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C.A.R.’s Solution for Buyers Who Want To Tour A Property But Are Unwilling To Sign A BRBC

By David Hamerslough and Victoria B. Naidorf

January 15, 2025

Buyers contact you to tour a property they are interested in. They tell you that they are not working with another broker and why they are interested in that property. You start to learn about their needs and wants and whether they are financially qualified to purchase the property.

After discussing what value you and your brokerage can provide these buyers, you start to explain that the new real estate industry practices require that you, as an MLS participant, have a written buyer representation agreement signed with the buyer before touring the property with them. The issue of agency is then discussed, including, among other things, whether any representation would be exclusive or non-exclusive, and the issue of compensation. As you start to explain what a buyer representation agreement is, the prospective buyers state that they are not willing to commit to an exclusive agency and representation agreement or to sign a Buyer Representation Broker Compensation (“BRBC”) Agreement at this time.

Since you are required to have such an agreement in place before touring any property, what options currently exist to address this situation? Zillow and some other real estate companies have produced what are described as “touring/showing/limited representation agreements.” Generally, these agreements compensate a broker with a flat fee for touring/showing a property to a prospective buyer with the expectation of then signing a buyer representation agreement after the buyer decides to write an offer. Some national commentators have expressed the opinion that such a limited agency agreement violates the terms of the NAR settlement, and some of the forms we have seen may not comply with the new California statute regarding broker representation agreements . So far, the federal and state courts, NAR, and the DOJ have not taken a position regarding whether or not a limited agency agreement can be used in place of a full BRBC. Until this issue is resolved, the better practice is to have prospective buyers sign a BRBC or decline to work with them.

C.A.R. has tried to bridge the gap between the simplistic broker-generated limited agency forms and a fully completed BRBC by creating the three-page Property Showing And Representation Agreement (“PSRA”).

This article discusses some of the issues that agents and their brokers should be aware of if a decision is made to use the C.A.R. PSRA.

1. How Is The C.A.R. PSRA Similar To The C.A.R. BRBC?

The shorter PSRA authorizes the broker to tour a limited number of properties identified in ¶ 1 with the buyers and to represent them in the acquisition of only those identified properties. Like the BRBC, the PSRA has a grid in ¶ 4, which is used to fill in the same basic terms of representation. Like the BRBC, the PSRA grid must be fully completed so that all of the required terms are included in that agreement so as to comply with the new California statute and the NAR settlement.

Here are some potential issues to consider when completing the grid in Paragraph 4:

  • ¶4A. Establishes the Term of the PSRA and the document limits the term to 30 days (“days” is not defined). The dates that are to be filled in cannot exceed 30 days. If a mistake is made in calculating the dates such that the PSRA term exceeds 30 days, there are factual and legal issues that will determine whether the PSRA is enforceable. Avoid them by filling in the dates accurately.
    • NOTE: It is not clear why C.A.R. chose to create a 30-day limit, but that pre-printed provision cannot be changed by the broker without the knowledge and informed consent of the buyer.
  • ¶4B(1). Establishes the amount of compensation to be paid to broker. Agents who leave the line for commission percentage blank or specify 0 will not be entitled to any compensation under this form. There is an “other” box which could be used to create a touring fee ($X for each property toured). Agents who use this method need to check the box and keep in mind that the touring or flat fee is still considered “broker compensation” under California law and must be paid directly to the broker. The PSRA includes an advisory note to that effect in Paragraph 5A.
    • NOTE: If the per-tour compensation method is used and an enforceable BRBC is subsequently entered into, the limit specified for the maximum amount the broker can be paid will necessarily need to account for the prior payments and the amount paid to be broker will need to be reduced to offset the separate fees paid by the buyer.
    • NOTE: ¶4B(2) states that broker “shall not receive” an amount in excess of what is in Paragraph ¶4B(1). If an enforceable BRBC is subsequently entered into, it is recommended that the BRBC specify as an additional term that it supersedes the provisions of any PSRA. Agents should be prepared to explain the change in the commission rate.

Compensation is potentially earned under the PSRA if there has been documented “Broker Involvement” on behalf of the prospective buyer with respect to the property that is identified in the PSRA and that prospective buyer then enters into a purchase agreement and the transaction closes escrow. The PSRA does not require that the broker write the offer upon which the buyer purchases and closes escrow or that the broker has represented the buyer in that transaction. The definition of “Broker Involvement” in the PSRA is the same as that in the BRBC; agents should carefully document their activities with their “non-exclusive” buyers to support a basis for claiming compensation.

