“Why do I have to sign a contract just to see a house?” – Anonymous Prospective Buyer.

By this point, all NVAR members are aware of the changes resulting from a proposed settlement by the National Association of Realtors® (NAR). One change is a requirement that Realtors® must have a written representation agreement with a client prior to offering touring services. Written representation agreements for licensees engaged by buyers have been required of real estate agents practicing in the Commonwealth of Virginia since 2012. The Virginia Code does not require licensees to execute a representation agreement with a potential buyer for the purposes of showing a property. As of August 17, 2024, Realtors® are now required to secure those agreements BEFORE showing a property to a prospective buyer.

Let me be the latest in what is hopefully a long line of people to reassure you that the sky is not falling for buyer’s agents. The value that buyers’ agents bring to their clients in a transaction is clear, and Realtors® are now better articulating that value. That said, whenever there are changes (and in this case, the changes are significant) it’s important to evolve your business practices to ensure your continued success.

“Flexibility is the key to stability.” – John Wooden

Realtors® should be prepared to answer questions and confidently address concerns that a potential client may have about signing a contract “just” to see a property. A great early step is to stop thinking about it as “just” showing a property. The purpose of a showing is to sell the property (or if not that one, then hopefully the next). How often do you simply unlock a door only to then stay completely silent for the duration of the showing? It is more likely that you are (at the very least) asking questions of the potential buyer(s) in order to establish what they are looking for, pointing out features of the property and how it might fit their needs, and then utilizing your expertise to help them determine whether this property is the one for them.

The reality is that some Realtors® do not always meet their legal and ethical obligations to educate their clients prior to the signing of a representation agreement and this failure often results in filings of ethics complaints and arbitration claims. Article 9 of the Code of Ethics says that “…Realtors® (must) make reasonable efforts to explain the nature and disclose the specific terms of the contractual relationship being established prior to it being agreed to by a contracting party.” And no, emailing the agreement to your client with a note that you’ll explain the important points later does not satisfy this ethical obligation. With extra attention now on representation agreements, Realtors® will be well served by having prepared explanations and presentations that both articulate their value and meet their professional obligations.

“The opportunity in real estate right now is going to be open houses...” – Jared James

In a video posted to his Instagram, James further explains that open houses are the one place where you can be in a property with a potential buyer, where you can educate them about the property or the home-buying process, and where you can build a relationship with them without a representation agreement. Keep in mind that this “superpower” is only available to the Realtor® hosting an open house as they are there as an agent of the seller. The final point made by James is that Realtors® might see an increase in traffic at open houses if more potential buyers decline to sign a representation agreement in order to see a property leaving open houses as one of their only options. While it remains to be seen whether buyers in Northern Virginia decline to secure their own representation, it remains true that open houses provide Realtors® with a unique opportunity.

If you will be looking to open houses as one of your business development tools, there are a few things to keep in mind. If you have not already done so, check with your broker to determine your firm’s policy on dual agency. While legal in the Commonwealth of Virginia, acting as a dual agent opens a Realtor® up to an amount of risk that is unacceptable to many. Listing agents might also see an increase in offers from unrepresented buyers, which also may carry several  risk management considerations.

Another item to discuss with your broker is whether you will charge fees for ministerial acts done on behalf of unrepresented buyers. Virginia Code defines ministerial acts as “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.” A ministerial act might be a listing agent drafting a purchase offer at the direction of the unrepresented buyer, but the agent may cross the line if they begin to advise the unrepresented buyer about how they can strengthen their offer or negotiate a better deal.

“REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.” – Article 16 of the Code of Ethics and Standards of Practice of the National Association of Realtors®

Remember, it’s not only unrepresented parties that attend open houses. It is very important that you make appropriate efforts to establish the existence of exclusive representation agreements with all open house attendees. And if you do learn that an attendee is represented by another Realtor®? That is not an opportunity for you to convince them to ditch their Realtor® and work with you (that’s an easy Article 16 violation for a hearing panel). Any experienced Realtor® will have their own story (or stories) about a potential buyer who was mistaken (or dishonest) when asked if they were already represented by another Realtor®, but Article 16 protects Realtors® who, “prior to entering into a representation agreement, … make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement (before providing) the same type of real estate service.”

Real estate can be a challenging career, but that is part of what makes it so rewarding. It is also an industry that rewards agents who pivot most effectively when the industry changes. Open houses are just another tool for your tool belt as you continue to adjust to this new normal. Change is here, so let’s steer into the skid and continue to learn how best to not just adapt, but to thrive – together.