California homebuyers will now have a 90-day limit on their contracts with real estate agents, following a new law signed by Governor Gavin Newsom. Assembly Bill 2992, authored by Assemblywoman Stephanie Nguyen (D-Elk Grove), will go into effect on January 1, 2025, capping the duration of mandatory buyer-agent agreements at three months.
This legislation comes in response to the National Association of Realtors (NAR) legal settlement that imposed mandatory buyer-representation contracts as part of efforts to reform commission structures in real estate transactions. California is now one of 28 states to adopt mandatory agreements between homebuyers and their agents.
The passage of AB 2992 introduces key reforms in the real estate industry by limiting how long buyer-agent contracts can remain in force before renewal is required. The new law mandates that these contracts, which became compulsory following the NAR settlement, cannot exceed 90 days unless both parties agree in writing to renew the agreement.
According to the California Association of Realtors, which sponsored the bill, the 90-day limit provides greater flexibility for homebuyers who often navigate an already complex and competitive housing market.
Prior to this law, the vast majority of homebuyers in California could purchase properties without any formal agreement with their agents. However, under the terms of the NAR settlement, buyers are now required to enter into formal contracts with agents who are members of a Realtor-affiliated Multiple Listing Service (MLS), a crucial database of homes for sale.
The NAR’s antitrust lawsuit, settled last year, reshaped how commissions are structured. Traditionally, sellers covered both their own agent’s fees as well as the buyer’s agent’s commission. Now, buyers will likely bear the responsibility for compensating their agents, unless they negotiate to have sellers cover the costs.
By introducing this 90-day limit, California lawmakers aim to protect buyers from being locked into long-term contracts and ensure a fairer real estate process.
Starting in January 2025, homebuyers across the state will benefit from this added layer of consumer protection in their real estate transactions, marking another step toward transparency and fairness in the housing market.
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