A young Black couple looks at a contract

Report: Existing buyer agency agreements can harm consumers 

The Consumer Federation of America analyzed 43 agreements and concluded that they generally served to protect agents but offered few benefits to buyers.

February 28, 2024
4 minutes

Key points:

  • The CFA report pointed to a number of "unfair provisions" in buyer agreements from 37 states.
  • The organization said some agreements provided loopholes for agents to inflate commissions even if compensation rules change.
  • As buyer agreements become more common, brokers and agents may need to "grow more flexible about agreeing to customer requests," the CFA said.

As brokerages and agents increase adoption of buyer agency agreements, consumers may be at a disadvantage, concludes a new report from the nonprofit advocacy group Consumer Federation of America (CFA).

The report analyzed 43 agreements from 37 states that were issued by local Realtor associations between 1995 and 2024. It indicated that many of the contracts contained unfair provisions designed to protect agents, but not consumers, such as including unreasonable administrative fees, allowing buyer agents to switch to dual agency or represent multiple buyers competing for the same property, and limiting remedies for buyer complaints.

The 20-page report was released at a time when many brokerage companies across the country are rethinking their commissions strategies and requirements in the wake of a wave of lawsuits challenging compensation practices.

"One important finding is that newer contracts usually permit buyer agents to arrange, with listing agents, additional compensation from sellers beyond what is negotiated with buyers," the report states. "This provision has the potential to thwart any efforts to sufficiently separate buyer agent and listing agent commissions," which could "allow the industry to preserve a fixed rate system even if mandatory offers are prohibited," the report cautions.

In its statement of interest in the MLS PIN settlement, the DOJ cited similar CFA research when making its case that the settlement agreement doesn't go far enough to protect consumers.

"Buyer agency contracts have the potential to protect home buyers, but the way most are written, protect only agents and their brokers," CFA Senior Fellow Stephen Brobeck said in a news release. "If buyer brokers refuse to improve unfair contract provisions, buyers should consider hiring an attorney and working directly with listing agents."

NAR, brokerages advocating for buyer agreements

Buyer agency contracts have become more common in recent years, Brobeck said. Data from NAR shows that about 41% of homebuyers surveyed in 2023 had signed a buyer agency agreement, and that number is likely to rise as more industry leaders push for mandatory buyer agreements.

Gary Keller, co-founder and chairman of Keller Williams, is one of the leaders emphasizing the importance of buyer agreements.

"If you ask me what should change in the industry more than anything else, it's that every one of you leave here and for the rest of your life when you meet a potential buyer, you pull out your value proposition, your service plan, and you pull out a buyer agency agreement — and you go through it and you explain how you work and how you get paid," Keller said during the agency's annual Family Reunion conference this week.

Discount brokerage Redfin is trying to make buyer agreements more attractive to clients through its "Sign & Save" program introduced in early February, which gives buyers a financial incentive to sign.

And NAR has called buyer agreements a "win-win proposition for both real estate professionals and consumers."

Inconsistencies, lack of transparency can harm consumers

But homebuyers who sign the agreements often don't know exactly what the contract covers, the CFA report warns.

It indicated that some agents provide the contracts just before an offer is made, giving buyers little time to consider the content of the agreement, and noted that the language is not only hard to understand, but is inconsistent across different states and MLS regions. Contract length also varied considerably, even when the agreements contained very similar terms, making it harder for some consumers to read and interpret them.

"As buyer contracts are used with greater frequency, buyers are likely to demand more from these contracts, and an increasing number of agents and their brokers are likely to grow more flexible about agreeing to customer requests," the report notes.

As more brokerage companies develop or refine their buyer agreements, they may want to take note of the CFA's advice to consumers. The report made several recommendations for homebuyers, such as insisting that their agent provide the contract sooner so they have enough time to review it, asking for explanations about how to resolve conflicts of interests, or refusing to sign a contract that prevents them from seeking court remedies.

"Regulators including state attorneys general should review these contracts to ensure that consumers, as well as agents and brokers, are protected by them," Brobeck said.

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