Colorado official: Buyer contracts can’t be required for home tours 

Do homebuyers have to sign a buyer agency agreement before touring a home? The Colorado Department of Regulatory Agencies says no, and the state agency has raised new concerns about buyer agreements with the Colorado Association of Realtors. 

One of the biggest policy changes coming out of the NAR settlement is the mandatory use of buyer agreements, which have to be signed before an agent can show a buyer a home. They're pitched as a way to provide transparency and protection for home shoppers while formalizing the client relationship for agents. 

But there are some new hurdles — specifically in Colorado — to implementing this new professional standard. 

Can agreements be required in Colorado? 

In a letter addressed to Colorado Association of Realtors CEO Tyrone Adams earlier this month, Marcia Waters, the director for the real estate division within the Colorado Department of Regulatory Agencies, said requiring consumers to sign an agreement with an agent before touring a home presents a number of conflicts. 

First, she explained, a real estate license is not even required to tour a property in Colorado, and second, an agreement is not required to show a property. She highlights a statute that covers when an agent or broker is entitled to commission, explaining that it's only once a purchaser is "ready, willing and able to complete the purchase of real estate" and the seller has agreed. 

Waters clarified to Real Estate News that "if you want to have a broker represent you as a buyer agent, you have to sign a contract with them," but reiterated that Colorado law doesn't require that buyers sign an agreement for compensation before touring a property. And because a real estate license isn't required to tour a home, showing a house is "technically not part of the brokerage duties" in Colorado, Waters said. 

Regulators have 'significant concerns'

Waters concludes that mandatory buyer agency agreements — specifically with language implying or expressing compensation — are not consumer friendly. 

"Requiring a consumer to sign a compensation agreement to view a property doesn't meet the criteria in the statute for when a broker is entitled to a commission, nor does it align with the performance of their licensed uniform duties," she explained. 

"The Division has significant concerns about these agreements as they do not appear to align with our mission of consumer protection. Consumers should have the opportunity to evaluate the qualifications of a real estate professional before signing a binding agreement with a broker."

Waters also stresses that the NAR rules apply only to member agents — Realtors — and association-owned MLSs. 

"We have about 52,000 real estate brokers in the state of Colorado and those are not all 'Realtors,'" she explained to Real Estate News. "This is being couched as our entire brokerage population has to comply with this and that's not accurate."

Some consumers feel misled

Additionally, Waters tells Adams that her division has received complaints from consumers who claim agents have presented the buyer agreement as an insurance document and that there is "growing confusion surrounding the requirements of the proposed NAR settlement" and how the settlement practice changes are being implemented in Colorado.

"The consumers were told that the documents were required to be signed to view properties," she explained. "Several consumers signed the documents, thinking they addressed possible liability issues arising from damage that may occur during property showings. They later discovered that they had unwittingly signed listing agreements and are ensnared in contracts with brokers with whom they do not want to represent their interests." 

Waters told Real Estate News that agents or other real estate professionals who had engaged in this type of activity will "see disciplinary action." 

Scrutiny, concern surrounding implementation of buyer agreements

While NAR and top brokerages have promoted the benefits of buyer agreements since the settlement was first announced in March, consumer watchdogs and government lawyers have criticized some agreements and cautioned that buyer agreements are not always pro-consumer. 

And some industry insiders predicted issues similar to what Colorado regulators are seeing. 

At a conference for real estate journalists last month, Maurico Umansky, founder of The Agency, warned of friction between agents and consumers caused by buyer agreements. 

"Here's what's going to happen: You're a buyer, and you come to me and you say, 'Hey, I want to go look at this house.' And I say to you, 'In order for you to look at this house, you've got to sign this buyer agreement.' But the buyer agreement that I have you sign makes me your exclusive agent for the next three years and you don't really realize that," he explained.

"You walk into the house with me and you hate me and you're like, I don't want this guy representing me. And I'm like, 'Well, you have no choice. You just signed an agreement that says I'm your exclusive person for the next three years.' Right? You're gonna be suing me. It is going to be the biggest mess on the planet."