Touring Virginia Homes
Section: Buyer Playbook
Author: Susan Isaacs, Washington DC Real Estate Strategist
Unrepresented buyers may request showings from a listing agent, who represents the seller. If the agent has no obligation or intent to represent that potential buyer, and is acting on behalf of the seller, the buyer does not need an agency agreement to view the home. The agent facilitating the showing will, however, require the buyer to sign a Disclosure of Brokerage Relationship stating that the unrepresented buyer understands that the representative works for the seller, not them. Virginia law says this document is needed if you contract on the property in question, prior to settlement.
See § 54.1-2138. Disclosure of brokerage relationship in residential real estate transactions
Why It’s Important To Know The Rules And Law Relating to Agreements
Even agents are confused by the rules, which apply to all MLS participants, not just members of NAR, but which may come into conflict with state or local laws. If you understand the rules and law for your search areas, you’ll have an easier time facilitating your search and engaging an agent when you’re ready.
Virginia law requires written buyer-broker agreements before offering real estate services. Showing homes to a potential buyer when not acting as a representative of the seller constitutes performance of real estate services, and an agreement is required.
An agent representing the seller, but who performs real estate services on behalf of a potential buyer as well, is practicing dual agency and both the seller and buyer are required to formally agree to this in writing before any work is performed.
So, to recap:
An agent who represents the seller is contacted by an unrepresented buyer who wants to tour the property the agent has listed. Is an agreement required? No, as long as the agent does not perform any real estate services for the buyer. But there is a disclosure form required from the buyer;
An agent who does not represent the seller is contacted by a buyer who wants them to show a home. Is an agreement required? Yes.
Who Is Required To Follow These Rules?
The rule applies to any MLS Participant “working with” a buyer will be required to enter into a written agreement with the buyer prior to touring a home, including both in-person and live virtual tours.
While it has long been a recommended “best practice'“ for agents to obtain a signed agreement prior to performing any work for a home buyer, it is no longer optional. The National Association of REALTORS® settlement, which is enforced by REALTOR® controlled Multiple Listing Services, requires all MLS participants working with buyers to have a written agreement prior to home tours. This applies to NAR members, and other real estate agents, as well.
Types Of Agreements
Various types of agreements exist, and which ones are used depend on location, circumstances and the brokerage involved. The NAR settlement does not dictate:
The type of relationship between the broker and potential buyer (agency, non- agency, exclusive, non-exclusive, subagency, transactional, customer)
Term of the agreement (one day, one month, one house, one zip code)
Services to be provided (ministerial acts, a certain number of showings, negotiations, presenting offers)
Type or amount of compensation charged;
however many brokerages are specific as to which types of agreements and compensation they offer as part of their practice.
All agreements must include the following:
A specific and conspicuous disclosure of the amount or rate of compensation you will receive or how this amount will be determined, to the extent that you will receive compensation from any source.
The amount of compensation in a manner that is objectively ascertainable and not open-ended.
A term that prohibits you from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and
A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.
Open Houses, Ministerial Acts And More
Attending Open Houses
Buyers can search third party sites like Redfin and Zillow for a general overview of the market in their desired locations before deciding on representation, and attend open houses to see what various price points offer in the way of condition, square footage, finishes and other property attributes.
Open houses are the only exception to the requirement for an agreement prior to touring.
But while buyers will be able to tour the homes, they will not be able to obtain more than rudimentary information, as anything more can constitute providing real estate services, which requires an agency agreement.
Hosts of open houses are not necessarily the listing agent working on behalf of the seller. It may be an agent associated with the listing agent. These are agents affiliated with the same brokerage, perhaps on the listing agent’s team. They are interested in meeting buyers who have not yet chosen an agent, or who are acting as a fill-in for a listing agent unable to host. Hosting agents are not the experts on the homes they host, that would be the listing agent. Hosting agents must be mindful of the restrictions involving providing service without a written representation agreement, and crossing the line into dual agency territory.
