows the agent to

collect more than the number agreed to in the buyer representation agreement, something that

is not allowed by the settlement. It could be that this was not the intention of the provision; the

clause could simply refer to the fact that the buyer’s agent will first seek compensation from the

listing broker. However, provisions like this sow confusion for agents and buyers.

https://www.qgdigitalpublishing.com/publication/?m=58779&i=820682&p=14&ver=html5.

“SCARY” WARNINGS

Some of the forms contain provisions in ALL CAPS and bold which may scare buyers into acting

a certain way. For instance, the Minnesota Realtors forms have the following “CAUTION:”

At least one portion of this statement is not accurate. A buyer who has signed a representation

agreement may attend open houses; they do not need to be accompanied by their broker to each

and every open house. A provision like this keeps the buyer wholly reliant on their agent in their

home search.

New Mexico has particularly frightening warnings for unrepresented buyers:

Notice all the scare tactics:

➢ Caution icons

➢ ALL CAPS AND BOLD

➢ “We have advised you to get representation and ‘despite this advice’ you ‘have elected

NOT’ to hire a broker”

➢ “We may not give you the forms you need”

➢ “And, by the way, you may not be saving the seller any money”

In my view, these forms are not motivated by a desire to protect an unrepresented buyer (or

even protect the brokerage from liability). They are designed to scare someone into hiring an

agent.

OTHER PROVISIONS TO BE AWARE OF

This report is by no means an exhaustive list of contractual provisions that may be problematic

from a buyer’s perspective. Other provisions of potential concern include the following:

• Dispute resolution clauses (arbitration or mediation) barring litigation

• Attorneys’ fees provisions

• Dual agency provisions where a buyer pre-authorizes a conflict of interest

• Termination provisions (or, more accurately, the absence of termination provisions)

Quotes added by author to translate forms into plain English.

Or dual agency provisions which are virtually impenetrable. See e.g., Pennsylvania Association

Realtors form:

DUAL AGENCY Buyer agrees that Broker and Broker’s Licensee(s) stated above may also

represent the seller(s) of the property Buyer might buy. A Broker is a Dual Agent when a

Broker represents both Buyer and a seller in the same transaction. A Licensee is a Dual

Agent when a Licensee represents Buyer and a seller in the same transaction. All of

Broker’s licensees are also Dual Agents UNLESS there are separate Designated Agents

for Buyer and a seller. If the same Licensee is designated for Buyer and a seller, the

Licensee is a Dual Agent. Buyer understands that Broker is a Dual Agent when Buyer is

viewing properties listed by Broker.

4. DESIGNATED AGENCY Designated Agency is applicable, unless checked below.

Broker designates the Licensee(s) stated above to exclusively represent the interests of

Buyer. If Licensee is also the Seller’s Agent, then Licensee is a DUAL AGENT. Designated

Agency is not applicable.

5. BROKER’S SERVICES TO OTHERS (A) Broker may not take action that is inconsistent

with Buyer’s interests. However, Broker may provide services to a seller for which

Broker may accept a fee. Such services may include, but are not limited to, listing

property for sale; representing the Seller as Seller Agent; deed/document preparation;

ordering certifications required for closing; financial services; title transfer and

preparation services; ordering insurance, construction, repair, or inspection services.

Providing such services is not in itself a breach of Broker’s fiduciary duty to Buyer. (B)

Broker/Licensee may show the same properties to other buyers and may represent those

buyers in attempts to purchase the same property that Buyer wishes to purchase. Broker

does not breach a duty to Buyer by showing a property Buyer is interested in to other

prospective buyers. (C) It is a conflict of interest when Broker or Licensee has a financial

or personal interest in the property and/or cannot put Buyer’s interests before any other.

If Broker, or any of Broker’s licensees, has a conflict of interest, Broker will notify Buyer

in a timely manner.

• “Junk fees” provisions

• Provisions which bind a buyer to a long-term (greater than 3 months) contract with an

agent.

Additionally, these forms are notable for what they do not contain: provisions which let the

buyer know about any monetary incentives or kickbacks the realtor receives from referrals.

For instance, the Minnesota Association of Realtors buyer agreement provides:

The forms should disclose that the agent may receive compensation for these third-party

referrals. Most buyers are not aware that their agent, who is already getting paid thousands of

dollars, could be making even more money off them. This fact may encourage buyers to shop

around and go with an independent professional.

Conclusion

Most buyer forms are complicated and confusing. Buyers will not be able to understand them

and will likely get burned by provisions they did not anticipate. I expect this to happen, for

example, with clauses that require a defaulting buyer to pay their agent’s commission. If a buyer

is considering breaching a contract to purchase a home—perhaps because they lost their

financing, or their life circumstances changed—they would not be aware that that they owed

their realtor for the failed sale. Yet almost every single contract includes that as the default

provision.

There are provisions in these forms that seek to circumvent the NAR settlement. Many forms

specified that realtors could seek to modify an agreement to increase their compensation if the

seller or seller’s agent was offering more than the buyer agreed to. First, buyers will be

pressured into signing these modifications for fear of compromising their relationship with their

agent; this is suggestive of economic duress. And second, if there is extra money “on the table,”

why should that money go to a non-participant in the transaction? The buyer’s agent has already

agreed to the fee they are charging. Why should they be entitled to more? These modification

provisions put the agent’s financial interests over those of the client.

One particularly egregious form is that promulgated by the Northwest MLS which “auto-fills” a

number for a buyer to pay when a space is left blank. A provision like this will almost certainly

The draft Northern Virginia Association of Realtors buyer agreement, for instance, provides a space for

commission, plus a retainer fee, plus a “service fee.” The South Carolina Association of Realtors’ form

also has spaces for commission, plus a retainer fee, plus an “administrative fee.”

not withstand contractual scrutiny. But buyers will fall victim to it for the time being (until such

term is challenged).

The NAR Settlement has ushered in new rules and realtor practices unfamiliar to home buyers

and sellers. These forms just add to the confusion and potential for exploitation. I would ask

regulators and those drafting these forms: Do you think your mother or father would understand

this? Would you want your son or daughter to sign these forms? If the answer to either of these

questions is no, then it is time for a do-over.

About the Author

Tanya Monestier joined the University at Buffalo Faculty of Law in July 2022 as a Professor of

Law. She teaches Contracts, Sales, and Conflict of Laws. Monestier’s work has been published

in leading academic journals, including Cornell Law Review, Wisconsin Law Review, Boston

University Law Review, Cardozo Law Review, American University Law Review, Hastings Law

Journal, and the Ohio State Law Journal. Monestier’s academic work has been cited by

numerous trial and appellate courts, including by the Supreme Court of Canada, the Second

Circuit Court of Appeals, the Ninth Circuit Court of Appeals, and dozens of federal and state

courts. Her amicus brief was recently quoted by the United States Supreme Court in Mallory v.

Norfolk S. Ry. Co., 143 S. Ct. 2028, 2054 (2023) (Justice Alito, concurring). She is a Staff Editor

for the American Business Law Journal.

Monestier has written articles in the areas of real estate and consumer protection. Her article,

Fixer Upper: Buyer Deposits in Residential Real Estate Transactions, 80 OHIO ST. L. J. 1149

(2019) argues that buyer deposits often operate as unlawful penalties. The article is cited in a

leading Property Law case book. Monestier’s follow-up article, Cake-and-Eat-It-Too clauses

was recently published in Wisconsin Law Review (Cake-And-Eat-It-Too Clauses, 2024 WISC. L.

R. 87 (2024)).

This Report represents the views of the author only.

References to the University at Buffalo Faculty of Law are for affiliation purposes only.