Is There a Difference Between Tour and Open House?

Mark Twain once said: “The difference between the almost right word and the right word is really a large matter. ’tis the difference between the lightning bug and the lightning.”

What about the words used in the 108-page proposed NAR Settlement Agreement. Is there a meeting of the minds as to the intent of some of the meanings? Words like compensation, concession, closing costs, buyer broker agreements, and tours. Unfortunately, there is a mix of interpretations from a large group of interested folks who are closely scrutinizing these keywords — attorneys, NAR leadership, associations, licensing law officials, and MLSs who are tasked with creating practice change rules and forms by August 17 deadline.

And, of course looming in the background with their own analysis is the ever powerful DOJ and FTC. Remember, the DOJ is not a party to the Settlement, and already has its crosshairs on NAR in another lawsuit.

What are the national and local trainers/coaches telling their panicky audiences thirsting for reliable “guidelines” to help the agents clearly understand the best practice steps in the new landscape. To this end, we’ve asked several recognized educators/trainers who currently present nationally both Residential Seller training and Buyer training to share their input with us (labeled “Trainer input”) based on their student reactions to the evolving environment of real estate practice post-settlement.

To all the disruption and confusion, add the chatter on social media from “some who may not be right, but are never in doubt.”

Let’s start with a discussion on the use of the word “tour” and its requirements.

What does it mean to tour a home?  Here’s the NAR interpretation at FAQ # 57 —  will this interpretation be acceptable to plaintiff attorneys, the Judge, the settling parties? Click here for NAR Facts

” Written buyer agreements are required before a buyer tours a home.
Touring a home means when the buyer and/or the MLS Participant, or other agent, at the direction of the MLS Participant working with the buyer, enter the house. This includes when the MLS Participant or other agent, at the direction of the MLS Participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.
A “home” means a residential property consisting of not less than one nor more than four residential dwelling units.”

  • The role of the listing agent is different at an Open House for the public than at a scheduled tour initiated by a request from a cooperating buyer agent. At the Open House, the listing agent needs to take meaningful steps to make sure that visitors understand that the listing agent represents the seller in disclosing facts about the listed home – they can do this by posting Open House signage that says the lister represents the seller, including an optional sign-in log, and asking the visitor if they are working with another agent?

In a recent FAQ from the California Association of REALTORS (C.A.R.), they asked this question  “Is an agent holding an Open House required to have every visitor who enters the open house sign a registration/log-in sheet, a non-agency agreement, or a buyer representation agreement?”

  • The response from C.A.R. was that the best practice is to ask adult visitors to sign in, but not require it. C.A.R. is currently creating several forms to help agents clarify their role.
  • Under C.A.R.’s proposed Open House Visitor Non-Agency Disclosure and Sign-In form, the visitor will be acknowledging that the agent at the open house is acting on behalf of the seller and is not representing the buyer. On the form, the visitor also can identify if they are working with another agent, so the listing agent can follow up with future discussions of interest – this makes it as evident as possible that this is not a fact listing agents want ignored.  Some listing agents will text, email the buyer agent after the open house to let them know their client was there and offer to set up an appointment to take them back through.
  • If the unrepresented visitor indicates an interest in creating a working relationship with the agent, then the visitor would be asked to sign either a non-exclusive Limited Property Representation form that only applies to the open house property for a short term, or to sign a full Buyer Representation and Broker Compensation Agreement (in a dual agency status). Trainer input: great if that is what the office policy is or the state requirement.  The whole point is informing the buyer who works for whom and what their options might be.
  • If the visitor refuses to sign anything but instead only wants to view the property, then it is advisable for the open house agent to refrain providing any information about the property other than what is on the information sheet prepared by the listing agent. Engaging beyond that may lead the visitor to believe that the open house agent is acting as their agent, and thus evidence an unintended dual agency. If the visitor keeps pressing for more information, the open house agent should best say they cannot provide such information unless the visitor is willing to sign in.
  • Trainer input: “Some agents should act like Sgt Joe Friday – just the facts, ma’am. Facts don’t lead you into “substantive discussions”. The problem is often that Consumers will start the substantive discussions e.g. “Do you think the seller would pay all my closing costs?” Does the contract allow me to extend the closing?”
  • Trainer input – “rather than re-invent the wheel, states should look to the states that have required written agreements prior to providing services to buyers for years.  It is not advisable to ‘throw paper at people’ when the agent/seller has invited random members of the public to check out their property.  Instead, in those states, what has been more of a consumer awareness process would be to post a plaque or inform all attendees who the agent represents and either offer the buyer representation as well or not depending on the office policy of the firm and any state law that might apply.  We posted a plaque that stated – “our firm proudly represents the seller in the sale of this property – we may offer you representation as well” or “our firm proudly represents the seller in the sale of this property and we may offer you assistance only.”

Further thoughts:

  • Many states have non-exclusive ‘non-representation’ forms, used often in cases when the agent is representing a buyer and the seller is a FSBO. The seller agrees to pay a negotiated broker fee and acknowledges that the seller is NOT represented.
  • A number of states now require written buyer representation agreements, such as Washington, California, Colorado, CT, PA, and many others coming.
  • Scenario #1 – The listing broker places a notice on the Open House signage stating that the broker represents the seller only. In some cases, a represented buyer — in a tight market and with the open house full of other buyers – might untruthfully admit that they do not have an agent, sign a non-representation form, and proceed with the listing agent. They really like the property and want to buy and they are happy with the price and want help to write up the purchase agreement especially with respect to a few contingencies and expanded closing dates, etc – who is going to negotiate that for the buyer? Have you ever noticed some consumers don’t always tell the truth?
  • Scenario #2 – A greedy listing agent tells buyers: “If you really want to get this house, you better work through me” OR today’s variation might be (whether it is true or not) “there’s no compensation offered to a buyer’s agent, but since I’m representing the seller and will get paid by them, you can buy this through me.”
  • Compliance For Compensation vs Concession Needs Clarification — where Saul Klein said: “A “Definitions” section covering key terms in the settlement would have been very helpful. The only people who know what the parties drafting the settlement intended are the attorneys for the Plaintiffs and NAR. We are left to guess what the Settlement negotiators had in mind on Key Elements of the settlement agreement.”
  • Related Reading:
  • NAR Settlement FAQs — Click HERE #54-73
  • Click HEREDoes the DOJ Buy in ?

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