Broker Toolkit

The terms “showing service agreement” and “touring agreement” are not defined in Louisiana, but we understand these to be written agreements between a potential buyer and a broker, which limit the services offered by the broker solely to showing or touring a home. It is expected that such agreements would expressly disclaim and clarify that no other services are being provided by the broker and potentially that no agency relationship is created.

The newly enacted Louisiana law (La. R.S. 37:1431(35) and La. R.S. 37:1448.4) regarding buyer agreements defines a “Buyer Agreement” as a written document signed by a broker and a buyer detailing the services to be provided by the broker to the buyer. The statute does not dictate what services shall be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers) nor does it state what type of relationship the broker has with the buyer (e.g., agency, non-agency, subagency, transactional, customer).

Further, La. R.S. 9:3892 provides the following:

Notwithstanding the provisions of Civil Code Articles 2985 through 3032 or any other provisions of law, a licensee engaged in any real estate transaction shall be considered to be representing the person with whom he is working as a designated agent unless there is a written agreement between the broker and the person providing that there is a different relationship or the licensee is performing only ministerial acts on behalf of the person.

Therefore, a limited service agreement such as a “showing service agreement” or “touring agreement” is permissible under Louisiana law. Such an agreement may be considered to be creating an agency relationship between buyer and broker, unless the agreement: (i) indicates that the buyer is not a customer or client as these terms are defined by Louisiana agency law; (ii) states that it does not establish an agency relationship between the buyer and the broker; (iii) dictates the nature of the relationship between buyer and broker; and (iv) details the services to be provided by the broker to the buyer.

Yes, an agreement between brokers regarding the compensation to be paid by one broker to another broker in connection with a particular transaction is generally permissible. NAR has published a “Broker-to-Broker Agreements 101” which can be accessed here:  https://www.nar.realtor/the-facts/broker-to-broker-agreements-101 that may help clarify the benefits and purposes of such agreements. There are additional factors that should be considered when entering into such agreements. Compliance with applicable laws and regulations regarding broker compensation must be followed. For example, real estate licensees cannot accept compensation or anything of value for their real estate services from anyone other than their sponsoring or qualifying broker (see La. R.S. 37:1446(F)). Additionally, brokers should have the written consent of their respective clients to authorize the payment and receipt of the compensation set forth in such a broker-to-broker agreement. Brokers must ensure that any broker-to-broker agreement is consistent with the terms, provisions and conditions of any listing agreement, buyer representation agreement or similar agreement with their respective clients.

A buyer’s broker may contact the listing broker to confirm whether the listing broker or seller is offering buyer broker compensation before showing a home. However, REALTORS® must be certain to avoid any appearance of “steering.” As stated in the NAR FAQs:

Under NAR’s Code of Ethics, steering buyers based on the amount of broker compensation is prohibited. REALTORS® MUST pledge themselves to protect and promote the interests of their client, putting their client’s best interests before their own. A REALTOR® must never put broker compensation before their client’s interests. If a REALTOR® does anything to put their own (or another broker’s) compensation before her client’s interests, they are violating this primary code of ethics and potentially violating the broker’s fiduciary duties to their client (depending on the broker-buyer relationship and state law).

Buyer’s brokers must not delay showing properties due to an inability to determine if a listing broker or seller will compensate the buyer’s broker, and must not refuse to show properties that are not subject to an offer of compensation from the listing broker, unless the buyer has expressly authorized the buyer’s broker that the buyer does not want to be made aware of such properties. Further, a practice or policy involving the systematic determination of whether listing brokers are willing to pay compensation to buyer’s brokers for a large number of properties may be viewed as a violation of the settlement agreement terms – as opposed to a more specific and focused inquiry with respect to a particular property or group of properties.

Louisiana law (La. R.S. 37:1448.4) regarding “buyer agreements” does not dictate a particular time when the agreement must be signed. It simply states in section (A)(1) that: A buyer agreement shall be executed between a broker and a buyer. 

However, the terms of the NAR settlement require that all MLS Participants working with a buyer enter into a written agreement before the buyer tours any home. MLS participants must comply with the rule regarding timing – you must enter into a written agreement before the buyer tours any home. See the FAQs below from NAR that further explain these concepts:

61. The practice change requiring written agreements with buyers is triggered by two conditions: it only applies to MLS Participants “working with” buyers and is triggered by “touring a home.” What does it mean to be “working with” a buyer?

The “working with” language is intended to distinguish MLS Participants who provide full or limited brokerage representation or services for the buyer (including transaction brokerage)—such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS Participants who simply market their services or just talk to a buyer—like at an open house or by providing an unrepresented buyer access to a house they have listed. 

If the MLS Participant is working only as an agent or subagent of the seller, then the Participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.

