Under the now-ended system of real estate practices, agents could work for buyers with only an unstated, unwritten commitment. (Which was no commitment at all!)
Buyers could "play the field" and "work with" multiple agents, letting lots of agents know what they were looking for, even seeing several properties, without signing anything.
Much of that has now changed, by 180 degrees.
It's not government regulations at issue (yet). It's the outcome of a "global" settlement to an array of litigation facing realtor associations and MLSs. We've agreed to "practice changes" that emphasize, up front, transparency about the meaning of buyer agency and the amount of compensation we expect to receive.
California state law is catching up. And don't sleep on the feds: They're watching closely to see how faithfully realtors carry out the new litigation settlement.
Everything is moving in one direction: Firm commitments between buyers and agents, in writing, at the beginning of a relationship.
Buyers Must Sign; Agents Can Be Fined
The #1 rule that is almost guaranteed to freak out buyers and agents alike is that there absolutely must be a signed, written agreement between a buyer and an agent before any property is shown.
Even if property is not shown, arguably, a requirement to sign an agreement is triggered when "real estate advice" is provided from an agent to a buyer. (It's not very arguable – that's clearly the intent – but what constitutes "advice" as the trigger could be debated.)
This stuff is new to California, but it has been the long-standing practice in several states. Washington State famously implemented a state law just like this on Jan. 1, 2023, and everyone has figured it all out.
Buyers will adapt and learn the system.
Agents who try to avoid getting signatures could be asking for trouble.
For instance, a new MLS rule requires, "Buyer Broker[s] shall only provide access for showing, touring or inspecting a listed property to a client with whom the Buyer Broker has a written agreement..." The fine for failure to comply is $2,500, with no warning. Repeat violations could jeopardize an agent's MLS access.
By January 2025, new buyer agency rules will be in state law, also. AB 2992, which is supported by the California Association of Realtors, has passed the state Assembly and is nearly finished with its process in the Senate. It requires that: "A buyer-broker representation agreement shall be executed between a buyers agent and a buyer as soon as practicable, but no later than the execution of the buyer's offer to purchase real property." (Boldface added.)
Agents who violate that law will put their license in jeopardy.
Two New Agreement Forms
Let's focus on showings, and the requirement for a signed agreement.
We now have two buyer agency forms that you're going to see. Both were produced by the California Association of Realtors. (There is some chatter about alternative forms that may be crafted by individual brokerages. We know Zillow [which is a brokerage, don't you know?] has already begun using their own form when referring online leads to agents.)
The main new form is a more fully fleshed out, longer-term commitment, known as the Buyer Representation and Broker Compensation Agreement, the BRBC. It can commit the parties for a maximum of 3 months, then must be renewed or extended.
This new form actually defaults to being a non-exclusive agreement.
That means a buyer can sign with multiple agents and decide whom to work with later, depending on the properties they see together. It's certainly meant to be easier for an agent to begin a relationship by asking for the formality of a signature if they don't also have to argue for exclusivity.
A non-exclusive agreement can always be changed to an exclusive agreement later, after the parties have worked together for a minute. Or an agent might make a very strong, initial presentation about why they should be hired exclusively from the get-go, and a buyer may say, "Wow, you're great, why would I look anywhere else?"
The non-exclusive version can be canceled in writing, effective immediately. An exclusive agreement can be canceled by either the buyer or agent, with 30 days' notice.
There's also a slimmer, simpler, shorter-term form that you may see earlier in a relationship: The Property Showing and Representation Agreement, or the PSRA.
This "quickie" form covers the showing of a maximum of 3 properties and/or a term of 30 days.
It is always "non-exclusive," although an agent can make a claim to receive compensation if they tour the property with the buyer, conduct a virtual tour with the buyer, write an offer, do a market analysis, or, in some cases, if the agent can say they "introduced" the property to the buyer.
The PSRA is not as solid or "safe" for the agent as the BRBC, but may be the most common form when rushing off to go see a few houses early in a relationship.
Open Houses: Form-Free?
Can you just drop in at an open house without signing anything?
Generally, yes.
The state realtors' association is asking open house hosts to provide a sign-in form whereby potential buyers declare, upon arrival, that they're just looking at the house, not hiring an agent.
A listing agent holding open a house to potential buyers is clearly working for the seller – doing the job in their listing agreement, which is to expose the property. So when people walk in, there's little room for misunderstanding about the relationship between the agent and the visitor.
Still, if the discussion between an open-house visitor and the hosting agent begins to delve into real estate advice, we're being told to either sign up the person as a potential client, or at least get that visitor to sign a waiver of any relationship. It's a fuzzy, grey line – do try to be understanding if an open-house agent "tries too hard" to follow the rules.
Compensation Is The Thing
All of this process is supposed to gin up an early, upfront conversation about how much a buyer's agent will be paid if the buyer successfully makes a purchase.
It's a stern correction to the previous business practice, where such conversations were rare, and buyers' agents were simply paid whatever the seller and listing broker had decided to offer, before marketing a property.
The BRBC, for instance, features the compensation issue like this:
The signed agreement must provide a percentage or amount for compensation here. Later, the buyer's agent is literally prohibited from receiving more than this signed agreement states.
That rule is meant to force a real conversation, rather than allowing an agent to "duck" it by saying, "Oh, let's just put '$100.00' here, and we'll see what the seller is offering at the time we write an offer."
There are no two ways about it: In signing, the buyer is committing to be sure that their agent is paid for a transaction.
The buyer, in many cases, will ask a seller to pay their agent's commission. But if the seller says no, or doesn't pay the full amount, the buyer is legally responsible to pay.
This may be the most difficult part of the new practice, because:
- buyers' agents aren't accustomed to explaining their role and value proposition;
- buyers aren't always inclined to guarantee an agent's pay; and
- sellers' willingness to pay anything – or all of what's in a buyer agency agreement – is unknowable until the time that an offer is presented and negotiated.
Can a buyer's agent's fees be re-negotiated later, if a seller offers to pay nothing, or less than what's in the agreement?
That's exactly, 100%, the sort of thing that was envisioned by the plaintiffs' attorneys who initiated lawsuits against the real estate industry in the first place. They wanted buyers' agents' fees to be a visible, negotiable part of every transaction.
So, here we go.
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Nerdy notes: Your blog author and local broker, Dave Fratello, is a longtime member of the CRMLS Rules Committee, past chair of the local South Bay Association of Realtors' MLS Committee, and a current member of the Board of Directors of the California Association of Realtors, serving on the MLS Policy Committee, among others. As such, Dave has been involved in discussions, planning and rule-making related to all of the topics referenced in this post.
Deep Dive Opportunities: Want to get more background on changes in broker compensation and MLS rules? See:
It's a 'New World' on the MLS Already
How Buyers' Agents Are Paid... For Another Week
Why and How Buyers' Agents Are Paid... And How It's Changing
