A major shift has arrived in California real estate, and if you’re in the business—whether residential or commercial—you need to pay attention.
What’s in the Law?
For starters, this isn’t just a suggested best practice. Under AB 2992, written agreements are now mandatory when representing buyers. No more handshake deals or loosely defined relationships. Brokers must present and execute a buyer-broker representation agreement with their client before submitting an offer on a property.
These agreements must include:
- The broker’s compensation terms
- A breakdown of the services the broker will provide
- The conditions under which the broker gets paid
- The duration of the agreement and how it can be terminated
In addition, before signing, brokers must provide buyers with a written agency disclosure form, ensuring they fully understand the nature of the representation and the broker’s role in the transaction.
What This Means for Commercial Real Estate
While commercial brokers are no strangers to formal agreements, this law forces a more structured and transparentapproach to buyer representation. In some ways, this is a good thing—establishing clear expectations up front can reduce misunderstandings later. But in an industry where relationships and flexibility are key, some see this as unnecessary government interference.
Brokers will now need to:
- Lock in client
commitments earlier.
Those informal “let’s see what’s out there” conversations may now need to
be backed by signed paperwork sooner than some clients expect.
- Clearly define
compensation terms.
No more vague or open-ended agreements. Brokers must spell out exactly how
and when they will be paid.
- Educate clients about
the new rules.
Some buyers, especially those used to the old way of doing things, may
push back on signing agreements upfront. Brokers will need to walk them
through why this is now required.
California has been moving toward more consumer protection in real estate for years, and AB 2992 is just the latest step. While it might create short-term headaches for brokers who are used to looser arrangements, it ultimately aims to bring more clarity and accountability to buyer-broker relationships.
Whether this shift strengthens the industry or just adds another layer of red tape remains to be seen. But one thing is certain—if you’re working with buyers in California real estate, you’d better get those agreements in writing.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.