Unrepresented buyers may experience difficulty or delays in touring homes without an agent, not for any nefarious reasons, but because of the practicalities involved. While listing agents want to facilitate all possible showings for their seller, touring unrepresented buyers poses vetting and scheduling difficulties as well as safety risks:
Unrepresented buyers have not been vetted by an agent or lender. The listing agent can not be sure they possess the qualifications to purchase the home, intend to proceed with a purchase in a timely manner, or are even who they say they are;
Listing agents may not be available, particularly on short notice; to meet a buyer for a showing. In the past, this task would often be assigned to another agent, who would hope to gain the buyer’s business. Now, however, that agent can’t show the property as a representative of the seller without an agreement, either;
Some brokerages may allow the use of touring agreements for unrepresented buyers. This practice may or may not involve a fee, and the terms of these agreements vary according to their source;
Buyers can’t count on attending open houses to access the full scope of available inventory since only a percentage of listings hold open houses;
Northern Virginia real estate often sells quickly. Delays of any kind can cause a buyer to lose the opportunity to purchase a home;
Unrepresented buyers will need to source off-market listings. Over a million off-market homes have been sold in the U.S. this year. A significant portion of DCMA real estate is sold as ‘pocket listings’ or ‘private exclusives’ on broker networks.
We suggest that unrepresented buyers wishing to tour a listing:
Be prepared with a pre-approval letter from a local, reputable lender whose contact information is included on the letterhead and offer it to the listing agent;
Provide your name, phone number and email address when making the request and include a brief description of your home search;
Advise the listing agent of your status regarding agency: unrepresented, or working with an agent who is unavailable to facilitate the showing (provide the agent’s name and contact information as the agent should be the one to arrange the showing);
Request tours as far in advance as possible;
Request tours during normal touring hours;
Ask if there are any showing restrictions (such as 24 hour notice to tenant, or showing days/times restricted by homeowner occupant);
Put the showing request in writing in addition to making a phone call for the best chance of receiving a timely response;
Attend an open house if one is available.
Find an agent willing and able to effect a touring agreement to show the property.
What Are ‘Ministerial Acts’?
A ministerial act is an action performed in a specific way and according to legal authority, without using personal judgment or discretion.
Ministerial acts are performed by person or persons who follow explicit instructions from a statute or other legal authority. In general, ministerial acts are routine tasks that a real estate licensee can perform for a person without using their own judgment or discretion. These tasks are administrative in nature and support the transaction without providing advice or representation.
According to NAR’s definition of ‘working with the buyer’, listing agents are permitted provide access and answer general questions without any document being signed. Beyond those two things, the listing agent would be considered ‘working with the buyer’ and a Buyer Agency Agreement must be signed.
“Ministerial Acts”, as defined by code In Virginia:
The term “ministerial acts” means those routine acts which a licensee can perform for a person which do not involve discretion or the exercise of the licensee’s own judgment.
Code of the District of Columbia | Real Property
§42-1702”
Subchapter I. General §§ 42-1701 – 42-1709
*We cannot interpret this code relating to particular acts. Consult a legal expert.
Procuring Cause
What is ‘procuring cause’ and how does it affect buyers and sellers?
Procuring cause as it relates to real estate identifies the brokerage earning compensation as a result of an uninterrupted chain of actions that assisted the buyer in purchasing a property.
The agent who initiates a series of events or activities that leads to the sale is considered the procuring cause. This could include activities such as finding interested buyers, arranging showings, negotiating offers, and facilitating the transaction. This does not mean that showing the property defines procuring cause.
The agent who tours the property with the prospective buyer is not necessarily the procuring cause of the sale, and the fact that an agent was not the one to cross the threshold with the buyer for the first time does not prevent an agent from being the procuring cause. Instead, factors in procuring cause are timing, efforts and influence, and the entire course of events.
In a procuring cause dispute, an arbitration hearing panel reviews these factors to determine which broker qualifies as the procuring cause of the sale.
Buyers And Procuring Cause
If a buyer enters into multiple non-binding touring agreements, enters into non-exclusive buyer agency agreements with multiple brokers, or changes agents during an offer or sale transaction, a dispute regarding procuring cause may arise.
Disclaimer
We are not attorneys, legal experts, investment counselors, or CPAs. The content on this channel is presented for informational purposes only and derived from reliable sources, but should not be considered legal, financial, investment, transaction or real estate practice advice. Susan Isaacs and Compass, their principals and/or representatives, do not guarantee or warrant its accuracy, completeness, or applicability to any specific real estate transaction. Homebuyers should read applicable D.C. law and code as part of their due diligence, and seek help from licensed, qualified professionals for interpretation and application to their specific transaction.