JUNE/JULY 2012 WWW.VAREALTOR.COM20

ChangeBy Blake Hegeman and Andrew Kantor

Many Realtors® are already meeting these requirements; most of these changes simply put longstanding best practices into law. But VAR had specific reasons for advocating for the new law.

The law helps keep consumers fully informed about the real estate services they’ll receive and the nature of their relationship with the licensee. It removes ambiguity, and puts everyone on the same page.

® The new law protects licensees by ensuring they provide full disclosure to the people they work with — and that the nature of the brokerage relationship is clear, unambiguous, and in writing. This can reduce a lot of consumer confusion — and the potential for lawsuits.

The law is intended to make sure that licensees who practice dual agency are fully informing consumers about the risky nature of that relationship. 

On July 1, Virginia’s real estate agency law changes — this is the law that governs how Realtors® and their clients do business together. The changes are far from monumental, but they are going to impact some of your more common client interactions.

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There are three notable

changes to the law:

VOLUME 19 ● ISSUE 3 JUNE/JULY 2012

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Brokerage agreements must now be in writing. Further,they must be signed as soon as you engage in any kind of

“licensed activity” on your clients’ behalf. In other words, anything that requires you to have a real estate license. (More on that in a moment.)

So if you’re used to working with buyer clients on a handshake basis, and pro-viding the brokerage agreement later in the game (e.g., when an offer is made, or when you submit a contract), you’ll have to treat the process more formally. Specifically, starting July 1, before you do any real estate-related licensed activ-ity, you’ll have to have your client sign VAR form 450/460 — Exclusive/Non-Exclusive Right to Represent Buyer Agreement — or whatever equivalent form your company adopts. (A brokerage agreement is required for seller representa-tives as well, but this is typically fulfilled by the listing agreement.)

Your brokerage agreement must contain, at an absolute minimum, the following:

will provide. (Your bro-kerage may already have standard language for this section.)

how and when they will be paid.

-ment; if this is omitted, the law assumes it’s for 90 days. Traditionally, some agents

have waited until later in the client relationship to ask for a signed agreement, even to the point of including it with documents at closing. But best practices have always suggested you provide this sooner and in writing. And as of July 1, the law requires it as well.

The law requires that once an agent and a buyer have agreed to work together to purchase real estate, they must put their agreement in writing before the agent can begin to actually perform any licensed activity. Licensed activity means doing anything for a consumer you represent that only someone holding a real estate license is permitted to do. Some examples (and this is obviously not a comprehensive list):

make or ask for.

Before you engage in any of these (or other, similar activities with the intended outcome of bringing together a buyer and a seller), you must have your client sign a brokerage agreement.

do

A signed agreement doesn’t have to be a long-term contract — it can be for a month, a week, a day, or even to show a single property.

The agreement can stipulate that you are acting as a standard agent, a limited-services agent, or an independent contractor. (See the glossary for details.)

Brokerage agreements do not have to be exclusive.

Brokerage agreements

The most significant change is

fairly simple and straightforward:

There are two common ways of doing this: designated agency and disclosed dual agency. Both relationships require a written agreement signed by all parties. For designated agency, that’s VAR form 103; for dual agency use VAR form 101 (for residential) or 102 (for commercial) — or your company’s equivalent.

Of the two, designated agency —when a principal or supervising broker assigns different licensees within the firm to represent exclusively the seller and buyer, respectively — has far fewer pitfalls.

Dual agency is a much more controversial — and difficult — relationship, and it comes with significant limitations to the services you are legally allowed to provide either client. Because of that, starting July 1 the agency law will require you to provide those clients with new, specific language that more clearly explains those limitations. These are called “enhanced disclosures.”

merits of specific terms, offers, or counteroffers.

its condition (except the disclosures required by law for seller representatives).-

ing to the transaction. In short, both clients receive a reduced service level, but usually with no

reduction in fee. (The only exceptions to these rules are commercial transactions, and certain situations in which existing clients come together.)

These limitations are not new. Further, it’s long been the law in Virginia that licensees were required to explained to clients who contemplating a dual-agency relationship that the services and representation they’d receive would be dimin-ished. However, industry leaders, educators and regulators have been concerned for some time that in practice, many agents were not disclosing these caveats as clearly and thoroughly as they should. The enhanced disclosure requirements that take effect July 1 are intended to assure full and accurate disclosure.

There will be one major exception to the requirement to give the “new” disclosure of the consequences of dual agency to your clients.  You may continue to use the more limited form of agency disclosure (the one found in current VAR Form 100) when a current seller client and a current buyer client — with whom you already have pre-existing brokerage agreements — come together in a transaction.

