Effective August 12, 2024, the Emerald Coast Association of Realtors (ECAR) will implement new Buyer-Broker Agreement (BBA) forms in Florida, which will officially be required statewide on August 17, 2024. These changes mark a significant shift in how real estate transactions are documented and executed. Here’s a breakdown of what you need to know about these updates and how they might impact your real estate dealings.
Terminology Updates
One of the most noticeable changes is the replacement of the term “Buyer” with “Consumer” throughout the form. This update aligns with the Consumer Financial Protection Bureau (CFPB) guidelines established in 2015, which also refer to individuals in financial transactions as “Consumers.” This change ensures consistency with federal standards and clarifies that the forms now reflect a consumer-focused approach. The term “commission” has also been replaced with “compensation” throughout the form. This change is designed to be more inclusive and reflective of the actual financial arrangements involved. It clarifies that compensation includes any form of remuneration agreed upon between the Broker and the Consumer.
Streamlined Information
Section 3 has been revised to remove previous sections related to price ranges and preferred terms. The exclusion of these details offers better protection for both brokers and buyer agents by focusing on the essential terms of the agreement without unnecessary complications.
Clarification of Broker Duties
A new addition to Section 4 states, “Consumer understands that even if Broker is compensated by an owner or real estate licensee who is working with an owner, such compensation does not compromise Broker’s duties to Consumer.” This ensures that a broker’s obligations to the buyer remain intact, even if the broker is compensated by the seller, thereby addressing potential ethical concerns.
Enhanced Buyer Obligations
Section 5 now includes a new requirement in Section G, which mandates that Consumer must make a diligent, good-faith effort to perform the contract terms of any purchase agreement and to close. This addition ensures that if the buyer goes under contract to purchase a property and then defaults, the compensation due to the broker remains payable.
Retainers and Compensation
Section 6 clarifies that the retainer fee is non-refundable and is earned in addition to the compensation (or Broker’s fee) outlined in Section 7. This change eliminates ambiguity regarding whether the retainer will offset the Broker’s fee under Section 7. Section 7 clarifies that whatever compensation is paid by a seller to Broker will reduce/offset the amount Consumer owes Broker under the BBA.
30-Day Protection Period
The revised Section 8 now includes a default 30-day Protection Period. If the BBA terminates but Consumer closes on a property within the Protection Period, the Broker’s compensation will still be triggered. This provides additional protection for brokers and their compensation.
Conditional Termination
The redefined Section 9, formerly known as Early Termination, addresses cases where Consumer terminates the agreement early but continues to engage in property transactions. If Consumer contracts to acquire any property during the original BBA Term plus Protection Period, then Broker’s compensation is triggered and becomes payable by Consumer.
Legal Constructs and Dispute Resolution
Section 10 is completely revised and now specifies that the BBA is governed by Florida law. It maintains mediation as the initial step in dispute resolution, but now offers the option for arbitration or litigation. Both parties must initial their preference for arbitration; otherwise, disputes will default to litigation. This section also now provides for the recovery of attorney fees by the prevailing party in litigation (if arbitrated, each party bears its own attorney’s fees).
Role-Specific Forms
Section 12 is unchanged and addresses the different types of relationships between Broker and Consumer (i.e, transaction broker, single agent, or non-broker relationship). This ensures that the BBA form is tailored to the specific nature of the transaction between Broker and Consumer.
Additional Terms and Electronic Signatures
Section 13 allows for the inclusion of additional terms. Remember to have an attorney draft any necessary legal terms for this Section. Section 14 confirms that electronic signatures are acceptable and binding, reflecting current Florida statutes and aligning with modern practices. Additionally, a new disclaimer notes that “Broker commissions are not set by law and are fully negotiable,” addressing concerns from the National Association of Realtors (NAR) litigation and settlement.
Broker Compensation from Sellers
Finally, Section 14 of the updated BBA now specifies that Broker cannot receive compensation from Seller in excess of the fee provided under Section 7. Accordingly, if Seller is willing to pay Broker a fee in excess of what is indicated in the BBA, then the BBA will need to be modified (the modification form is forthcoming). However, Broker is entitled to receive compensation from Seller for services rendered to Seller by Broker. This provision offers better clarity and protection for brokers who represent both the buyer and the seller in the subject transaction.
Open Houses and Buyer-Broker Agreements
So what do you do when hosting an open house and showing the property to prospective buyers? In this scenario, the broker/agent is actually representing Seller during the open house and not the prospective buyers. Therefore, there is no requirement for the prospective buyer(s) to sign a BBA or Showing Agreement at the open house. However, if a prospective buyer who visited the open house is not already represented and expresses interest in viewing other properties, then you will need to have the buyer sign a BBA or Showing Agreement. This ensures that you have formal representation of the buyer for subsequent property viewings and transactions.
These updates to the Buyer-Broker Agreement forms in Florida aim to streamline processes, clarify terms, and enhance protections for both brokers and consumers. As these changes take effect, it’s crucial for both parties to familiarize themselves with the new terms to ensure smooth and compliant transactions.
Listen to our latest podcast episode to hear Dion and Ashley share more about these recent changes to the buyer-broker agreement form!