PAR Standard Forms Release – Improving Your Transition Game

Well… today’s the day. After months of (hopefully) reading up on NAR’s resources on facts.realtor, reviewing PAR’s revised forms, printed guidelines and webinar recordings, absorbing information from your MLS and then having conversations within your brokerage, today’s the first day of the rest of your career — the day that PAR’s amended forms are released!

We have detailed information about the forms content and usage on the PAR resource page as you need it, so today’s column focuses on the transition period that will be going on through August.

Q: When do I have to start using the revised forms?

A: Today, as soon as your electronic forms vendor gets the revised forms package rolled out because prior versions of the revised forms will be removed from the platforms. There’s a longer explanation that may help better understand what’s going on.

The terms of the NAR settlement agreement require covered MLSs to implement certain rules changes no later than August 17. Those MLS rules changes are technically what guides most of the form changes, so the real answer as to when you truly HAVE TO start using new forms is “whenever your MLS changes their rules.” But MLSs will be making the cutover to those new rules at different times over the next few weeks, so members in different MLSs will have different dates to worry about. Brokerages with a presence in several MLSs could have agents looking at several different implementation dates. There’s obviously no way to time a release for each of you individually, so releasing the forms for use on a single date before the rules change will ensure that everyone has access to the forms and can even practice with them a bit before the rules changes are fully implemented.

Q: Do I need to make changes to the new forms if we sign them before my MLS rules are changed?

A: Be sure to check with your broker about what they feel comfortable with, but major changes should not be necessary. For example, the new listing contract says that a listing broker is not permitted to advertise cooperating compensation in the MLS. That’s technically incorrect since the MLS can be used for that purpose until the MLS rules changes go into effect, so a broker could add some language telling the seller that the MLS will be used for the few days between signing and the rules change. But if you don’t add that clause it would be hard to see a seller being somehow disadvantaged because the MLS was used for a few days without seeing it in the form.

Similarly, the buyer agency forms contain settlement-required clauses explaining that the buyer broker cannot accept any payment greater than the brokerage fee agreed to in the form. While that doesn’t go into effect until the MLS rules changes, the expectation is that brokers would add this language to existing contracts that are missing it (see below), so having it here early allows for a conversation with the buyer and shows them what’s going to be coming up within just a few weeks.

Q: How can I explain these changes to my client?

A: NAR has resources on their website to help with those conversations. PAR’s contribution is through a new temporary form called the Notice of 2024 Practice Changes (Form NPC). Form NPC briefly explains potential impacts to buyers and sellers, as well as their contracts with brokers and each other. This form is not an addendum to any contract but is meant to start the conversation between broker and client to ensure that they’re brought up to speed on the rules that were implemented after their initial signatures and to help discuss whether amending or replacing any of those agency contracts would be necessary.

Q: Will I have to redo listing contracts and buyer agency contracts that were signed before the MLS rules change?

A: Probably, but of course, “it depends.”

Realistically, there are a couple of reasons why most buyer broker contracts will need to be revised and/or replaced. First, the settlement terms and MLS rules will require that any buyer broker fee be “objectively ascertainable” and can’t have a term along the lines of “the buyer agent will simply accept any amount offered by the listing agent or seller.” Any contract that doesn’t have a clear fee (e.g., there’s a zero, it’s left blank or there’s language suggesting that the fee is just a placeholder until learning what the listing broker or seller is offering) will be non-compliant and should be revised/replaced. On top of that, none of the PAR buyer agency contracts signed before August 1 have the language stating that a buyer broker will not retain a fee greater than what was negotiated between the buyer and broker.

Listing contracts are a bit tougher. The primary issue for listing agents is that the PAR listing contract says a listing broker can/will use the MLS to advertise cooperating compensation, but that will be forbidden under the new rules. Form NPC, see above, informs seller that the MLS can no longer be used for that purpose. If this is the only reason an existing listing contract might need to be updated then the notification (and signature) on Form NPC should be sufficient. That said, if the seller wants to make other substantive changes — maybe they want to adjust or eliminate cooperating compensation — it will be necessary to revise or replace the form.

Q: Will I have to change any agreements of sale that were signed before the MLS rules change?

A: You shouldn’t need to, no. The Agreement of Sale is a contract between a buyer and seller and it should not be impacted by rules changes made in the MLS. Even if a party wanted to change a term of the contract there’s no unilateral right to do, so they’d have to request negotiations with the other side who, of course, could refuse to negotiation or make changes.

Q: Will offers of compensation that have already been accepted still be honored after the MLS rules change?

A: They certainly should be, yes. When a buyer broker accepts an offer of compensation from the listing broker, whether by action (submitting an offer) or by contract (PAR Form CBC or some other written agreement), that contract is between the brokers and will not be affected by the MLS rules changes. Though these rules will impact how brokers can advertise cooperating compensation, they don’t stop brokers from making and accepting offers of compensation. As long as the contract is valid, it should still be enforceable after the change.

That said, it might not be a bad idea to print out copies of the MLS listing information prior to the new rules so you have a record of what was in the listing. Or you could get a Cooperating Broker Compensation Agreement (Form CBC) signed to memorialize the amount that’s been agreed to. Neither are absolutely necessary, but both/either could be helpful.

Q: I’m a listing broker. My seller has decided that they want to reduce/eliminate their offer of cooperating compensation after these changes go into effect. What do I do?

A: It depends. If an offer of cooperating compensation has already been accepted, then that amount is already due to the buyer broker and can’t be unilaterally rescinded. Remind the seller that this compensation is already “baked into” the terms of the transaction and neither party has the right to make unilateral changes like that (I sometimes just ask a caller what their seller would say if the buyer sent over a form that said, “I think property values are falling so I’ve decided to just reduce the price of your home by $20,000?”).

But if the property is still being marketed and there is no accepted offer of cooperating compensation, then there’s no reason the listing agent can’t negotiate a new fee provision that makes these changes. At that point, they’d just have to be sure that they’re clear with a potential buyer agent about what the new compensation is, if there is any at all.

Q: This is all terribly confusing — where do I go with my questions?

A: Please start out by reviewing relevant PAR resources if you haven’t already. You can take a look at the Comprehensive Guidelines that review the background of the settlement and explain how changes to six of the key forms will work together in a transaction, view one or more of our recorded educational webinars and/or refresh yourself on the detailed Guidelines for Preparation and Use for each individual form.

After that, your first stop should be your broker/manager. Many of the issues you’ll come across in the next few weeks will come down to broker policies and how they want agents to approach certain scenarios, so if you contact PAR, we will just have to send you back to the broker anyway.

If you have questions after that, the PAR Legal Hotline may be able to help. In fact, it could be even better (for us AND for you), if brokers/managers are able to take the questions in their office and make some of those calls in place of individual agents. A broker/manager answer can help a whole office, while an agent answer may just help an individual agent.