State Bill Would Limit Homebuyer Agent Contracts to 90 Days

A California legislator has proposed a law that would limit contracts between homebuyers and their brokers to about 90 days.

Assemblywoman Stephanie Nguyen, D-Elk Grove, has introduced a bill to limit homebuyer-agent contracts required under the National Association of Realtors legal settlement to three months, the Orange County Register reported.

If Assembly Bill 2992 passes, California would become one of at least 20 states with mandatory buyer-broker contract laws. The proposed law would take effect Jan. 1.

“Without legal protection, buyers and brokers are susceptible to potential disputes over compensation, legal uncertainties and conflicts of interest,” Nguyen said during a committee hearing in June.

Sellers now sign listing agreements consenting to pay both buyer and seller commissions when their transaction closes.

But the vast majority of buyers purchase a home without signing an agreement with their agents.

Just 41 percent of U.S. homebuyers had a written agreement with their agents as of June, according to the National Association of Realtors’ most recent “Profile of Home Buyers and Sellers,” which surveyed 6,817 buyers.

Among first-time buyers, only a third had written agreements, the survey showed.

That will change under the NAR’s proposed legal settlement, effective Aug. 17, which shifts responsibility for paying buyer agents to buyers themselves, unless they get sellers to cover those costs. The association was found guilty last fall for conspiring with other major organizations to violate antitrust laws and inflate agent commissions.

Under the pact, NAR will abolish its longstanding rule requiring sellers to say how much they’ll pay a buyer’s agent when posting their home on the Multiple Listing Service. Instead, such offers will be banned from the MLS database of homes for sale.

In addition, buyers must sign representation agreements before their agent can begin showing them homes.

Under AB 2992, state law would also mandate such contracts, according to the Register.

The agreements would end automatically after three months unless both sides agree in writing to extend it or unless the buyer is a corporation, LLC or partnership.

The contracts must be signed before buyers can bid on a home, and must spell out agent compensation, when payment is due, services to be rendered and the contract’s end date.

As of July, 19 U.S. states required buyer representation agreements, including Washington, Pennsylvania, Minnesota and Maryland, according to WERC, which advises relocated workers on buying homes. A similar law will take effect in Oregon next year.

— Dana Bartholomew