Like the BRBC, the PSRA provides for “a continuation period” where entitlement to compensation may exist, provided that a specific number of days is filled in in the blank space in ¶4B(3) and the prospective buyer then enters into an agreement to acquire the property shown to them by the broker within the agreed-upon continuation period. As in the BRBC, the broker’s right to compensation only applies if prior to the expiration of the agreement or any extension of it, the broker delivers a written notice to the buyer of those properties for which there has been Broker Involvement. A failure to provide that list will likely preclude the broker from recovering any compensation.

The PSRA also includes terms relating to, among other things, the timing of compensation (¶ 5D), payment through escrow (¶ 5E), credits where compensation is paid by the seller or others (¶ 5G), agency (¶ 7), broker authorizations and obligations (¶ 8), and prospective buyer obligations (¶ 9) that are part of the BRBC.

2. What Are Some Of The Differences Between The PSRA And The BRBC?

  • The PSRA only provides for non-exclusive agency representation; there is no option for exclusive agency/representation.

This means that your prospective buyers are free to work with other agents with regard to not only the specific properties identified in the PSRA but other properties as well.

As noted above, broker compensation for a resulting transaction is governed by whether or not there is evidence of Broker Involvement. The upshot regarding the PSRA is that if Broker Involvement is established by Broker A but the prospective buyer ultimately works with Broker B to complete a transaction, Broker A has a claim that they are entitled to the commission on the basis of being the procuring cause of the transaction. The outcome of such a claim will be decided by the AOR and will depend, of course, on a number of factors and circumstances.

  • The term of the PSRA cannot be more than 30 days (please see comments above with respect to ¶ 4A of the grid).

This is in contrast to the BRBC and the new California law that limits the term of a buyer representation agreement with an individual to 90 days.

The PSRA does not discuss what would be a reasonable term for a continuation period. In our view, given that the agreement cannot last longer than 30 days, it is unlikely that a continuation period that exceeds 30 or more days will be considered reasonable.

  • The PSRA is intended for use with a limited number of properties.

In view of the subtitle of the PSRA and the specific direction to list “Property Addresses” in ¶1, (rather than counties, cities, or developments as allowed in the BRBC), the number of relevant properties must be “limited.”What constitutes a reasonable limitation? Arguably, the three lines provided in ¶1 can be considered a “reasonable” limitation, but the check box at the end of that paragraph allows the parties to attach a list. Agents who attempt to use an attached list of properties should check the box and keep the following points in mind:

  • The separate list should be dated and signed at the same time as the PSRA:
  • The list should contain specific property addresses, not counties, cities or developments;
  • The list will also need to contain a limited number of specific properties;
  • It is unlikely that the number of properties on the attached list will be deemed to be reasonable if it contains more that three property addresses; and
  • The list should not be considered a way to continue to add additional properties to a pre- existing PSRA. It should be considered to be a single-use document that is utilized at the same time as the buyers sign the PSRA.
  • The PSRA may be cancelled at any time by either party.

Paragraph 4C specifies that either party’s cancellation before the term ends must be in writing. The question then is, when is that written notice effective? The default choice is upon receipt, or the parties can specify a different effective date by filling in a number in the blank space in that section. The PSRA does not contain any definition of the term “receipt.” Assuming that the definition is the same as used in other C.A.R. forms, cancellation would be effective once a buyer sends a text or email to the broker even though the broker has not opened or reviewed the communication. A broker who wants more time to provide a notice of broker-involved properties should put in a reasonable number of days on the blank line.

3. What Is Not In The PSRA?

Sometimes it’s important to consider what is not in an agreement as well as what is in that agreement. There is existing California case law that suggests brokers are responsible for pointing out to their clients what standard provisions may be missing in an agreement signed by their clients. With that precedent in mind, consider the following:

The PSRA does not specifically identify, incorporate or require the use of the three forms that C.A.R. has created to enable a broker to learn about the buyer’s needs, wants, and concerns as well as their financial ability to purchase a property. Those three forms are the BIPP, BFPI, and BMI-SB. NOTE: These forms were discussed in our prior article on the BRBC.