Authorized dual agents, on the other hand, work with the buyer (and the seller).

A written buyer agreement is required prior to a buyer “touring a home.” An MLS Participant “working with” a buyer can enter into the written buyer agreement at any point but must do so by no later than prior to the buyer “touring a home,” unless state law requires a written buyer agreement earlier in time (See FAQ “What does it mean to tour a home?”). (Updated 8/6/24)

62. What does it mean to tour a home?

Written buyer agreements are required before a buyer tours a home. Touring a home means when the buyer and/or the MLS Participant, or other agent, at the direction of the MLS Participant working with the buyer, enter the house. This includes when the MLS Participant or other agent, at the direction of the MLS Participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present. A “home” means a residential property consisting of not less than one nor more than four residential dwelling units.

This is also addressed on page 2 of the guidance that accompanies the sample buyer agreement forms published by Louisiana REALTORS® on July 15, 2024.

In short, two willing contractual parties are generally permitted to amend the contract under Louisiana law. Neither the settlement nor any related practice changes prohibit amendments to buyer agreements. However, there are important factors to consider when determining if an amendment is appropriate. The NAR FAQ below addresses this issue:

74. MLS Participants may not receive compensation for services from any source that exceeds the amount or rate agreed to in the buyer agreement. Does this mean that brokerages can only have one agreement with the buyer?

No. The practice change empowers buyers and brokers to negotiate and agree to services and compensation that work for them. MLS Participants should work with consumers to ensure they fully understand the options available. Compensation continues to be negotiable and should always be negotiated between MLS Participants and the buyers with whom they work.

At times, a new or amended buyer agreement may be appropriate, and the buyer and broker may agree to amended terms. However, amended agreements must also meet the requirements of the practice changes. The practice changes must be implemented fully and in good faith in the service of promoting consumer empowerment, choice, and healthy competition.

REALTORS® must be aware of their ongoing ethical obligations to their clients. Seeking an amendment to a buyer agreement to increase compensation could be seen as an attempt to put the buyer broker’s interest above their client’s interest. Brokers should clearly communicate and explain the proposed amendment, and how it would affect their client.  The timing of such an amendment is not dictated by any applicable law or practice change, but timing could be important. The buyer’s broker should not condition or qualify any offer to a seller based on the proposed change in compensation. Meaning, an offer to a seller should not be coupled with or tied to an increase in compensation from the buyer. That being said, NAR has clarified that A buyer can always ask their buyer broker to make it a term of an offer to purchase that the seller pay certain compensation to the buyer broker. That direction needs to come from the buyer to the buyer’s broker. 

Any proposed amendment should be done “in good faith in the service of promoting consumer empowerment, choice, and healthy competition”. Additional factors should be considered when drafting an amendment to a buyer agreement such as whether the increased compensation amount is limited to a specific property.

Brokers should ensure that any proposed amendment to a buyer agreement is in writing, is fully consented to by the buyer and clearly describes the changes to the original agreement.

No. Compensation must be objectively ascertainable and not open-ended. NAR has addressed this specific topic as follows:

75. In the buyer agreement, can buyers and buyer brokers agree to a range of compensation?

No. Under the settlement, any compensation agreed to in the written buyer agreement must be objectively ascertainable and not open-ended.

For example, a written buyer agreement cannot have a commission that is “buyer broker compensation shall be whatever amount the seller is offering to the buyer” or "between X and Y percent."

The buyer agreement may NOT include language indicating that buyer broker compensation is limited to what the buyer broker may receive in compensation from a seller or listing broker for services provided to the buyer. The NAR Proposed Settlement requires buyer agreements to include “a specific and conspicuous disclosure of the amount or rate of compensation the MLS Participant WILL receive or how this amount WILL be determined.” If a buyer agreement states the buyer broker will only be compensated by a seller and/or listing broker services provided to a buyer, it is not possible to clearly and objectively ascertain the amount of compensation the buyer broker WILL receive or how the amount WILL be determined.

It is unknown at the time of the execution of a buyer agreement whether a buyer will make an offer on a home and if so whether buyer broker compensation will be offered by the seller or listing broker for a particular home. That type of arrangement would be open-ended and not objectively ascertainable and therefore, prohibited.

No. Similar to the answer above, a range of compensation is also open-ended and not objectively ascertainable. However, there is no law or policy that dictates the amount of compensation agreed between buyers and buyer brokers (e.g., $0, X flat fee, X percent, X hourly rate).

No, this would be impermissible. Similar to answers above, that arrangement would establish an open-ended compensation amount. The AR FAQ below describes the requirements of the buyer agreement. 

