The rules and practices for viewing open houses across the United States have changed.
And, frankly, it’s weird.
So, as a start, I’m going to walk you through a form that you will be asked to sign at an open house.
You may be asked to make the decision on the spur of the moment, on which real estate agent will help you make the biggest financial decision of your life.
I am excited. Yes, I’m excited that you, the buyer, will have more rights, responsibilities, and choices And I believe that with greater awareness, education, and knowledge, you are better equipped to take advantage of this opportunity.
When you enter the open house or when you contact an agent or are contacted by an agent to view a property, maybe virtually or with FaceTime, make sure that you have the right form, because you will be asked to sign a form.
Now notice that this is the Property Showing and Representation Agreement.
And it’s for use with a prospective buyer for up to three open houses or three other properties. This is often used when you’re first meeting a broker or an agent and you don’t know whether you want them to represent you or not. And this might be the form you get at the front door. of an open house in California.
It’ll be similar across the United States, but I don’t have those forms. And each company may, or they do have the right to change the form or to have something similar, but it’ll be very much like this. Okay. Be aware though, I’m going to switch gears right now and I’m going to go to page two of this agreement because you absolutely do not have to sign it. You do have to sign an agreement to see the property, but it doesn’t have to be this one. So I’m going to show you page two of this agreement so that you’re aware of it when you go to an open house or when you talk to an agent.
I’m going to come back to this page, but I’m switching gears right now so you’ll see what I’m talking about.
Okay, at the bottom of page two, it says, you are not required to sign a representation agreement to see this property in an open house.
If you do not want the agent holding the open house to represent you, then you should not sign this form.
And you should read and understand. The Open House Visitor and Non Agency Disclosure and Sign In Form, which I will do next.
I’m a little bit surprised they have this on the second page and don’t tell you this first, but, you know, this is the way it’s set up.
If you’ve already signed a representation agreement with another broker, you should inform the broker of the name of that other broker and provide a copy of that agreement to the broker.
If you have already signed a representation agreement with another broker and you signed this form, you may be obligated to pay two different brokers if you purchase this property.
This is a big deal. Okay? If you have any questions on this, contact me or certainly contact and question the person giving you this form. Okay. Now, if you don’t want to sign this form, you get another one.
That’s called the Open House Visitor and Non Agency Disclosure and Sign In. And notice the name of the property. Obviously, you’re going to an open house, you better know what open house you’re going to. Okay? And you should know the people you’re talking to. Now, notice the instructions on this page.
You’re the visitor, and it’s your intention to view property. The agent is holding an open house or conducting an in person Or a live virtual tour. What is a live virtual tour? I’m not quite sure but I truly believe it’s when someone is taking you around on FaceTime and you are FaceTiming with them. So they are actually in the property conducting it for you.
So it would be at 123 Education Street and you are interested in viewing this property. The agent agrees to show it to you with the following conditions. Remember when you have extra rights, you have extra responsibilities.
First one, agent doesn’t represent the visitor, that’s you. They’re not working for you and they have not entered into an agreement with you. And when they talk about entering into a representation agreement, we’re talking about written agreement because all agreements are in writing to be valid.
Okay, the communication with the agent at the open house or the, or the FaceTime tour is for the benefit of the seller only.
Okay?
Any communication that you have with the visitor is only for the seller because you are unrepresented at this moment.
The really kicker on this one is the communication with the agent is not confidential, because they don’t represent you. So be careful that you don’t reveal any information that you don’t want passed on to somebody else.
However, if you write an offer on that property, then you will need to know who they represent, you or the seller or both of you.
If you, the visitor, wants to be represented by the agent, Then, you must sign a representation agreement like the one I’m just about ready to go back to.
And if you still decide you do not want anybody in this open house to represent you, then you’ll put your name in, and identification, and you will identify an agent if you already have one.
And what will happen is Either you will show the person holding the open house a copy of your agreement with your other agent or the other agent will be called to identify whether they have an exclusive agreement with you, a non exclusive, if it’s relating to this particular area, Irvine in this case, because I named it Irvine, or San Francisco, or someplace else. So it’s unrelated to this representation.
It’s really important to understand what you’re going to be handed so that you read it. And many of the people that I’ve dealt with, I have to almost force to read the agreements by not letting them sign it until I ask them questions. Sort of like going to school where you need to have some questions before you’re allowed to take the test.
Okay? Now, let’s go back to the original representation agreement. Remember, this one is if you don’t want to be represented, don’t want any information about the house, and everything’s for the seller, and nothing’s confidential. Okay? Even if you say something like, um, my lease is up and I want to buy a house next week, now the whole world might know it if it’s passed on.
So, back to the agreement that you will sign, if you want, at the open house to see the property and have some confidentiality. Now, the broker agrees to give you a tour. The buyer, you, grants the broker the right to represent this buyer. And here are the terms of your representation.
