The New Reality of Buyer’s Agent Agreements: What You Need to Know Before Signing on the Dotted Line
By Corey Chambers
In the shifting sands of California’s real estate market, buyers’ agent agreements and compensation are undergoing a seismic transformation. These changes, driven by a nationwide settlement of class-action lawsuits and new state legislation, aim to redefine how buyers’ agents earn their commissions and interact with their clients. But what does this mean for buyers, agents, and the industry at large? Buckle up—we’re about to dive into the brave new world of buyer representation.
A Not-So-Humble Beginning
Traditionally, the process was simple—for agents, anyway. Sellers and their listing agents determined not only the commission for themselves but also for the buyer’s agent. This arrangement was baked into the listing agreement, leaving buyers and their agents little say in how commissions were divvied up.
But change has swept through the industry like a Santa Ana wind. Class-action lawsuits accused industry giants of anti-competitive practices, alleging that these arrangements inflated home prices and commissions. The outcome? A settlement that shifts the onus of negotiating compensation squarely onto the buyer and their agent.
The Post-Settlement Landscape
Starting January 1, 2025, the game changes entirely. Under the new rules, buyers and their agents must hash out a compensation agreement before taking a single step inside a potential dream home. This agreement—a buyer’s broker representation agreement—must specify the agent’s compensation, the services they’ll provide, and the expiration date of the agreement (no longer than three months).
Agents, take note: this isn’t optional. It’s the law. Without this signed agreement, agents risk being left high and dry, not to mention falling afoul of the Department of Real Estate (DRE).
What Buyers Need to Know
For buyers, this shift means more transparency but also more responsibility. Here’s how you can expect to compensate your agent:
- Out of Pocket: You pay your agent directly from your funds.
- Seller Concessions: You negotiate with the seller to cover some or all of your agent’s commission as part of the purchase price. The seller can accept or reject this.
- Dual Agency: If the costs are prohibitive, you might consider approaching the seller’s agent for dual representation. Just be aware—dual agency requires disclosure and careful navigation of potential conflicts of interest.
And if none of these options work? You always have the right to walk away or proceed without representation. Just know that going it alone in the California real estate jungle isn’t for the faint of heart.
Agents: Prepare for a New Playbook
Buyer’s agents, it’s time to sharpen those negotiation skills. With your commission no longer guaranteed by the seller’s side, you’ll need to clearly articulate your value to your clients. Transparency and communication are key. Avoid these pitfalls:
- Failing to Put It in Writing: All agreements and changes must be documented—no verbal promises or vague emails.
- Misrepresenting Commission Rates: Commissions are negotiable. Don’t claim otherwise.
- Pressuring Clients: Give buyers the time and space to review agreements.
Additionally, if you’re piecemealing services or requesting advance fees, ensure you follow the DRE’s strict guidelines. Advance fees, for instance, require the broker to obtain a letter of “no objection” from the DRE.
Why It Matters
This isn’t just a procedural shake-up. It’s a cultural shift in real estate. The new rules aim to promote fairness and transparency, empowering buyers to have a greater say in their transactions. For agents, it’s a call to elevate professionalism and provide clearer value propositions.
Make The Change
As the January 2025 deadline looms, both buyers and agents should prepare for this new era. Buyers need to understand their options and what they’re paying for. Agents must adapt their practices to remain compliant and competitive. Ultimately, these changes may lead to a more equitable marketplace where trust and transparency take center stage.
So, whether you’re buying your first home or helping clients find theirs, remember: knowledge is power, and preparation is everything. Welcome to the future of California real estate!
Have a question? Request more information by calling 888-240-2500 or fill out the online form.
Copyright © This free information provided courtesy Entar.com with information provided by Corey Chambers, Broker DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 888-240-2500 or visit WeSellCal.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Text and photos created or modified by artificial intelligence. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.
