Buyer Representation Agreements (BRAs) play a crucial role in defining the relationship between buyers and brokers. As we approach 2025, significant changes are on the horizon. These are expected to impact how these agreements are structured and implemented – big time. This blog will explore the recent updates and what they mean for both buyers and real estate professionals. So, keep reading and find out more about how these agreements benefit buyers and brokers.
Background on Buyer Representation Agreements
A Buyer Representation Agreement is a contract between a buyer and a real estate broker. It outlines the broker’s responsibilities in assisting the buyer with their property search and purchase. Moreover, it ensures that the buyer receives a thorough representation and that the broker is compensated for their services.
Recent Changes in Legislation
As of August 2024, the National Association of REALTORS® (NAR) implemented a settlement that mandates brokers to have a written agreement with buyers before showing properties. This requirement applies specifically to residential property sales. However, starting January 1, 2025, California will expand this requirement to include all types of properties, both residential and commercial, excluding leases.
Key Requirements for Buyer Representation Agreements
Under the new California law, all brokers must secure a written agreement with buyers before any property is shown. This change aims to enhance transparency and accountability in real estate transactions. The requirement applies to all property types, ensuring that buyers receive the same level of representation regardless of the market segment.
This shift in federal law highlights the importance of state-level protections, such as those provided by the Unruh Act. As federal protections become more limited, states like California must continue to lead the way in ensuring that all individuals are protected from discrimination in housing.
Timing and Duration of Agreements
The law stipulates that the written agreement must be executed at the earliest practical time before the submission of an offer. Additionally, the maximum duration of a Buyer Representation Agreement is set at three months, except for corporations, LLCs, or other non-individual entities. Renewals of these agreements cannot exceed three months. This condition ensures that the representation remains current and relevant.
The FHDA form serves as a valuable resource for REALTORS® to ensure compliance with Fair Housing laws and to educate clients about their rights. By familiarizing themselves with the categories outlined in the form, they can better advocate for their clients and promote an inclusive housing market.
Agency Disclosure Requirements
An essential component of the Buyer Representation Agreement is the agency disclosure. Brokers must inform buyers about their agency relationship. The aim to do so is to clarify the duties and obligations owed to them. This transparency is vital for building trust and ensuring that buyers are fully aware of their rights and the services they can expect.
Proposed Regulations by DRE
The California Department of Real Estate (DRE) is expected to issue proposed regulations regarding these agreements in the summer of 2025. These regulations will provide further guidance on compliance and best practices for brokers. As a result, this ensures that the implementation of the new law is smooth and effective.
Considerations for Commercial Practitioners
While the new law applies to all property types, commercial practitioners may seek changes or repeal of the three-month limit for Buyer Representation Agreements. This flexibility could be crucial for commercial transactions, which often involve longer decision-making processes and more complex negotiations.
C.A.R. Forms and Compliance
To assist brokers in complying with the new legal requirements, the California Association of REALTORS® (C.A.R.) has developed specific forms. These include:
- Buyer Representation Agreement (BRBC)
- Property Showing Representation Agreement (PSRA)
These forms are designed to meet both legal and settlement requirements, providing brokers with the necessary tools to ensure compliance.
Conclusion
The upcoming changes to Buyer Representation Agreements in California represent a significant shift in how real estate transactions will be conducted. By understanding these new requirements, both buyers and brokers can navigate the real estate landscape more effectively. It is essential for all parties involved to stay informed and adapt to these changes to ensure a smooth and successful transaction process. If you need any guidance regarding buyer agreement, feel free to reach out to Olga Wright. Not only she’s here to provide professional real estate guidance, but she’ll also guide you through the relevant legalities. So, contact her today and get the advisory or real estate services you need.