And remember, the buyer is advised to read all three pages, and we’ve just gone over part of page two, where it said you don’t have to sign this.
Okay, when do you want this agent at the open house to represent you? I would guess it starts today, and it ends at a certain time that you will, you guys will decide.
Maybe. Tomorrow, maybe this week, maybe today, maybe within 30 days because it cannot exceed 30 days. Okay, that’s of course unless you close the transaction meaning you’ve bought the house.
You and the broker you’re talking with will decide what your compensation should be. Okay? You will, I recommend that you learn a little bit about what kind of services the broker will give you before you decide on the compensation.
If the compensation is, I’m just going to walk you through this house, well, you’ve got to decide what that’s worth. Okay?
Reminder again, is all Compensations are negotiable. All terms of a real estate transaction are negotiable. That doesn’t mean that you’ll get to negotiate what you want, but at least they are negotiable. They’re not set by a broker and they may be negotiated between the buyer and the broker. Again, fully negotiable.
However, you’re going to have somebody work for you, and they do have a right to be compensated for their work. Even someone who mows your lawn is, is, has the right. Someone who operates on your kidneys has the right, and your real estate broker that you’ve hired to do some work has the right, but you want to know what are they going to do for their right to represent you.
Okay, even if it’s a non-exclusive representation, meaning you can go to other brokers and have them represent you on other properties, it is important that if they’re involved and do any of the following things, this is the property they’re going to represent you on and get paid on. If they’re shown the property by you.
If, even if they show it to you on FaceTime, this is really a monumental change that you actually have a relationship with your agent and will l pay them what your compensation is if they show it to you virtually on FaceTime, or if they’ve submitted an offer, or they’ve given you a market analysis or reviewed other documents with you.
Maybe that’s the title policy, maybe it’s a disclosure, maybe it’s a homeowner association information, maybe it’s school information, and it was introduced to you by the particular broker. This means that’s when they have the right to be paid. Okay, I’m going to go back to page 2 now and talk about the top of page 2 of this agreement and remember, you’re going to get this at an open house and my concern is, how much time will you have to go over what you sign?
Before you go in the door, or will there be another agent standing at the door and the seller’s agent will be standing someplace else in the property. I almost think that you should have this before you ever go out into open house. And that even means whether you’re a neighbor. This is serious stuff and it is brand new and in all the years that I’ve been a real estate broker, this is the most major change in the way real estate will be practiced by agents and buyers and sellers in the whole United States.
In this agreement, remember you’re at an open house signing this, you’ve assigned The compensation you agreed on to the, to the broker through your escrow, you’re assigning it, you’re agreeing to it up front. And you can cancel this agreement, or the broker could cancel this agreement. And you give the notice to the other party on the time that you agreed to give the notice.
And we’ve already gone over this section.
The third page is pretty simple. It’s where you both sign it.
Now why is this all happening? What’s causing this change? And the easiest place to find it is on the Broker Compensation Advisory. It doesn’t say, How the world’s changed, whoops, the world’s changed in residential real estate, it talks about a compensation advisory. And if you’ve been a part of the media information on this, the media is talking about broker compensation because now you, the buyer, have the responsibility and the right to agree to a compensation with your broker. And I feel very strongly that you need to evaluate what the services will be and put it in writing, and also, what are their qualifications? What is their education? Have they worked in your neighborhood before? Have they represented buyers exclusively in that area?
For how many transactions? Or do they really only represent sellers? How well do they negotiate? Those are not in this agreement, but it better be in your, in my opinion, in your agreement as you’re agreeing to compensate the broker and deciding what that should be. Now, why is this all happening? Okay.
The requirement for written agreements.
By the way, this advisory is given to both sellers and buyers. So it helps explain the whole situation. But why is the requirement for written agreements? This is pursuant to a nationwide class action settlement.
And in this case, buyers are required to have a written agreement with their agent prior to showing. And that’s a residential property right now. And that’s any kind of tour, as we talked about. In the agreement, per this, per this mandate, it must identify the amount of compensation paid to the broker for their services.
We have an interesting situation in California because there’s legislation pending and expected to become law on January 1st of 2025 where all licensees showing a buyer any type of property will be required to have a written agreement prior to the showing. Right now, this written agreement is mandated nationwide only in residential, one to four units, and actually it doesn’t include tenants, but everybody that I’ve spoken with and the forms are now going to include tenants because the units are residential one to four. Now, for this compensation advisory, we’re going to go to page two now, and everybody needs to receive this.
Notice again, the date is July 2024. That may change.
Page 2 Broker Compensation Advisory. Now, it’s another explanation, and again, sellers and buyers will receive this advisory. It’s a changing practice related to a seller’s broker’s offer of compensation.
