Beware of These Real Estate Contracts

You may have heard of the term caveat emptor, which means “buyer beware.” This is important for buyers and sellers in the current housing market. More and more buyers are being asked to sign contracts linking them to the real estate agents helping them find a house. Most of these contracts are so one-sided that buyers may want to consider hiring a real estate attorney and working directly with the listing agent.

The Consumer Federation of America (CFA) examined 43 buyer-broker contracts from 37 states. Most of which were lacking in consumer protections and were written to protect the agent, not the client. One of the worst contracts was the draft from the California Association of Realtors. This draft contract was “virtually unreadable,” as the average person would not be able to understand the terms they are agreeing to. The contract disguises the obligation of the buyer to pay their agent.

Multiple listing services are now requiring that buy-side agents obtain clients’ signatures on representation contracts. The contract from the California Association of Realtors contains problematic provisions related to dispute resolution, dual agency, and commissions. It is recommended that they dump the whole contract and start over. The one from eXp Realty, however, is exemplary and could serve as a model for other groups’ contracts. It is written with the buyer in mind.

Buyer agency contracts should be protecting homebuyers, but they usually don’t. They typically protect only agents and their brokers. The unfair practices include the following:

• Charging unreasonable fees that are not counted as commissions
  Limiting remedies for dissatisfied buyers
• Protecting agents and their brokers from uncoupled commissions

“Coupled commissions” refers to the common practice of buyer-agents collecting commissions from both their clients and from sellers. If commissions are uncoupled, consumers will be able to negotiate lower rates. Agents and their brokers will be able to continue colluding to maintain existing commission rate levels.

What Should You Do?

If your agent asks you to sign a buyer-broker agreement, don’t. Get a copy and take the time to read it over carefully. Ask for a 60-day contract, not one that obligates you to work with the agent for 90 days or longer. Do not allow for any penalty clauses for early termination.

Most contracts allow agents to withdraw from the agreement; buyers should have the same opportunity. Bargain hard on what you’ll pay your agent. Agents should be willing to take a lower commission if you are prequalified for financing, are paying cash, or found the property on your own. If the property is overly expensive, the agent should be willing to take a lower cut as well.

Seek Legal Help

Real estate can be a tricky business. There is a lot of money at stake and you need to make sure you are protected.

Real estate contracts can be unfair. You always need to read the fine print. Fort Lauderdale real estate contract lawyer Edward J. Jennings, P.A. can assist you so you make the right decisions. Call 954-764-4330 or fill out the online form to schedule a consultation.

Source:

miamiherald.com/news/business/real-estate-news/article289860509.html