Alabama law: Buyers don’t have to sign contract before home tours

Ivey signed the bill into law on Tuesday after it passed the state Senate earlier this month. The bill was first introduced in early February when it was sponsored in the Alabama House of Representatives by State Representative Randall Shedd (R-Cullman).

Formerly known as House Bill 230, the law reaffirms Alabama’s existing Real Estate Consumers Agency and Disclosure Act (RECAD) framework, with emphasis on early discussions of brokerage services and compensation, but it prevents consumers from signing a contract with an agent early on in their relationship. 

The bill was backed by Alabama Association of Realtors and is in direct response to the Department of Justice’s (DOJ) statement of interest about the National Association of Realtors’ (NAR) commission lawsuit settlement agreement. Under the terms of NAR’s settlement, consumers must sign a buyer representation agreement with their buyer’s agent before touring a property. Nothing in the settlement defines how long the agreement may be for or if it must apply to one or many properties. Despite the flexibility provided, the DOJ still took issue with these agreements.

In its statement of interest, the DOJ wrote that it believes the buyer broker agreements have the potential to “limit how brokers compete for clients.”

“It bears a close resemblance to prior restrictions among competitors that courts have found to violate the antitrust laws in other proceedings and could limit — rather than enhance — competition for buyers among buyer brokers,” the DOJ wrote in its statement of interest.

Alabama Realtors took the DOJ’s threat at face value, with trade association CEO Jeremy Walker telling the Capitol Journal in February that while buyers may want to work with an agent to find a property, “they don’t want to be forced into a buyer agreement too soon.”

“They want to get to know you before they say, ‘Hey, I want to work with you.’ And that’s where we want to get that part right,” Walker added.

While some industry professionals echo Walker’s view on buyer broker agreements, others believe not having your buyers sign an agreement prior to their first home tour is an even greater liability. 

“The reason why the buyer rep agreement is there — and the reason why NAR agreed to it and the lawyers pushed for it — was to remove any potential steering from the conversation,” James Dwiggins, the CEO of NextHome, told HousingWire in early March. “If you are required to sign a buyer rep agreement with an agent, and outline your fees and services in advance of showing any house, there will not be any potential steering issues because you’ve agreed to your rate of compensation before you look at any properties.

“What Alabama is missing in this particular regard is the fact that they’re opening themselves up and their members up for potential steering claims again. I think it is a bad move.”