58. What provisions must be included in written buyer agreements?

The written agreement must include: 

• A specific and conspicuous disclosure of the amount or rate of compensation the Participant will receive or how this amount will be determined, to the extent that the Participant will receive compensation from any source. 
• The amount of compensation in a manner that is objectively ascertainable and not open-ended.
• A term that prohibits the Participant from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and 
• A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.

Allowing the broker to unilaterally change the compensation amount would not satisfy the requirements. Further, it would put the buyer in a position of being subjected to a significant increase in compensation without the buyer’s consent.

Inserting “0%” is permissible. That establishes a compensation amount that is objectively ascertainable and not open-ended. As set forth in FAQ# 5 above, any subsequent amendment must be in writing and signed by the buyer.  Additionally, any such amendment should meet the requirements of the practice changes, must not violate any ethical obligations to the buyer, should be clearly communicated and explained to the buyer and the buyer’s broker should not condition or qualify any offer based on the terms of the proposed amendment. As stated above, that does not prohibit the buyer’s broker from following the direction of the buyer if the buyer asks their broker to make it a term of an offer to purchase that the seller pay certain compensation to the buyer broker.

There is an obvious risk that the buyer will not enter into any such subsequent amendment and that buyer’s broker would then be entitled to the compensation amount set forth in the written agreement  - 0%.

Yes, as long as the buyer broker’s compensation is specific, and objectively ascertainable and not open-ended, you can set the compensation with the buyer’s consent in the manner described above. There is no law or policy that dictates the amount of compensation agreed between buyers and buyer brokers such as $X, X flat fee, X percent, X hourly rate or any combination thereof.

No, this would not be permissible because the compensation would not be objectively ascertainable, and it would be open-ended. An amendment would be required to decrease the compensation to be paid to the buyer broker. See FAQs above regarding prohibitions on open-ended compensation and amendments to buyer agreements.

No. The proposed provision establishes a compensation amount that is open-ended since the amount is not fixed in advance. The NAR settlement clearly states that the amount of compensation must be objectively ascertainable and not open-ended. Therefore, this provision could be deemed to be contrary to the requirements of the settlement. See FAQs above regarding prohibitions on open-ended compensation.

First, the ability to terminate the buyer agreement would depend on the terms of that buyer agreement. In the sample form agreements prepared by Louisiana REALTORS, both the buyer and buyer’s broker have the right to terminate upon written notice to the other party. However, a broker must consider his/her ethical obligations before simply “walking away” from a client involved in a real estate transaction solely because the broker anticipates a potential failure to pay the compensation that is owed. 

A broker would also maintain the ability to enforce the buyer agreement and to collect payment through available legal remedies. In the alternative, a broker could agree to amend the buyer agreement to reduce the compensation.

This may violate the Code of Ethics. Article 16 of the Code of Ethics provides “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.” And, Standard of Practice 16-13 provides “All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client’s representative or broker, and not with the client, except with the consent of the client’s representative or broker or except where such dealings are initiated by the client.” We are therefore of the opinion that unless the listing broker gives you permission to contact the seller, doing so would likely constitute an ethics violation.

No, the seller in that scenario was never obligated to make any payment to the buyer’s broker absent a contractual obligation to do so. If a seller is/was willing to pay some form of compensation to a buyer’s broker, that seller is not obligated to make that payment unless that is set forth in the purchase agreement or some other contract. If the offer to purchase – which subsequently is executed by seller and becomes the contract between the buyer and the seller - did not include any requirement that the seller pay such compensation, the seller is not obligated to pay the buyer broker’s compensation. An obligation of the seller should have been included in the offer to purchase.  

Broker to broker compensation agreements are not expressly addressed or governed by the practice changes or by applicable rules and regulations, except for generally applicable requirements addressing compensation between brokers. Because compensation must be paid to a broker, and not directly to an agent (except by that agent’s qualifying broker, see La. R.S. 37:1446(F)) the broker-to-broker compensation agreement should be entered into by the respective brokers. It should be the brokers that are parties to the contract, not the individual agents. The Louisiana Real Estate Commission administrative rules provide that “listings and other agreements for real estate brokerage services must be solicited under the name of the broker corporation or supervising broker.” However, it goes on to state: “These agreements shall be signed by the broker or by a sponsored licensee acting under written authority of the sponsoring broker.” If a licensee/agent is acting under written authority from the broker, that licensee/agent may execute the agreement on behalf of the broker.

To be clear, disclosure of information on MLS is not set by law. Rather, it is set by rules and policies adopted by the applicable MLS. The practice changes that go into effect August 17, 2024, prohibit “offers of compensation” on an MLS.  The offer of compensation referred to is compensation to be paid to a broker in a residential real estate transaction. Owner financing does not fall within the scope of this new prohibition, and accordingly the statement above would be permissible despite the practice changes being implemented August 17, assuming it is not otherwise prohibited by the applicable MLS.