New Alabama law: Buyers can tour homes without a contract
Buyer agreements “are a good thing,” Alabama Realtors CEO says, but the law, inspired in part by the DOJ, gives consumers and agents more time to negotiate.
A new law in Alabama makes it clear that would-be homebuyers in the state can't be forced to sign a binding contract just to look at a home — an update to the previous law and a response to potential "red flags" about buyer agreements, the CEO of the state's Realtor association told Real Estate News on Friday.
"We think written buyer agreements are a good thing. They are healthy. They're good for consumers. They're good for our members," Alabama Realtors CEO Jeremy Walker said. "It's good to have the terms of representation in writing, clarity for both parties, but you've got to be sure that people have adequate time to consider the terms and negotiate those terms."
Enter House Bill 230, which was passed unanimously by Alabama lawmakers and signed Thursday by the governor. The new law, which will take effect in a month, was created to head off workarounds like a potentially risky "sign now, amend later" approach to buyer agreements and compensation, Walker said. It was also inspired by the Department of Justice statement of interest on the topic, in which the DOJ said a buyer agreement signed before a home tour could limit competition.
How we got here: A key part of the National Association of Realtors' $418 million deal to settle commissions lawsuits is the requirement that buyers sign an agreement with an agent before getting a tour of a home. And that agreement must spell out how the agent will be paid.
While these agreements can take a range of forms — from a non-exclusive "touring agreement" to more robust contracts with varying degrees of consumer-friendliness — they must be in place, or agents are potentially putting themselves at risk of being sued.
The NAR perspective on state laws about agreements: The National Association of Realtors says that state law prevails over the terms of the NAR settlement, at times adding the caveat that this applies when state law requires a buyer agreement sooner than the settlement does.
However, the settlement itself says it applies "unless inconsistent with state or federal law."
Alabama's new law appears to align with the text of the NAR settlement — and with Colorado's approach. Regulators in Colorado have made it clear that state law does not require potential buyers to sign an agreement before touring a property.