What is a buyer representation agreement, how does broker compensation work, and what does California law require before you submit an offer on a home?
A buyer representation agreement is a written contract between you and your real estate broker that defines your working relationship, outlines services provided, and clearly explains broker compensation. Under California law, a signed agreement is now required before submitting an offer — ensuring transparency, clarity, and consumer protection.
What Is a Buyer Representation Agreement?
A buyer representation agreement is a formal written contract between you (the buyer) and a licensed real estate broker. It establishes that the broker is representing your interests in a real estate transaction.
In simple terms, it answers three essential questions:
- Who represents you?
- What services will they provide?
- How will broker compensation be handled?
When you sign a buyer representation agreement, you’re formalizing a professional partnership designed to protect your interests throughout the homebuying process.
Why California Law Now Requires a Written Agreement
Effective January 1, 2025, California law (AB 2992) requires:
- A signed written buyer representation agreement must be in place before submitting an offer
- The agreement must clearly define services provided
- It must outline broker compensation
- The agreement may not exceed a maximum term of three months
- Compensation is fully negotiable
- Compensation is not legally required to be paid by the seller
This shift promotes transparency and ensures you understand your obligations and your broker’s role before entering into a binding transaction.
What Does the Buyer Representation Agreement Cover?
Scope of Representation
- Identifying potential properties
- Scheduling and conducting showings
- Providing market analysis
- Advising on pricing strategy
- Preparing and submitting offers
- Negotiating contract terms
- Coordinating inspections and escrow
- Guiding you through closing
Broker Compensation Structure
The agreement outlines the amount or percentage agreed upon, how it is calculated, when it becomes due, and potential sources of payment. Compensation is negotiable under California law.
Duration of the Agreement
Buyer representation agreements in California may not exceed three months in duration.
Exclusivity Terms
Some agreements are exclusive, requiring you to work solely with that broker during the agreement period. Others may be non-exclusive.
Why This Agreement Benefits You
Stronger Advocacy
A signed agreement creates fiduciary obligations and strengthens representation.
Transparency Around Broker Compensation
You understand how your broker is paid and avoid surprises at closing.
Legal and Professional Compliance
Written agreements support consumer protection and consistent industry standards.
Frequently Asked Questions
Do I have to sign a buyer representation agreement to tour homes?
Many brokerages require a signed agreement before providing full brokerage services.
Does signing mean I’m obligated to buy a home?
No. It outlines the working relationship and compensation terms if you purchase during the agreement period.
Who pays broker compensation?
The agreement explains how compensation is handled and identifies potential sources of payment. Compensation is negotiable and not automatically required to be paid by the seller.
Can I cancel the agreement?
Termination terms are included within the agreement. Review the length, cancellation provisions, and obligations carefully.
Can I work with multiple agents?
That depends on whether the agreement is exclusive or non-exclusive.
Tips Before Signing
- Read the entire agreement carefully
- Ask questions about unclear terms
- Review compensation structure
- Confirm duration complies with California law
- Understand cancellation provisions
Final Thoughts
Understanding your buyer representation agreement and how broker compensation works under California law gives you control over your real estate experience. This agreement forms the foundation of your professional relationship with your broker and supports transparency throughout the transaction.
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Margaret Shendal | Broker Associate | The Agency | DRE # 01464329
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