The United States Department of Justice has deemed buyer broker representation agreements to be of critical importance in protecting purchasers of real property who choose to employ a real estate professional to guide them through what are often very complex transactions.

The reason is that buyer broker representation agreements ensure that buyers possess a written document identifying the services the real estate licensee will provide, and the terms under which the licensee will be paid. Simply put, agreements of this nature promote transparency. This is also the reason that close to half of all states have adopted laws that mandate the use of buyer broker representation agreements in real estate transactions.

Recognizing the consumer-friendly nature of buyer broker representation agreements, Arizona Representative Gail Griffin brought forth HB2009, which would mandate the use of buyer broker representation agreements by all real estate licensees prior to a buyer touring a home. The language in the bill was drafted to mirror the settlement terms agreed to in the Sitzer-Burnett class action lawsuit.

The bill received widespread industry support, including the support of the Arizona REALTORS®, Arizona Mortgage Lenders Association, and an esteemed former ADRE Commissioner, just to name a few. It easily passed through both the Arizona House and Senate with bipartisan support. Because of the benefits of buyer broker representation agreements, legislators on both sides of the aisle agreed  it was important for HB2009 to be signed into law. As a final step, the bill landed on the desk of Governor Hobbs for signature.

Unfortunately, the Arizona Department of Real Estate lobbied in opposition to the legislation, seeking the support of legislators, industry stakeholders, and the very same licensees the Department regulates, including members of this association. The Department then asked the Governor to veto the legislation. Relying on the advice of her cabinet member, to the detriment of buyers and real estate professionals Governor Hobbs did just that, issuing her veto on Tuesday, June 18^th.

Approximately one month prior to the veto, the Arizona Department of Real Estate was asked to identify in writing its concerns with the legislation. To the dismay of industry stakeholders, the Department failed to do so. However, roughly 48 hours before the Legislature adjourned “Sine Die” for the year, long after the deadline for amendments to be considered, the Department did propose an overly broad and burdensome amendment that would have undermined buyer representation as we know it and likely have rendered the entire statute unenforceable. Lobbyists for the Arizona REALTORS® ultimately learned that the Department expressed concerns about buyer broker representation agreements frequently being used by real estate professionals to “trap” buyers into employment agreements and then abandon them, making licensees sound unprofessional at the expense of their clients. Any such concern is easily dismissed.

First, HB2009 does not dictate the specific agreement/form that must be used, nor does it require that the agreement be exclusive in nature. The Arizona REALTORS® publishes standard forms for use by its members in their real estate transactions and has been doing so for decades. One new form approved for release is an Agreement to Show Property. This form is non-exclusive, meaning that a buyer can enter into a hundred different such agreements with a hundred different real estate licensees. If choosing to use this form, contrary to the allegations asserted, the buyer will in no way be “trapped” in an exclusive buyer broker representation and they will not owe a commission to multiple licensees. When using this form, the buyer is responsible for compensating only the licensee who represented the buyer in the successful purchase of the property indicated on the purchase contract. The Governor was therefore asked to keep in mind that HB2009 “will not force buyers to remain in representation agreements that they no longer wish to be a party to.”

As former Arizona Department of Real Estate Commissioner Judy Lowe expressed to the Governor, “Supporting this bill aligns with your ongoing commitment to consumer rights and economic fairness. By endorsing the Arizona Buyer Representation Bill 2009, you will ratify a platform that supports fair treatment and professional advocacy that all of our Arizona home buyers deserve.”

Second, real estate licensees are generally paid only if they represent their buyer in the successful purchase of a property. The allegation that real estate licensees enter into buyer broker representation agreements and then abandon their clients is simply false. Like all professionals, real estate licensees want to be compensated for their services. They are therefore highly incentivized to diligently represent their client’s interests and their successful purchase of a home.

Pursuant to the terms of the Sitzer-Burnett lawsuit, REALTORS® will universally use buyer broker representation agreements to ensure that buyers know: (i) the services their agent will perform when representing them; (ii) how and when their agent will get paid; and (iii) how much their agent will earn. Other real estate licensees may choose not to utilize such agreements due to the Governor’s veto, again showing the value of using a REALTOR® as we continue to hold ourselves to a higher standard.

We are beyond disappointed in the Governor’s veto of this simple and logical piece of legislation and the fact that her veto was based on misrepresentations and false allegations that portrayed Arizona REALTORS® as unprofessional. Our association will nevertheless continue to serve its members and protect the interests of the public as we have done for decades.