"Navigating the Shifting Landscape: Real Estate Agents, NAR Settlement, and CAR's New Forms"

As the Chief Strategy Officer at Redy and a long-time licensed Realtor in California, I've closely followed the NAR settlement developments. Today, I want to discuss a significant change that is making waves in our industry, particularly in California, and what services real estate agents actually provide.

The California Association of REALTORS? (CAR) has just released 30 new and revised forms, and one change is turning heads: the removal of listing broker offers of compensation.?This move comes in response to the upcoming NAR settlement implementation and recent scrutiny from the Department of Justice.

Why This Matters

This change is more than just paperwork shuffling. It's a proactive step towards aligning with the new industry practices set to take effect on August 17, 2024.?By removing the listing broker's offer of compensation from these forms, CAR is encouraging a shift in how we approach commissions and compensation in real estate transactions.

The Bigger Picture

CAR's General Counsel, Brian Manson, emphasized that while offers of compensation among brokers remain legal, this change aims to lead the industry towards where real estate practices are heading.?It's about adapting to the evolving landscape and staying ahead of regulatory scrutiny.

What's Changed

Here are the key changes in the new California Association of REALTORS? (CAR) forms:

1. Removal of listing broker offers of compensation: The most significant change is eliminating the listing broker's offer of compensation to buyer's brokers from the forms.?This proactive step aligns with the upcoming NAR settlement implementation and addresses recent scrutiny from the Department of Justice.
2. Release of 30 new and revised forms: CAR has released a substantial update, including 30 new and revised forms as part of their semi-annual standard forms update.
3. Timing of release: The new forms will be available starting July 24, 2024, giving agents time to review the changes before the NAR settlement rules take effect on August 17, 2024.
4. Adaptation to new industry practices: These changes are designed to lead the industry towards new practices in real estate transactions, particularly regarding how compensation is handled and discussed.
5. Focus on consumer understanding: While not directly stated in the new form changes, there needs to be more criticism and discussion about making forms more understandable for consumers. This may have influenced some of the revisions, although specific details are not provided in the search results.
6. Proactive approach: CAR's General Counsel, Brian Manson, emphasized that these changes are meant to be proactive, preparing for the practice changes that will take effect on August 17 in accordance with the NAR's proposed settlement.
7. Compatibility issues: Some of the updated forms may not be compatible with previous versions, necessitating the use of the new forms moving forward.

What This Means for REALTORS?

1. Education is key: CAR offers free courses on the new Buyer Representation Form and Residential Listing Form.?I strongly encourage all California REALTORS? to take advantage of these resources. Even though your Brokerage may offer extensive training, there is much to learn about these new forms. I attended the CAR town hall, and it was super helpful.
2. Adapting practices: We must rethink how we discuss compensation with clients and other agents. This change pushes us towards more direct conversations about fees and services.
3. Client communication: It's crucial to clearly explain these changes to your clients. They may have questions about how this affects their transactions. The RLA, BCA, and SPBB have many changes and impacts on Sellers that must be carefully explained.

And The Grid is Back

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How do the new C.A.R. forms affect buyer and seller responsibilities?

Key Changes Affecting Buyer Responsibilities

• Buyer Representation Agreements: The new forms consolidate previous buyer representation agreements into a single Buyer Representation and Broker Compensation Agreement (BRBC). This form includes: Non-Exclusive Representation: Entitles the broker to compensation only when there is broker involvement in the purchase. Exclusive Representation: Entitles the broker to compensation upon any purchase of property during the representation period, with or without the broker's help. Disclosure Obligations: The buyer's broker must disclose any expected or actual compensation from others on a particular property.
• Contingency Advisories: New advisories inform buyers about the risks of making offers without contingencies and the contractual value of loan, appraisal, and investigation contingencies. This aims to ensure buyers are fully aware of the implications of waiving these contingencies.
• Solar Panel Disclosures: A new form provides detailed advisories about solar panel systems, including ownership, leasing agreements, and the importance of reviewing all related documents. Buyers must review and understand these disclosures to make informed decisions.

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Key Changes Affecting Seller Responsibilities

1. Disclosure Requirements: Sellers are now required to provide known information about any property defects and additional disclosures about solar panel systems. This includes answering a detailed questionnaire regarding the solar setup to ensure buyers are fully informed.
2. Proof of Replacement Property: For sellers who have a contingency to find a replacement property, new language requires them to provide proof of having entered a contract to purchase or lease a replacement property if they remove this contingency.
3. Security Deposit Notifications: Sellers must notify buyers about the remaining security deposit and provide an itemization of its use when selling tenant-occupied properties. This ensures transparency and compliance with legal requirements.
4. Clarification of Seller Credits: Changes to the Seller Counter Offer (SCO) and Seller Multiple Counter Offer (SMCO) forms clarify that seller credits in the offer remain unchanged even if the purchase price changes, ensuring consistency and avoiding misunderstandings.

General Updates

• Electronic Delivery Options: The updated forms allow brokers to designate electronic delivery methods for communications, enhancing efficiency and clarity in transactions.
• Incompatibility with Previous Versions: Some new forms are not compatible with older versions, necessitating the use of updated forms to ensure compliance and avoid potential legal issues.

