Want to Tour a Home to Buy in California? Effective August 17, 2024: Buyer Representation and Broker Compensation Agreement Required

Aug 13

Starting August 17, 2024, a new Buyer Representation and Broker Compensation (BRBC) form is now required for every showing and offer in California. Each state will have its own version of this form. Whether you’re scheduling a showing or attending an open house without an agent, this form will be mandatory. While 18 states, such as Washington, have required this form for years, it was not previously a requirement in California.

What is the Buyer Representation and Broker Compensation Agreement?

The BRBC Agreement is a formal contract that establishes a relationship between a buyer and their realtor. Here’s what you need to know:

Formalized Relationship: The BRBC Agreement clarifies the terms under which your realtor will represent you in your home search and purchase. It outlines your responsibilities and the services your agent will provide.
Compensation Details: This agreement specifies how your realtor will be compensated, ensuring that both you and your agent are clear on financial terms from the start.

Why These Changes?

These adjustments stem from legal settlements involving the National Association of Realtors (NAR), which have led to a new approach in how commissions are managed:

Settlement Impact: The settlement requires removing commission information from MLS listings, prompting the need for more transparent agreements like the BRBC.

How Does This Affect Buyers?

New Tour Requirements

Signed Agreement: To view homes, you must now sign a BRBC Agreement with your realtor. This ensures that you and your agent have a clear understanding of compensation and terms before any property tour.
Open Houses: New rules for open houses are being developed by the California Association of Realtors. While specifics are still being finalized, expect changes in how open houses are managed under these new regulations.

Changes in Commission Payments

Seller’s Discretion: Previously, sellers covered commissions for both their agent and the buyer’s agent from the sale proceeds. Now, sellers can opt out of paying the buyer’s agent's commission.
Buyer’s Obligation: If a seller does not offer a commission to the buyer’s agent, the BRBC Agreement will require you, the buyer, to cover the agent’s fee. This could potentially impact your budget, adding another layer of cost to consider.

Exclusivity vs. Non-Exclusivity

Under the BRBC, a broker and a buyer can enter into an exclusive or non-exclusive relationship. The BRBC defaults to non-exclusive representation, though the parties may opt to select exclusive representation instead.

There are two main differences between exclusivity and non-exclusivity in the BRBC Agreement:

Exclusive The broker is entitled to compensation if, during the term of the contract, the buyer purchases a property that fits the contract's parameters (e.g., single-family home, duplex, etc.), whether or not the broker was involved. The broker would get paid even if the buyer acts alone or with a different broker, so long as the other requirements are met.
Unilateral cancellation (i.e., a cancellation by one party) is effective 30 days after receipt of the cancellation notice.

Non-Exclusive
The broker is entitled to compensation if, during the term of the contract, the buyer purchases a property that fits the contract's parameters AND there was broker involvement. (See below for an explanation of what "broker involvement" means.)
Unilateral cancellation is effective immediately upon receipt of the cancellation notice.

As noted above, in order for a broker to receive compensation in a non-exclusive relationship, there must be broker involvement. "Broker involvement" means any of the following:

The buyer physically entered and was shown the property by the broker;
The broker showed the property to the buyer virtually;
The broker submitted to the seller a signed, written offer from the buyer to acquire, lease, exchange, or obtain an option on the property;
The broker performed a market analysis related to the property or reviewed property-specific documents or disclosures with the buyer; or
The property was introduced to the buyer by the broker, or the property was one for which the broker acted on the buyer's behalf.

What Should Buyers Do?

Understand the Agreement: Before signing the BRBC, make sure you thoroughly understand its terms and how it affects your financial obligations. This document is key to ensuring a smooth transaction.
Prepare for Additional Costs: Be ready for the possibility that you may need to pay your agent’s commission if the seller does not. Factor this into your overall budget for purchasing a home.
Stay Informed: Knowledge is power in navigating these changes effectively.

If you have any questions or need guidance through these new regulations, don’t hesitate to REACH OUT.

Best regards,

Lindsay Woolf | CA DRE #02236711
DOMO Real Estate | CA DRE #01290500

Disclaimer: The information provided in this blog post is for general informational purposes only and does not constitute legal advice. Real estate transactions can be complex and subject to local regulations.

CA Real Estate