On Septembr 24, 2024, Governor Newsom signed into law the California Association of REALTORS® (C.A.R.) sponsored bill AB 2992 (Nguyen). Effective January 1, 2025, which will require a time-limited buyer-broker agreement or written contract between a buyer and their agent, before the buyer makes an offer to purchase real estate in California.
AB 2992 was one of eighteen consumer protection bills signed by the governor this legislative session and mirrors twenty-seven other states that require such buyer broker agreements.
C.A.R. standard forms, which are used in most residential real estate transactions in California, have had buyer broker agreement forms available for optional use by agents for some time now, and practitioners who utilize such forms have found that having a clear explanation of the relationship is beneficial to both the agent and the buyer.
Homebuyers undertake one of the most significant financial transactions of their lives and that relationship deserves a written agreement which ensures that buyers have, just like sellers currently, a clear understanding of their relationship with their agent.
Major Provisions of AB 2992
- Defines "buyer-broker agreement" as a written contract between a buyer and a buyer's agent by which the buyer's agent has been authorized by the buyer to provide services for or on behalf of the buyer for which a real estate license is required pursuant to the terms of the agreement.
- Requires a buyer-broker agreement to be executed between a buyer's agent and buyer as soon as practicable, but no later than the execution of the buyer's offer to purchase real property.
- Makes it unlawful for a buyer-broker agreement to last longer than three (3) months from the date the agreement was made.
- Exempts from above, any buy-broker agreements entered into between a real estate broker and a corporation, limited liability company, or partnership.
- Specifies that a buyer-broker representation agreement to include, but not be limited to, the following terms related to:
- compensation of the real estate broker;
- services to be rendered;
- when compensation is due; and
- contract termination.
- Prohibits an automatic renewal of any buyer-broker agreement.
- Permits a renewal of a buyer-broker agreement, if the renewal is in writing, dated, and signed by all parties to the agreement.
- Makes it unlawful for a renewal of a buyer-broker agreement to last longer than three (3) months from the date the renewal was made.
- Establishes that a buyer-broker agreement that violates the terms described above is void and unenforceable.
- Requires the buyer's agent to provide a specified disclosure form to the buyer prior to the execution of a buyer-broker representation agreement.
- Specifies that any person licensed by the Real Estate Law who violates the provisions related to buyer-broker representation agreements is deemed to have violated their licensing law.
