New California law limits homebuyer agent contracts to 90 days

Gov. Gavin Newsom signs Realtor-backed rules stemming from federal lawsuit settlement

California Law Limits Homebuyer Agent Contracts to 90 Days
Governor Gavin Newsom (Illustration by The Real Deal with Getty)

Gov. Gavin Newsom has signed a law that limits contracts between homebuyers and their brokers to 90 days.

The law, Assembly Bill 2992, limits homebuyer-agent contracts required under the National Association of Realtors legal settlement to three months, the Orange County Register reported. The law goes into effect Jan. 1.

The legislation imposes a time limit on agreements that became mandatory last month under the NAR’s commission lawsuit settlement.

California is now among 28 states with mandatory buyer-broker contract laws requiring home shoppers to have a buyer-representation agreement with their agents.

The bill, introduced by Assemblywoman Stephanie Nguyen, D-Elk Grove, was passed by the Legislature in Sacramento last month.

The new law requires written consent by both the buyer and the agent for renewing the buyer’s representation agreement every three months.

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As of August, at least 27 states require such agreements, including Washington and Oregon, according to the California Association of Realtors, which sponsored the bill.

State law now requires sellers 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.

The NAR settlement 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. 

The settlement now makes such agreements mandatory for all buyers working with agents who are members of a Realtor-affiliated Multiple Listing Service, a database of homes for sale. 

NAR agreed to the rule changes after losing a $1.8 billion verdict in a federal class-action lawsuit in Missouri.

— Dana Bartholomew

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