[dropcap4 variation=”red”]E[/dropcap4]ffective July 1, 2012, Virginia agency law was revised to require written brokerage agreements between licensees (Realtors®) and their clients (buyers or sellers) when a brokerage relationship is established.  The major revision can be found HERE in Virginia Code § 54.1-2137.

The new law has caused some confusion with Realtors®, buyers and sellers.  Some of the questions raised are: “What is a brokerage agreement?”  “What is a brokerage relationship?”  “Who is a client?”  “When must the brokerage agreement be executed?”  Many of these questions are answered by the Virginia legislature HERE in Virginia Code § 54.1-2130.

The Virginia Real Estate Board responded to some of the confusion on September 6, 2012 by issuing the “Guidance Document on the Necessity of Brokerage Agreements.”  Click HERE to take a look at the document.  The Board also posted a video HERE where Cliff Wells, 2012 Chairman of the Virginia Real Estate Board announces the issuance of the guidance document.  Amanda Arwood has also posted a blog on the guidance document at VARbuzz HERE.

A written and signed brokerage agreement is required when a “customer” becomes a “client.”  The essential element of this distinction is the intent of the individual.  The guidance document provides several hypotheticals to illustrate when the proper intent is met and a brokerage agreement is required.

My suggestion to Realtors® is to ask direct questions regarding your customers’ (potential clients) intent.  Be up front and discuss the nature of the relationship and what that customer wants from you.  If you think a brokerage agreement is necessary, explain to the customer what Virginia law requires regarding brokerage agreements.  Be careful not to give legal advice or imply that each provision of your brokerage agreement is required by Virginia law.  Most likely there are provisions in your brokerage agreement that are not required by Virginia law.  You may open yourself up to legal liability if your new client signs the agreement with the belief that each provision is a requirement.

My suggestion to customers (buyers and sellers) is to read the brokerage agreement carefully.  Not all brokerage agreements are identical.  Some brokerage agreements contain additional provisions that are not required by Virginia law.  Make sure you understand exactly what provisions are required and what provisions are discretionary.  If you plan on using an attorney to conduct the closing, give him or her a call in advance to get some advice.