Old school, historically, for the last at least 75 years in California, many seller brokers used a multiple listing service to make an offer on how to compensate your broker, the buyer broker who brought a buyer. So they told you in advance, we, if you bring a buyer to this house and this buyer agrees to it, we will pay the buyer’s broker a certain amount of money.
However, the nationwide settlement prohibits the seller’s broker from doing this. And that’s why all of this changed. It was a massive settlement because some sellers sued in Missouri and said, we didn’t know that we were actually having our agent pay the buyer’s broker. So now, everything’s changed and the buyer has power to make their choices and to pay their own broker.
They don’t have to depend on the sellers to do that, but they better understand their obligations, their rights, and what these forms say.
Now I’m going back to the real formal buyer representation contract and I’m only going on page 3 of 5. On another video, we will explain the formal agreement with a buyer representative. Notice again, it’s July of 2024 and this is only page 3.
And let’s go backwards. Financial information. The buyer will provide financial information including proof of funds and their abilities to buy the property and to pay their broker, okay? Super important and guess what?
New form. I’m going to switch forms again.
To buyer financial and personal information. Again, July 24, 2024. And what’s important about this is you, the buyer, when you sign a buyer broker agreement or a buyer representation agreement and you choose your Realtor, you are also agreeing to tell them all kinds of personal information.
One of the things, of course, is your financial information and you will be doing that anyway if you want a loan or you want to present an offer because we now include those with the offer.
However, before the broker decides to work with you, they want personal information. own or rent? Are you a first time home buyer? Do you own tons of property? How many? And, are you a licensee, a contractor, an investor, a plumber, electrician? What’s your experience related to real estate? Another super personal statement, which we ask anyway, all these things when we’re working with a new buyer, but this is the first time I have seen or used a form like this,
in three states where I have been licensed (currently I’m licensed in 2 states), that a buyer will be signing. It’s usually sort of been in our files so we know whether you have to sell your house right now, whether you have to be in the house before school starts, or what your reasons are. Or if you’re getting a divorce, if you’re getting a partnership breakup, if you’re getting married, if you’re having a baby, all these things have been very personal and have not been signed by the buyer up to now, that I’ve seen anyway.
And because You actually have a buyer representation agreement. This is confidential. Okay? So, this is brand new form, never seen anything like it before, where the buyer actually has to sign it. Of course, the broker has to sign it, too, because the broker has agreed to be your agent. And, they’ve agreed the confidentiality is important.
Now back to page 3 that I started on where I started from the bottom and said let’s look at the financial agreement you’re agreeing to. And let’s go backwards. This is sort of fun, why not? Buyer obligations. You agree to timely view and consider the properties I select.
You agree to negotiate in good faith and you’re going to act in good faith towards the completion of your contract. Let’s go up a little bit farther.
Broker obligations. I think these personally are very minimal and I hope that you will use a list that’s extensive saying what you expect out of your broker.
Locating and presenting properties, presenting offers, assisting you in negotiating,
and facilitating escrow process. Well, since you are authorizing them to do these things, you better be sure they’re good negotiators, that they’ve also represented buyers before. And how many years or months or weeks of experience have they had? Have they worked as a transaction coordinator or an assistant?
Are they truly representing buyers? Okay. You will direct the broker to order reports, investigations, and schedule, but they are also agreeing to attend meetings and appointments with the professionals chosen. That means to me, inspections, etc. And you have the right to know who’s going to be attending those.
Will it be an assistant? Will it be a transaction coordinator? Will it be a non-licensee? Who will be joining you at these meetings?
Also, the broker agrees to help you with your financing process. And part of those are giving you referrals if you need them. And assisting you in obtaining the pre-approval or pre-qualification letter. But the other thing is, maybe you need to negotiate how the costs will be. Maybe you need to negotiate whether you’ll get down payment assistance, or whether you’ll get buy downs of your interest rate. There’s a lot of things that you will be wanting your broker to help you with, and it’s really important that they have the competence to do so. Alright, let’s go a little higher, backwards, it’s so much fun.
I wanted to say that this tells you that if you have other agreements, you must tell your broker that you’ve agreed to work with another agent also. Hopefully they don’t cross over where you’re working on the same properties, but if they do, you could be owing double fees. So it’s really important that you have a good relationship with your broker.
So, we’ve discussed the open house, sign in and disclosure, we’ve discussed broker compensation advisory, remember that?
We’ve discussed your financial and personal information that you will want to give, or that you’re actually going to be contractually obligated to give.
We’ve read why the practice is changing.
And we started talking about some of the obligations you will have and your broker will have.
I’m sure you remember this, is you don’t have to sign a representation agreement if you go to an open house, but otherwise, if you do go there, you will either sign a representation agreement or a non representation agreement.
Oh, and if we haven’t met, my name is Maxine Golden. I’m a longtime real estate agent and broker in Newport Beach, California. if you have any questions, feel free to ask me in the comments.