A new Ohio law effective today drastically changes how Ohio real estate licensees represent clients, including when a prospective buyer wants to view a residential property. Licensees are now obligated to enter into a written agency representation agreement with a buyer before they can show a property to a buyer.
Written Buyer Agency Agreements Now Required
Specifically, HB 466 mandates that before marketing or showing a seller's residential real property to a buyer, making an offer to purchase residential real property on behalf of a buyer, or making an offer to lease a residential premises on behalf of a tenant for a term exceeding eighteen months,
an Ohio real estate licensee shall enter into a written agency agreement with the buyer. The law also requires written agency (listing) agreements with sellers (but that was already common practice).
Written agency agreements, including listing agreements, were not previously required under Ohio real estate license law.
Ohio’s new law dovetails from the National Association of REALTORS
® settlement of a landmark antitrust verdict last year. As a result of that settlement, as of August 17, 2024, multiple listing services (MLSs) had to remove any offers of compensation from the seller’s broker to a buyer’s broker for procuring a buyer and handling the buyer’s side of the transaction. This is a departure from the longstanding practice of the listing broker offering part of its fee from the seller to compensate the buyer’s brokerage (cooperating compensation).
Mandated agency agreements may address what services will be provided to a buyer client, what duties are owed to the client, and fundamental considerations of a purchase transaction. Written agency agreements may be exclusive or non-exclusive and the duration of the agreement as agreed by the parties will vary.
Disclosure of Buyer Agency Compensation
The agency representation agreement will address who may pay for the buyer’s brokerage fees. Agency agreements may require home buyers to compensate their buyer’s agent directly if the seller’s brokerage will not agree to pay all or part of the buyer’s brokerage fees. Importantly, the buyer’s brokerage may not accept any commission or fee in excess of the amount specified in the written agency representation agreement with the buyer.
Given that multiple listing services no longer address cooperating compensation, negotiation of the buyer’s brokerage compensation now must take place during the transaction itself. A buyer may ask a seller to compensate the buyer’s brokerage as a condition of the offer to purchase.
Required Provisions of Agency Agreement
As a result of the National Association of REALTORS® settlement, all agency agreements will conspicuously state that
commissions are not set by law and are fully negotiable. Ohio law requires some additional language as outlined below.
The agency agreement must be signed and dated by the licensee and the client, and must include the following:
- An expiration date
- A statement that it is illegal to deny housing based on race, color, religion, sex, familial status, ancestry, military status, disability, or national origin
- A statement about the definition and illegality of “blockbusting”
- A HUD Equal Housing Opportunity logotype
- A statement that the licensee is an agent of the client and whether the relationship is exclusive or non-exclusive
- The specifics of how the buyer’s brokerage will be compensated
- A conspicuous statement that broker fees and commissions are not set by law, are fully negotiable, and may be paid by any party to the transaction, or by a third-party, or by sharing or splitting the fees and commissions between brokers.
Apart from the foregoing, Ohio real estate brokerages’ written agency agreements for buyers, sellers, and tenants may have differing terms. The agreements are an effort to educate consumers about the transaction contemplated, including how the buyer’s brokerage will be compensated. The new law increases transparency to consumers who intend to buy, sell or rent residential property.
For any questions on this or other real estate developments, please contact one of Frantz Ward’s Real Estate attorneys.