Navigating the Buy-Side Texas Contracts Under New NAR Rules: A Guide for Agents

 📊 Want a visual aid? Request a copy of the detailed flowchart I created to simplify this process! Get it here: https://forms.gle/q9FC9N1vAFbvogTn9

In the past few weeks, we’ve covered critical updates affecting the real estate industry. Two weeks ago, we reviewed the listing documents required under the new National Association of Realtors (NAR) rules. Last week, we discussed the latest changes to contracts. Today, we’ll focus on the buy-side of these contracts—a complex area that many agents find confusing. If you’re looking for a visual aid, click the link in the description to request a copy of the flowchart I’m using to stay on track. Now, let’s dive in!

Understanding the Buy-Side Flowchart

The flowchart outlines the steps involved when working on the buy side of a transaction. The first step is filling out the Buyer Representation Agreement, which can be either a short form or a long form.

**1. Short Form Buyer Representation Agreement**

The short form is designed for agents who are primarily providing showing services. It’s not recommended for full-service representation because it offers limited protection. In this form, you’ll fill out standard fields, such as the parties involved, and specify whether you’re providing full or showing-only services. Key points include:

- **Broker Obligations**: If you select "showing service," some paragraphs, including 6, 7, and 8, do not apply.

- **Compensation**: The client agrees to pay the broker a fee, which must be routed through the broker and not directly to the agent.

It’s important to note that the short form should only be used in showing-service scenarios. If you start with this form but need more comprehensive coverage later, you can always amend or terminate the agreement and switch to the long form.

**2. Long Form Buyer Representation Agreement**

The long form is straightforward and covers all aspects of the buyer-agent relationship. This form offers the best protection for both you and your client. Key areas include:

- **Market Area**: This section must list specific counties, such as Harris County, Fort Bend County, Montgomery County, etc. Avoid ambiguous terms like "and surrounding areas."

- **Broker Compensation**: Outlines how and when the broker is paid. This section is crucial, especially if the seller is not offering compensation to the buyer’s agent, as it ensures the buyer pays the broker's fee.

**Handling Compensation: What Happens Next?**

Once the Buyer Representation Agreement is signed, the flowchart guides you through scenarios involving compensation:

- **Is Compensation Being Offered by the Seller?**

- **If No**: Proceed with negotiations and contracts, knowing the buyer is responsible for the broker’s compensation.

- **If Yes**: You can use the Addendum Regarding Broker Fees, attached to your purchase contract, which details how broker fees are handled.

**Addendum Regarding Broker Fees**

This document specifies how the listing broker and buyer’s broker will be compensated. It’s only applicable when there’s no separate compensation agreement between the seller and the other broker.

- **No Cooperating Compensation**: If the seller isn't paying the buyer's broker directly, this form is essential.

- **Cooperating Compensation**: When the seller pays the listing brokerage, and the listing brokerage pays the buyer’s brokerage, you'll use form 242, which establishes the compensation agreement between brokers.

**Amendments and Changes to the Buyer Representation Agreement**

Sometimes, circumstances change, and you’ll need to update the original Buyer Representation Agreement. Use the Amendment to Buyer Representation form (Form 1505) to:

- Change the market area, end date, or other specific terms.

- Switch from showing services to full services.

- Adjust broker fees if new compensation arrangements are agreed upon.

**Key Takeaways: Disclosure and Compliance**

These contract updates emphasize the importance of transparency in real estate transactions. Always ensure that your agreements reflect the most current terms, and remember to amend documents as necessary. Disclosure is key—clients must be fully aware of any compensation or bonuses you receive.

By staying organized and following the flowchart, you can navigate these updates confidently and provide the best service to your clients. For a copy of the flowchart that simplifies these processes, click the link below to get yours.

Have a great day, and see you next week!