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An Alabama bill that was passed into law last week will allow potential homebuyers in the state to tour homes without having to sign a contract with an agent.
The law is in contrast to terms of the NAR antitrust commission lawsuit settlement, which stipulate that a written agreement must be in place for in-person and live virtual homebuyer tours for agents who use the MLS.
House Bill 230 was passed unanimously by Alabama lawmakers and signed into law last Thursday by Governor Kay Ivey. The new law will take effect in one month and was reportedly inspired, in part, because of the Department of Justice’s Statement of Interest on buyer agreements in November. In that Statement of Interest, the DOJ warned that buyer-broker agreements, even those for a “no-obligation showing” have the potential to limit how brokers compete.
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“We’re grateful that our members had a voice for the first time in this process through a democratically elected body,” Alabama Association of Realtors CEO Jeremy Walker told Inman. “From our standpoint, state legislators are the appropriate body to govern laws affecting real estate. So with HB 230 passing, we’re excited that there’s going to be greater transparency for consumers in their first interaction with an agent, the homebuying process [and it will] allow them the opportunity to build a relationship with an agent before they enter into a buyer’s agreement with an agent.”
Homebuyers should be allowed adequate time to negotiate and consider the terms of any agreement before entering into one, Walker added. And the somewhat harried manner in which homebuyers might have entered into a touring agreement just to have the chance to view a property in person was a bit “problematic.”
“Buyers are forced into these agreements somewhat under duress [as] the condition of viewing a property,” Walker said. “And when someone — this is basic contract law — someone’s forced into a contract under duress, that frequently makes the contract unenforceable and voidable at a later date.”
Walked added that the Alabama Association of Realtors in general is in favor of buyer contracts, but felt that the timing of entering into those contracts was an important factor to consider. He said the association had heard a lot of confusion over buyer touring agreements and about bad advice floating around for agents to encourage buyers to enter into agreements with the promise of being able to amend them later.
“That gives us grave, grave concern because for any legally enforceable contract, you have to have four basic elements inherent in any one of these. One is a valid offer, two is a valid acceptance, three is adequate consideration and the fourth principle is mutual consent or what’s known as ‘a meeting of the minds.’ So when people are entering into these agreements or being forced into that or being told, ‘Well, we’ll just amend it later,’ then those four elements of the contract are not present.”
Walker said that the DOJ’s Statement of Interest provided helpful guidance surrounding these concerns.
“When the Department of Justice speaks on an issue affecting real estate, it’s prudent for us to listen and try to understand that perspective,” he said. “We found their perspective to be very insightful and something that definitely caught our attention and was an additional reason for us to pursue HB 230.”
The NAR settlement allows some flexibility in what kind of written agreement must be in place before a home showing, with agreements ranging from non-exclusive touring agreements to more stringent services agreements, all of which must stipulate how much an agent is being compensated.
NAR’s settlement specifies that state and federal law supersede the settlement itself, and a FAQ page on the association’s website explains that written buyer agreements are required prior to touring a home unless the state law specifies that a written buyer agreement is required even earlier in buyer dealings.
Leighann Turner, an agent with RE/MAX Platinum in Decatur, Alabama, called the new law “freakin’ awesome” in a call with Inman on Monday.
“I think it was totally taking away the buyers’ rights making them sign something with somebody they may not even want to work with or that may not even work well with them, and you shouldn’t have to sign anything just to go in and freely view anything,” Turner said. “So I think it’s a win totally to keep RECAD [Real Estate Consumer Agency Disclosure] at the top of the list and let the buyer choose.”
She added that requiring homebuyers to sign a contract just for a home tour was like “asking somebody to get married when you don’t even know who they are,” and an additional step that created confusion and stress for homebuyers.
Beth Medley of Keller Williams in Huntsville said she thought the new law would encourage homebuyers to create stronger relationships with agents, get to know them better before entering into an agreement with them, and hopefully find a better fit in the process. Since the settlement terms went into effect last August, Medley said she’s made more connections with potential homebuyers because they need a written agreement to tour a home, but she felt it was likely not in the consumer’s best interest.
“What I’m finding is happening since the lawsuit, and more intensely probably in the last couple of months, is buyers are not calling a buyer’s agent,” Medley said. “They’re calling the listing agent when they want to see a property.
“And that can be good or bad … it’s great for the listing agent. It’s been good for me, I’ve picked up some clients. But if you think about it, we’re supposed to focus on what’s best for the consumer — not agents, not Realtors, but for the consumer. The consumer really needs a representative, a Realtor to be supporting them and representing them and [keeping] their best interest at heart.”
The Alabama Association of Realtors is one of a handful of Realtor associations who have questioned the requirement that agents be members of a local, state and national Realtor association in order to qualify for membership in any of those affiliates. In September, the association wrote a letter to NAR CEO Nykia Wright asking NAR to make membership optional.
