If passed, California AB 2992 will codify into state law the federal settlement reached with the National Association of Realtors, which agrees that buyers’ agents’ commissions will be paid by buyers instead of sellers.
Under both the NAR pact and the state bill, buyers must sign representation agreements before their agent can begin showing them homes. The agreements would end automatically after three months unless both sides agree in writing to extend it or unless the buyer is a corporation, LLC or partnership.
Also under the pact, NAR will abolish its longstanding rule requiring sellers to say how much they’ll pay a buyer’s agent when posting their home on the multiple listing service (MLS). Instead, such offers will be banned from the MLS database of homes for sale.
There are opposing views as to the effect this will have on buyer agents’ commissions, currently an average of 6%. A senior fellow for the Consumer Federation of America predicted commissions could fall as much as 30% over the next few years as buyer agents compete for business. Some real estate professionals pushed back, denying that commissions will fall much, if at all.
The bill has already passed unopposed in the state Assembly and two state Senate subcommittees. However, the bill still needs to go through a “suspense” hearing, a process required for bills with a fiscal impact of $150,000 or more to a state special fund (estimated admin/enforcement cost is approximately $800,000/year), as well as a vote in the state Senate prior to this term’s adjournment date of August 31, 2024. If passed prior to the term deadline, the law will go into effect January 1, 2025.
If the bill passes, California will become one of at least 20 states with mandatory buyer-broker laws regarding contracts.