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Make no mistake about it — the smartest thing you can do when representing buyers is to have them sign a full buyer broker representation agreement (BBRA) when you first start working with them, along with whatever agency documents your state requires.
Shortcutting the process by using so-called “touring agreements” that have been recommended by companies like Zillow, numerous brokers and industry experts can be fraught with very serious problems. In my opinion, it’s simply not worth the risk.
While most “touring agreements” aim for simplicity and are, in many cases, designed for statewide or national use, these shortcuts can create massive issues for both you and your buyers. Before you sign any touring agreement with a buyer, here are the issues you need to consider.
Agency issues
Of all the sticky wickets in real estate, agency relationships are among the most difficult due to the hodgepodge of discrepant rules and regulations. A Google search identified 13 different types of agency relationships, and there are hundreds of variants within these 13 major categories.
The Zillow Touring Agreement is a prime example of this issue. Errol Samuelson, chief industry development officer for Zillow, said, “Our touring agreement – which expires after seven days and covers touring activities only – does not require compensation or exclusivity. That’s by design. We believe any negotiation of compensation, and what it will look like for the buyer and agent to work together, should happen after both meet and feel ready. At the time when an additional agreement is signed, the buyer and the agent should be aligned on all terms and expectations, including compensation, with no surprises.
Regardless of what any touring agreement says, if the agent does not have their state-required agency documentation agreement signed at the same time, that agent may have just put themselves in an implied agency situation with all the risks that go along with full agency representation.
According to the NAR website:
In real estate transactions, agency is often formed without the signature of the client, so it is up to the real estate professional to keep track of your disclosure.
This scenario typically occurs when an agent other than the listing agent shows a listing to a prospective buyer without an agency relationship or BBRA in place. This can also extend to other situations where the agent acts in some capacity on behalf of the buyer.
WARNING: Regardless of whether you’re using a BBRA or touring agreement, always have the buyer sign the agency agreement as well. Agency agreements do not address compensation but can protect you for a specified time and for specific properties that you show.
No compensation
The biggest issue in Zillow’s Touring Agreement, and one you should check for if you’re considering using a different touring agreement, is the lack of agent compensation.
The Zillow Touring Agreement states:
4. No Fee for the Touring Services. (a) Buyer shall not owe or pay Broker any fee for the Touring Services.
In my opinion, this agreement asks me to work for seven days for free — this may be fine for the company or brokerage creating the touring agreement, but it’s terrible for agents. The potential buyer can use my time and expertise for seven days, is not obligated to compensate me, and then on Day 8, they can write an offer with their sister-in-law; she gets paid, and I don’t.
- The NAR preliminary settlement in the commission lawsuit requires a written agreement
NAR recently clarified when a written contract will be required under the terms of the preliminary settlement of the commission lawsuits.
Under the proposed settlement, just marketing services to a buyer, speaking with them at an open house, or showing a client’s listing to an unrepresented buyer does not mean that you are “working with” that buyer.
“But providing actual brokerage services to a buyer, i.e., identifying potential homes, arranging a showing, negotiating for the buyer, presenting the buyer’s offers, or performing other services for the buyer, are ‘working with’ a buyer,” the trade group said.
The NAR FAQ also expanded the definition of “showing a home” from being in-person to include buyers who view the property virtually as well.
If you are a member of NAR or work for any of the companies that have settled in the Sitzer-Burnett case, you must abide by NAR’s preliminary settlement agreement that went into effect on Aug. 17, 2024. This means that you must have a written agreement signed by the buyer before you can show them a property, except in the cases noted above.
Additional risks in touring agreements to watch for
Another important question is whether the touring agreement provides you adequate protection for other issues besides agency and compensation. Even if you’re willing to show buyers property without a buyer representation agreement in place, do you really want to incur the additional risks listed below?
