As of Jan. 1, 2025, a new California law (Assembly Bill 2992) requires real estate agents representing buyers to enter into a written buyer-broker contract agreement with their clients.
While this change was already being practiced by many in residential real estate, it’s now official, adding a new layer of formality — and potential friction — to the way real estate deals get done.
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
For individual buyers, these agreements cannot exceed three months — and automatic renewals are prohibited. However, if the buyer is a corporation, LLC, or partnership, there’s no limit on duration.
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 it means for CRE
While commercial brokers are no strangers to formal agreements, this law forces a more structured and transparent approach to buyer representation. In some ways, this is a good thing. It establishes clear expectations up front, which 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.
The big picture
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.