California bill would limit home buyers' contract terms to three months – Daily News

California lawmakers are considering a bill that would limit contracts between homebuyers and real estate agents, as required by the National Real Estate Agents Settlement, to three months.

If the bill passes, California would become one of at least 20 states with laws requiring buyer-broker agreements.

“Without legal protections, buyers and brokers will be more susceptible to potential disputes over compensation, legal uncertainty and conflicts of interest,” Rep. Stephanie Nguyen, D-Elk Grove, the bill's author, said at a committee hearing in June.

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Currently, a seller signs a purchase and sale agreement and agrees to pay both the buyer and seller fees when the transaction is completed.

However, the vast majority of buyers purchase a home without signing a contract with a real estate agent.

According to the National Association of Realtors' (NAR) latest survey, “Home Buyer and Seller Profile,” only 41% of U.S. home buyers had a written contract with a real estate agent as of June 2023. The study was based on a survey of 6,817 buyers. Only one-third of first-time home buyers had a written contract.

But that will change under a proposed legal settlement proposed by the National Association of Realtors that goes into effect Aug. 17. Under the settlement, the responsibility to pay a buyer's agent will shift to the buyer, unless the seller is asked to cover the costs.

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Under the agreement, NAR will repeal a long-standing rule that requires sellers to tell buyers' agents how much they will pay them when listing their homes on the Multiple Listing Service (MLS). Instead, such offers will be banned from the MLS database of homes for sale.

Additionally, buyers must sign a representation agreement before an agent can begin showing homes.

Under Assembly Bill 2992, such contracts would also be required by state law.

The contract automatically terminates after three months unless both parties agree to an extension in writing or the buyer is a corporation, LLC, or partnership.

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The contract must be signed before a buyer makes an offer on a home and should specify the agent's compensation, payment due dates, services to be provided, and closing date.

As of July, 19 states in the U.S., including Washington, Pennsylvania, Minnesota and Maryland, require buyer representation agreements, according to WERC, which provides home-buying advice to displaced workers.

A similar law will go into effect in Oregon next year. If passed, AB 2992 would also go into effect on Jan. 1.

The bill has already been approved without opposition by two committees in the state Assembly and Senate.

But with the Legislature scheduled to recess on Aug. 31, the bill still must go through a “hold” hearing, a procedure required for bills with a financial impact of more than $150,000 on the state's special funds.

The state Department of Real Estate estimates enforcement and administration costs could total more than $800,000 a year.

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