CFA RELEASES CRITERIA FOR EVALUATING HOME SELLER CONTRACT FORMS

Washington, D.C. - This morning the Consumer Federation of America (CFA) released "Proposed Criteria for Evaluating Home Seller Contract Forms." The real estate industry has been revising these forms to comply with the terms of the National Association of Realtor (NAR) Settlement of class action litigation, scheduled for implementation by August 17.

"These criteria will assist regulators, consumer groups, and the industry itself in evaluating the fairness of new seller contracts," said Stephen Brobeck, a CFA senior fellow. "Recent CFA research has shown that these contracts have the potential to harm or help home sellers depending on their clarity and content," he added.

On July 2, CFA released a "Report on CAR's Proposed Seller Listing Agreement," prepared by Tanya Monestier, a law professor at the University at Buffalo Faculty of Law, that criticized the California Association of Realtors (CAR) agreement as neither readable nor understandable as well as containing many unfair contract provisions.

Today, CFA is releasing a new seller contract - "Exclusive Authorization and Right to Sell" - that was prepared by eXp and is being distributed to its brokers and agents. Like a buyer contract form eXp released earlier, the new seller form is understandable and fair to consumers. In 2022, eXp was the largest U.S. residential brokerage firm by number of agents.

CFA's new 16 criteria for evaluating seller contract forms set a high but reasonable standard. Eleven of these criteria are similar to CFA's criteria for assessing buyer contract forms. These include four criteria related to the readability of the contract forms. "If a contract cannot be read or understood, buyers expose themselves to great risk by signing it," noted CFA's Brobeck

The criteria also include disclosure of the actual dollar amount of the commission, criticism of pre-approval of dual agency, and disapproval of any limitation on seller remedies.

Five new criteria, however, involve compensation of listing and buyer agents. The criteria criticize any seller contract that combines seller and buyer agent commissions as violating the principle of the NAR Settlement. Moreover, any seller concessions should never include a dollar or percentage figure. The contract should simply indicate whether the seller is prepared to consider negotiating monetary concessions.

"CFA does not oppose monetary assistance from sellers to buyers, only broker manipulation of this assistance to ensure current levels of broker compensation that are strongly influenced by broker collusion," said CFA's Brobeck.

The criteria also address broker compensation when buyers are unrepresented customers. The criteria include a requirement that listing agents show properties to all prospective customers, including those without an agent. They also accept that agents can request a reasonable fee from these buyers to cover any additional administrative expenses and, if buyers balk at paying this fee, can request the fee be paid by their seller clients. This fee, like the commission, should be expressed in dollars, not a percentage of the sale price.

CFA is encouraged that the U.S. Department of Justice has been investigating CAR's seller and buyer agreements. CAR withdrew their initial forms and made some improvements that benefit consumers. However, CFA still considers the forms to be poorly organized and written in legalese so that consumers are unable to understand them.

On July 16, CFA released "Proposed Criteria for Evaluating Home Buyer Contract Forms."

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