Enhanced disclosure of dual agency

When an

unrepresented

person is interested

in a property you

have listed, you

might be tempted to

keep the entire trans-

action in the firm and

represent both sides.

Words and phrases and clauses:With the new agency law, there are some terms you might hear every now and again, and some others where it’s crucial to understand the difference.

The new agency law still allows you to represent your client and treat the other unrep-resented party as a customer; the Virginia Real Estate Board Regulations allow you to perform ministerial duties for a customer (even for a fee, if you negotiate one). VREB regulations define 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.”

Some examples of ministerial acts you can do for a customer include:

the terms of the contract is reserved for your client and

A standard agent has a list of mandatory duties outlined in the Virginia Code; an example is “[r]receiving a and presenting in a timely manner written offers and counter-offers to and from the seller and purchasers, even when

When a client does not want a Realtor® to perform

limited-services agent or an independent contractor. The

A limited-service agent performs, not surprisingly,

client. In effect, it’s taking the list of everything a full-

isn’t interested in.

the following criteria:1. It discloses that the licensee is acting as a limited-

services representative.2. It provides a list of the specific services that the

licensee will provide to the client.3. It provides a list of the specific statutory duties of a

standard agent that the limited-services representative will not provide the client.

4. It includes this language (or its equivalent):By entering into this brokerage agreement, the undersigned do hereby acknowledge their informed consent to the limited service representation by the licensee and do further acknowledge that neither the other party to the transaction nor any real estate licensee representing the other party is under any legal obligation to assist the undersigned with the performance of any duties and responsibilities of the undersigned not performed by the limited ser-vice representative.Another form of representation is that of an indepen-

dent contractor

estate licensee is acting as an independent contractor and not as an agent. (This has nothing to do with your

the terms are the same.)

specifically for use when a Realtor wants to act as an independent contractor, tentatively titled “Independent

You have a client when you have

means you’ve agreed to perform licensed activity for that consumer (licensed activity is performing services that only someone holding a real estate is permitted to do).  Once you’ve agreed to perform the licensed activ-

you as the person’s agent or representative. A customer

or her own agent. You cannot give advice to a customer -

-gation to represent the interests of your existing client

-

Words and phrases and clauses:

Working with unrepresented partiesIf you already represent a client in the transaction — say, you’re hosting your seller’s open house, or you get a call

writing as soon as you begin any substantive discussion about the property with someone who isn’t your client.

Brokerage Agreement for Unrepresented Parties, for this very purpose.

The idea is to inform the interested party that you’re there as the seller’s representative, and thus speaking with you is like speaking with the seller. (It’s a good idea

house you’re hosting.)

Therefore, one of the first questions you should always

another licensee.

tenant — anyone who isn’t your client and who is not

-

asks you if the seller is willing to reduce the sale price

is willing to agree to paint the house as part of the

Ultimately, it is up to the licensee to determine when

-

disclosure form.

V AR’s Agency Center

Webinar

Visit VAR’s new, growing, and comprehensive site for all things related to the changes to the agency law:

You’ll find a frequently updated list of agency courses throughout the Commonwealth, Q&As on the law, help for navigating transactions, video presen-tations, a new version of the consumer-oriented A Realtor®’s Role (included in this issue!) and more.

If your current license expires you can take the agency course any time between now and your renewal date. (In fact, if your license expires in July 2012, you’ll need the course quickly.)

However, if your license expires you should wait to take the course until after you have renewed your license and your next licensing cycle begins. (You may also take the course now to be sure you’re familiar with the law’s requirements, but you’ll need to take it again, for credit, in your next license cycle.)

Check with your local association or real estate school to find where you can take this course, or browse through the large database of classes compiled at to find one near you. Just be sure it’s listed as “Approved 3 hours CE/PL RSA.”

With all the publicity being given to these changes to the agency law, it’s easy to lose sight of a simple fact: Not that much is changing. In fact, for many Realtors®, the only difference will be switching to using the new forms. (See Forms Factor, page 19.)

The “new” agency law simply codifies longstanding best practices — what should have been standard operating procedure all along. It protects Realtors®

by ensuring they inform their clients quickly and clearly about the nature of what can be a complex relationship. And it protects consumers by giving them the confidence to know up front what to expect from their Realtor®. ●

Starting July 1, in order to renew their licenses real estate agents in

Virginia must take a three-hour course on the provisions of the agency

statute and the changes made in the legislation.

Bottom line

on the new agency law:

featuring attorneys and educators from NVAR, RAR, and VAR.

See the new forms, get real-world examples of dis-closure conversations and

Register today at

Mandatory three-hour class