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Based on the changes to CAR forms and the NAR settlement, here are some simple strategies for discussing compensation with home sellers:

1. Be transparent about your services and fees upfront. Explain clearly what services you'll provide as the listing agent and how you'll be compensated for those services.
2. Focus on the total cost to the seller. Rather than discussing buyer's agent compensation separately, present the total commission as one figure that covers marketing, your services, and potential buyer's agent compensation.
3. Educate sellers on the changing landscape. Briefly explain how the industry is moving away from standardized commission sharing and toward more flexible arrangements.
4. Discuss options for handling buyer's agent compensation. Present different scenarios, such as: The seller deciding on a case-by-case basis whether to offer compensation to a buyer's agent The buyer being responsible for their agent's compensation Building in flexibility to negotiate buyer's agent compensation during the offer process
5. Emphasize value over price. Focus on the services and expertise you bring to the table, rather than just discussing commission rates.
6. Use a consultative approach. Ask questions to understand the seller's priorities and concerns, then tailor your compensation discussion to address those specific points.
7. Provide a clear breakdown of costs. Offer a detailed explanation of how your fee is structured and what it covers, to help sellers understand the value they're receiving.
8. Be prepared to explain market norms. While avoiding discussion of "standard" rates, be ready to provide context on typical compensation structures in your market if asked.
9. Discuss potential buyer incentives. If appropriate, discuss how offering buyer's agent compensation might affect the pool of potential buyers and time on the market.
10. Keep the conversation flexible. Emphasize that compensation arrangements can be adjusted as needed throughout the listing process to respond to market conditions or specific buyer situations.

Remember, the key is to have open, honest conversations that prioritize the seller's interests while clearly communicating the value of your services.

What Services Real Estate Agents Provide

Agents Know Your Value

I was thinking about all of the services involved in listing a property; here is a sample for readers of what Agents actually do during the prep of listing a home up until closing:

1. Prepare listing presentation and comprehensive marketing plan
2. Discuss staging or home prep strategies
3. Provide detailed market analysis and weekly market updates
4. Research and share all comparative active, pending, and sold properties
5. Strategic Pricing- price the property using a detailed comparative market analysis
6. Provide a seller net worksheet to calculate estimated proceeds after closing
7. Provide professional photography
8. Upload property information to MLS and advertise on major real estate websites
9. Launch a social marketing strategy
10. Advertising
11. Tour the property and advise on preparation for showings, open houses, etc.
12. Identify strategies for offering compensation to cooperating brokers
13. Provide access to professional information sheets about the property
14. Provide access for Inspections and negotiate repair requests
15. Access for termite and negotiate repair requests
16. Access for Buyers Appraisal
17. Manage all private showing requests
18. Advertise, manage and host broker previews and open houses
19. Present offers objectively, pointing out the pros and cons
20. Prepare counteroffers, amendments, notices, addenda, and other paperwork
21. Handle all negotiations on behalf of the seller
22. Work to satisfy contingencies on a timely basis
23. Coordinate all documents with settlement services
24. Review the preliminary settlement statement before closing
25. Meet Buyer for the final walkthrough
26. Meet Buyer to deliver keys

Here is a sample sheet that summarizes this well...

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Then I started thinking about how much time it takes from pre-listing to post-closing.

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Initial Consultation and Listing Preparation: This stage involves pricing the home, providing staging advice, and preparing marketing materials. It can take up to 5 to 15 hours.

Marketing and Advertising: Creating listings, taking professional photographs, and promoting the property can take an additional 10 to 20 hours.

Showings and Open Houses: Depending on the number of interested buyers, conducting showings and open houses may take 10 to 20 hours.

Negotiations and Paperwork: Handling offers, counter-offers, and preparing necessary documentation typically requires 15 to 30 hours.

Closing Process: Finalizing the sale, including coordinating with title companies and ensuring all paperwork is in order, can take another 5 to 10 hours.

General Range of Time Spent: Real estate agents' time commitment can range from 100 hours or more per transaction.

This variability is influenced by the property's condition, the seller's needs, and market dynamics. I once had a deal that took four months to close.

Closing thoughts…

These updates reflect CAR's commitment to transparency, compliance, and adapting to new industry practices. Both buyers and sellers must familiarize themselves with these changes to navigate real estate transactions effectively. While agents and their brokers will have training on the changes, Real Estate agents will have one of those moments... to reflect on what the heck just happened. I can’t say this often enough: who you hire matters!!!

That is why Redy.com makes so much sense. It is a place where sellers experience fair and transparent proposals from agents who are willing to invest directly in selling their homes. It is also a place where sellers can fully vet potential agents and safely and securely control the rules of engagement. When Agents compete, Sellers Profit.

Looking Ahead?

As industry professionals, we must embrace these changes and see them as opportunities for growth and transparency. The real estate landscape is evolving, and it's our responsibility to evolve with it. Remember, change can be challenging, but it often leads to innovation and improvement. Let's approach these new forms and practices with an open mind and a commitment to serving our clients better than ever. I'd love to hear your thoughts on these changes. How do you think they'll impact your business? Let's discuss in the comments below!

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