California Buyer-Broker Agreements: DRE Bulletin Adds to the Maze

The real estate industry is facing significant changes to buyer-representation, and PSAR members need to stay informed. With the recent Sitzer-Burnett settlement, the passage of California’s AB 2992, and NOW a newly released California Department of Real Estate (DRE) bulletin, REALTORS® are navigating uncharted territory. These updates reflect an ongoing evolution in the industry, but inconsistencies between them may create challenges for REALTORS® working to remain compliant.

C.A.R. Legal is currently reviewing these documents in detail and will likely reach out to the DRE for clarification regarding the bulletin. REALTORS® can expect further guidance as these details are analyzed more thoroughly.

This blog is a first look at how these changes align—or don’t. While this is not a definitive legal analysis, it highlights important areas to consider.

Key Inconsistencies REALTORS® Need to Understand

1. Timing of Agreement Execution

• Choose: Sitzer-Burnett Settlement: REALTORS® and MLS subscribers must secure a signed buyer-broker agreement before touring properties.

• AB 2992: Allows the agreement to be signed as late as the execution of a purchase offer.

• DRE Bulletin: Reflects AB 2992’s timing, which is less stringent than the settlement.
  Impact: REALTORS® may face conflicting guidance depending on whether they are complying with AB 2992, the settlement, or MLS rules.

2. Agreement Expiration

• Choose: AB 2992: Limits agreements to a maximum of three months.

• Sitzer-Burnett Settlement: Does not specify a duration but requires clear terms.

• DRE Bulletin: Does not mention expiration limits.
  Impact: REALTORS® could face compliance issues if agreements extend beyond three months under California law, even if not restricted under the settlement.

3. Compensation Negotiation and Disclosure

• Choose: Sitzer-Burnett Settlement: Caps compensation at the agreed amount and prohibits exceeding it from any source.

• AB 2992: Allows buyers to negotiate seller concessions to cover agent fees but does not impose a cap.

• DRE Bulletin: Discusses compensation but lacks clarity on handling caps or seller concessions.
  Impact: REALTORS® may inadvertently violate settlement terms by exceeding the agreed-upon compensation if following only state law or the bulletin.

4. Scope of Applicability

• Choose: Sitzer-Burnett Settlement: Applies to all REALTORS® and covered MLS participants.

• AB 2992: Broadens applicability to all California buyer’s agents, regardless of MLS or REALTOR® status.

• DRE Bulletin: Suggests universal applicability but does not distinguish between REALTORS® and non-REALTORS®.
  Impact: REALTORS® operating outside MLS systems may face uncertainty about compliance standards.

5. Content of Agreements

• Choose: AB 2992: Mandates detailed agreements specifying services, compensation, payment timing, and an expiration date.

• Sitzer-Burnett Settlement: Requires clear compensation disclosure but does not specify other elements.

• DRE Bulletin: Mentions transparency but omits critical details about mandatory agreement elements.
  Impact: REALTORS® risk non-compliance if agreements lack required elements under AB 2992.

First Look Recommendations for REALTORS®

1. All Association members who are REALTORS(s) and all MLS members must abide by the terms of the settlement, even if AB2992 is less restrictive. Consult Your Broker: Brokers are a key resource in clarifying compliance with these changes

2. Utilize the C.A.R. Legal Hotline: REALTORS® should seek professional guidance on navigating the complexities of overlapping requirements.

3. Adopt a Conservative Approach:

   • Execute agreements before property tours, consistent with the settlement.

   • Ensure agreements meet AB 2992’s requirements, including the three-month expiration limit.

   • Disclose compensation clearly and avoid exceeding agreed-upon amounts.

What’s Next?

The DRE bulletin is brand new, and this is PSAR’s first analysis of its potential implications. While C.A.R. attorneys will undoubtedly provide a more detailed review, it’s critical for REALTORS® to begin understanding these changes now. Taking a proactive and cautious approach will help REALTORS® avoid missteps and serve clients effectively during this transitional period.

PSAR is here to support its members through these changes. Stay tuned for updates and additional resources as more information becomes available.