BRBC Practices Over The Last Six Months

By David Hamerslough and Victoria B. Naidorf

Recently, we learned of a dispute involving a Buyer Representation And Broker Compensation Agreement (“BRBC”) that was not executed by the buyer and buyer’s broker until after ratification of the purchase contract. The seller had requested a copy of the BRBC before the buyer submitted their offer but did not include that request as part of a counteroffer. After ratification, the seller’s agent received a copy of the BRBC from the escrow officer. The seller is now claiming that they don’t have to pay any compensation to the buyer’s broker despite the fact that ¶ 3G(3) of the C.A.R. purchase contract stated that they would be paying 2.5% compensation. The buyer’s broker is taking the position that they are entitled to compensation in the amount of 2.5% despite the fact that the BRBC states that the compensation shall be 2%.

We do not know what rationale the buyer’s broker has for this position. Under the facts as we understand them, the seller is not obligated to pay any compensation to the buyer’s broker. Our conclusion is based upon, among other things, Civil Code § 1670.50. This statute went into effect on January 1, 2025 and sets forth requirements for the use of BRBCs, including minimum terms, duration, scope, etc. Significantly, the statute also provides that a BRBC “that is made in violation of this subdivision is void and unenforceable.”

What surprised us is that this dispute was the first instance that we had heard about since our article of February of this year (February 2025) that discussed three such claims being made by sellers. This caused both of us to contact a number of brokers whom we know to see if our experience regarding a lack of such disputes was similar to theirs and, if so, what might explain this fact. For anyone who requires more background on this issue, please refer to our article of August 2025 (August 2025).

The following are some of the observations made by the brokers we contacted:

• The number of disputes involving these issues has been negligible. Those claims they were aware of were raised by the seller, with the exception of one claim raised by a buyer. That claim was made by a sophisticated buyer with knowledge of the requirements for representation agreements. While there were other situations in which a buyer’s broker had to reduce their compensation to coincide with what was in their BRBC, none of these disputes caused a transaction to not close and/or result in lawyers getting involved.
• It is a minority practice in northern California for a seller to request the BRBC before contract ratification. In southern California, requesting a BRBC prior to ratification is even less of a standard practice.
• MLS Listings, Inc. is not conducting spot checks regarding this issue.
• There are buyers’ agents who are signing a BRBC or a Property Showing And Representation Agreement (“PSRA”) with a low amount of compensation (e.g., $500 or half a point) but then asking for a greater amount of compensation when the purchase contract is presented. In some instances, these brokers executed a new compensation agreement with the buyer once a specific property was targeted and increased the compensation to what they would be requesting in the purchase contract. In other instances, no new compensation agreement was executed by the buyer and the buyer’s broker.

The following are some of the explanations we received:

• Since C.A.R. revised its RPA in August 2025, its position on this issue can be summarized as follows: (1) there is no C.A.R. or NAR requirement for one broker to share with other brokers its client compensation agreements and it may not be appropriate to do so; (2) it is generally inappropriate for one broker to get involved in another broker’s relationship with their own client; (3) real estate licensees should not be making legal conclusions regarding the validity of another broker’s contract; (4) transactions may not close escrow; and (5) sellers should focus on the net amount they will receive based on the compensation requested in ¶ 3G(3) and if they are not satisfied with that net amount, they should address and resolve that issue as part of the negotiation process.
• Sellers who have requested the BRBC and then discovered an inconsistency between its terms and those in ¶ 3G(3) have been willing to pay the amount of compensation in the BRBC rather than taking the position that they are not obligated to pay any compensation at all. One reason for doing so is to avoid the risk of escrow not closing.
• Most buyers are accepting the explanations they receive from their brokers regarding the “strategy” described to them at the time the initial BRBC or PRSA is signed, why a new compensation agreement is needed, and whatever “rationalization” is being provided by the buyer’s broker if the seller raises this issue. The consensus of the brokers we spoke to is that many buyers who find themselves in this situation don’t really understand who is paying their broker’s compensation, why, and potential financial impacts to them. Where the issue does arise and is not resolved quickly, most buyers’ brokers are reaching some resolution with their buyer that involves some reduction in their compensation. The amount of that reduction, who is actually paying the buyer’s broker, and other issues that are part of that situation don’t get shared with the seller’s agent or the seller.

The foregoing is by no means a complete discussion of all the facts, issues, and/or explanations for the lack of claims regarding the payment of compensation to buyers’ brokers by sellers. What struck us, and what has been confirmed by the brokers we spoke to, is whether the last six months represents a trend with respect to these issues or whether sellers and buyers will become more aware of these issues and how they might impact them as the use of representation agreements evolves, as the market changes, and in the context of other industry issues (e.g., the class action litigation on behalf of buyers).

Whether there is a trend or not, the concerns we expressed in our August 2025 article remain. The short summary is that we believe that sellers should have the right to receive, prior to contract ratification, a copy of a buyer’s BRBC if that buyer is requesting that the seller pay compensation to the buyer’s broker. Sellers should be allowed to confirm that the BRBC is valid, covers the property, and specifies compensation of no less than the amount the buyer is requesting that the seller pay.

We also remain concerned that a lack of inquiry by the seller and the failure to produce the BRBC prior to ratification may “encourage” unethical behavior on the part of buyers’ brokers with respect to executing a valid compensation agreement with their buyer. If one is executed, it will be at a low amount with the understanding that it will be amended to increase that amount once a specific property is identified, or multiple compensation agreements will be executed with varying amounts of compensation provided for, the use of which will then be dictated by the compensation the seller is willing to pay. Some of the agency, fiduciary, and ethical issues that exist with respect to these practices were discussed in our August 2025 article as well.

Sellers and buyers are of course free to make any decisions they want with respect to a real estate transaction. Whether they make an informed decision depends on, among other things, the facts and circumstances, the knowledge and experience of the involved parties, the discussions that occur, and a number of other factors. Based on the last six months, our concern now is whether any of these issues are going to be evaluated. If not, then are the objectives of transparency and accountability, among others, really being achieved?

If the last six months represent what we can expect in 2026 and beyond, then the only major, long-term impact of the NAR settlement on brokers/agents was changing their advertising rules in the MLS and adding some paperwork requirements (which are, sadly, often not handled well). Regardless of what the doomsayers originally predicted, the NAR settlement may not have greatly impacted the ability of agents to negotiate their compensation. The reality is that in the majority of transactions, everyone wants escrow to close, and that generally requires negotiating how much everyone is to be paid. The more skilled brokers/agents are at negotiating compensation and demonstrating their value, the more they will get paid.

We wish you all happy holidays.