California sets a 3-month limit on buyer agent agreements
The new law, which takes effect Jan. 1, allows agreements to be extended — but not automatically. It was created in response to the NAR settlement.
California real estate agents will soon have a deadline when it comes to working with homebuyers.
The details: On Sept. 24, California Gov. Gavin Newsom signed Assembly Bill 2992, which limits the duration of buyer-agent agreements to three months. The new law will take effect on Jan. 1, 2025.
Previously, the state did not have rules in place about buyer-agent agreements. The legislation came together after the $418 million settlement between the National Association of Realtors and home sellers involved in the buyer commission class action lawsuit.
According to the nonprofit group CalMatters, the three-month agreement cannot be renewed automatically, but the relationship could be extended by a new written agreement, signed by all parties.
A chance to "try out" agents: The new law states that the buyer-broker agreement be put in place "as soon as practicable, but no later than the execution of the buyer's offer to purchase real property." This leaves room for potential buyers to "try out" different agents.
"In this way, the bill recognizes the often personal aspect of a relationship between a potential buyer and agent and the need to allow a potential buyer to find the 'right fit' before being obligated to enter into a contract with that agent," according to the analysis done by CalMatters.
The bill received support from the California Association of Realtors (C.A.R.) and Zillow.
The MLS and NAR perspective: As for brokers who use the multiple listing service, they'll still need to have a buyer representation agreement signed prior to touring a property, said Brian Manson, general counsel at C.A.R., a rule that Colorado officials have pushed back on.
The new law is designed to improve transparency by having rules in place for agents who don't use the MLS.
"It also firms up the timing in the event there is no showing," Manson said.
NAR is clear in its settlement FAQ, saying all MLS participants working with buyers need an agreement in place before touring a home, unless state law requires it earlier in the process.