Paragraph 9 of the PSRA, which identifies a prospective buyer’s obligations, states that the prospective buyer will, among other things, communicate and cooperate with the broker regarding any material issues or factors in any resulting transaction during the representation period and, if requested, provide relevant personal and financial information. This creates a contractual obligation to provide the information/documentation, but there is no mechanism or guidance for how to do so. We suggest incorporating the three forms listed above in the section entitled “Other Terms” (¶ 4D), assuming that text overflow will enable you to do so. If there is not enough room, we suggest creating an addendum identifying these forms and having the buyer and broker sign it.

Paragraph 8 of the PSRA authorizes the broker to diligently represent the prospective purchaser in any resulting transaction for a property that has been entered by the parties during the representation period and then identifies that the broker’s obligation is to conduct a reasonably competent and diligent visual inspection of the accessible areas of the property. The scope of the listed broker obligations should be contrasted with the obligations contained in the BRBC. It should also be noted that C.A.R has made the statutory inspection/disclosure obligation (Civil Code § 2079) a contractual obligation More importantly, brokers should not assume that their obligations are limited to what is spelled out in the PSRA. Please remember that there will still be common-law fiduciary duties as well as duties related to the standard of care that must be followed by the broker even if those duties are not detailed in the PSRA.

Paragraph 7 of the PSRA addresses the subject of agency. While we understand that the Agency

Disclosure (“AD”) is bundled with the PSRA, the language in ¶7A only states that the AD should be provided “as soon as practicable prior to writing an offer.” The new California law regarding buyer representation agreements states that the agency disclosure shall be provided to the buyer prior to the signing of a buyer representation agreement. Since the C.A.R. PSRA is both a property-showing and representation agreement, the AD should be provided to the buyer before the PSRA is signed. The other form that is not identified in the PSRA but is identified and attached to the BRBC is the Possible Representation Of More Than One Buyer Or Seller-Disclosure And Consent (“PRSB”). While the subject of multiple representation is discussed in ¶7B of the PSRA, the PRSB requires buyers to separately acknowledge and consent to such multiple representation. Not only is the PRSB not identified in the PSRA, to our knowledge it is not bundled with the PSRA at this time.

A broker’s right to their commission may be impacted by, among other things, the timing of the delivery of these disclosures. There is existing California precedent holding that the failure to timely provide these forms or obtain informed consent regarding dual agency or multiple-party representation may impact a broker’s right to recover their commission or may lead to other liability. We anticipate that this precedent may now be used where a buyer’s broker is seeking their commission.

There is a text box at the top of page 3 of the PSRA. The first section is for “Prospective Buyers attending an open house without representation.” This type of buyer is warned that they are “not required to sign” a representation agreement. Brokers and agents should be aware that the PSRA should not be viewed as a substitute for the Open House Visitor Non-Agency (“ONHA-S1”) unless the buyer is specifically advised that (1) they are creating an agency relationship with the Open House Agent and (2) have received the two agency disclosure forms discussed above.

  • NOTE: While the text box advises buyers that they should read and understand the ONHA-S1, a better practice is to actually show a buyer the ONHA-S1 so that they understand its content and warnings.
  • NOTE: We have advised brokers/agents to have their buyers put their signed BRBC on their phones to show other agents at open houses and when otherwise dealing with agents. We believe that this is a better way to inform another broker that a buyer has already signed a BRBC with you. That same advice should be applied to the PSRA.

Finally, there is no space for the prospective buyer to specify their contact information let alone any agreement for how the buyer is to be contacted by the broker. The better practice is to get written authorization from the buyer regarding acceptable contact mechanisms. The PSRA (¶ 4D) does have a one-line space for “other terms.” We assume that text overflow can expand that space. If securing the authorization to use the contact information cannot be addressed in that space, you will need to address it on a separate document.

4. Conclusion

The enforceability of either the PSRA or the BRBC will turn, in part, on how completely and accurately these forms document the terms of the buyer representation. On the one hand, these issues can be managed by the use of a fully completed and enforceable BRBC and adhering to your contractual, statutory, fiduciary, and agency duties. Although we believe that C.A.R. has tried to create an easier alternative to the BRBC, our concern is that a broker/agent who uses the PSRA in order to avoid using the BRBC may inadvertently fail to create a legally enforceable PSRA. While any case will turn on the facts and circumstances, brokers should consider the impact of the issues raised in this article when relying solely on the PSRA to recover their commission.

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