Lack of pre-approval
Are you willing to waste your time showing buyers property who have not been pre-approved and who may not even be qualified? The first step any agent who is going to represent buyers should take is asking the potential buyer to be pre-approved for a loan prior to looking at the property. If the buyers are unwilling to do that, don’t waste your time.
Disclosure issues
Misrepresentation claims can arise even when no formal agency relationship exists, particularly if an agent/broker provides incorrect or misleading information about a property.
- Real estate errors and omission (E&O) insurance generally protects against legal claims for professional errors, but is your E&O in play if your touring agreement clearly states that the buyer is not your client and you are not their agent?
- When you set an appointment to show another agent’s listing, do you have to disclose that you do not have a BBRA in place? In other words, your “buyer” is not your client, may not be pre-qualified, and may even be a looky-loo.
- An additional issue is whether the seller and/or the listing agent are prepared to have another agent show a property when that agent doesn’t have a signed BBRA. It’s one thing when an unaccompanied buyer comes to an open house since the listing agent has a clear-cut agency agreement in place. It’s something else entirely if there’s another agent involved.
- Does the agent showing a listing under a touring agreement have any duty to disclose what may be structural defects or any other issues they observe when the buyer is not their client, and there is no agency relationship in place?
- What happens if the buyer’s agent states that the fence is the boundary line of the property, and that’s incorrect? Will the buyer’s agent’s errors and omissions insurance cover this scenario if there’s no BBRA in place?
Liability insurance issues
This is an issue that almost no one discusses, but it’s one every agent who takes buyers out to view property should address. I remember having a client with me who was recuperating from neck surgery. We were sitting at a red light and the car behind me was rear-ended and then slammed into my car, reinjuring my client. The driver was uninsured and fled the scene.
If you’re not carrying an umbrella policy on top of your regular auto insurance/home insurance, it’s something you should carry to protect your assets.
Personal risks
What’s amazing to me is that any touring agreement (including Zillow’s) where I’m working without representing the buyer (but probably under an implied agency as noted by NAR) and without compensation fails to even recognize the real risks I incur in showing property, over and beyond the risk agents face due to predators or other criminals who seek to do us harm. Am I really supposed to incur all these risks and costs for free?
Accidents at the property
I remember tripping while exiting an open house on a showing and fracturing my elbow. While my medical insurance picked up the cost, today there’s almost always a question from the insurance company whether this accident was work-related. If you answer, “yes,” and you cannot file under Workman’s Compensation, your insurance company will probably go after the seller’s homeowner’s policy.
What happens if you do not have a BBRA in place? Will you end up having to pay this cost on your behalf? Even worse, if it’s your buyer who is injured, would they sue you, the sellers, and/or the listing agent?
While errors and omissions (E&O) insurance typically covers claims from negligent acts, it may not adequately cover accidents at open houses or during showings. Agents must ensure their E&O policies cover such incidents, as many policies have significant limitations or don’t cover bodily injuries unless specific conditions are met, such as the use of lockboxes during showings.
Procuring cause issues
NAR’s Arbitration Guidelines, created pursuant to Article 17 of the Realtor Code of Ethics, define procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” In practice, “the broker whose efforts set off that unbroken chain of events will be regarded as procuring cause.”
In the example above of a touring agent who originally showed the property and the buyer’s sister-in-law wrote up the transaction, neither agent would have an unbroken chain of events leading up to the offer.
If the sister-in-law has a signed BBRA and/or agency agreement and the touring agent does not, the sister-in-law would be paid the commission.
If you’re an agent, do not use any touring agreement without your managing broker’s consent. Remember, when it comes to “agency,” the “agent” is the brokerage — not you the individual agent.
If you’re a brokerage, make training your agents on getting a BBRA signed your top priority, even if the BBRA is for a short period and/or only specific properties as opposed to using a touring agreement. Anything less can lead to disastrous results, and it’s simply not worth the risk to you, your agents and their clients.
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, and the founder of RealEstateWealthForWomen.com is a national speaker, author and trainer with over 1,500 published articles.
