Buying a Home in San Diego: Who Reads the "Civil Code"? - Page Two of the California "Disclosure Regarding Real Estate Agency Relationship" Form

Before reading this post, be sure to read the first post I wrote about the "Disclosure Regarding Real Estate Agency Relationship" Form - click here.  

The "Disclosure Regarding Real Estate Agency Relationship" Form (also called the "DA Form") is a two-page form that California has designed to educate home buyers and sellers about how agency works (to be read and signed by buyers and sellers before hiring an agent). The first page of the form has been reviewed and explained in my previous post entitled "Learn All About the Disclosure Regarding Real Estate Agency Relationship Form - A FORM YOU MUST SIGN BEFORE WORKING WITH AN AGENT."

The second page of the form holds the Civil Code section that explains in further detail the purpose and meaning of the disclosure form. I doubt that even 5% of buyers and sellers ever read the second page. That's not a good thing. The real estate process in California requires a lot of paperwork, and I urge each of my clients to always read what they are signing. Ultimately, the buyer is responsible for looking out for his/her best interest, and each buyer should always read the whole disclosure form (and all other real estate paperwork) when he/she is signing the paperwork.

By doing your research ahead of time, you can read through the paperwork and get familiar with many of the forms you will be seeing throughout your San Diego home purchase. That being said, I will attempt to break down and review the second page of the DA Form here in this blog post, especially noting some items that a buyer should be aware of.

Below, I have pasted the top paragraph containing definitions of the real estate terms used in the Civil Code and on Page One of the disclosure form. A home buyer should understand all of these terms and definitions, but I have highlighted a few to point out and clarify my opinion.

In my opinion, buyers should educate themselves on what an Agent is and what an Associate Licensee is. As you can read above, if you sign a buyer representation agreement with an Associate Licensee (or, in common language, with a real estate agent) who works for a brokerage (all California real estate agents must either be a Broker or work for a Broker), you are signing an agreement to be represented by the Broker of that company. If you decide to purchase a home that is listed with that same company, you will be in a dual agency situation. Your broker will be representing both you and the Seller in the same transaction, and this limits the role of that Broker in how he/she can advise you and represent your best interests in the transaction (in other words, there is a conflict of interest, because the Broker is already representing the Seller).

Below, you see the next few paragraphs of the Civil Code. Read through it yourself. In general, this section discusses when a real estate agent is required to supply this form to a Buyer or Seller. The highlighted portion discusses specifically when a Buyer Agent is required to supply the Buyer with this form. The document here states that it must be supplied to the Buyer prior to execution of the Buyer's offer to purchase. However, many Buyers today sign exclusive representation agreements with their agents. These agreements are often signed several days, weeks, or months before writing an offer to purchase. It only makes sense that a Buyer should have the opportunity to read this disclosure before committing to sign an agreement with an agent. I don't know why this form leaves out that obvious situation, but I hope the California Association of Realtors fixes it soon.

Below, I share the next couple of paragraphs (we're almost done, I promise!). This section mainly deals with reminding that an agent must disclose to the Buyer and to the Seller exactly who he/she is representing in the transaction (the Buyer only, the Seller only, or Dual Agent representing both the Buyer and the Seller). There is also a reminder highlighted at the bottom that no Seller Agent may act as an agent for the Buyer only. In other words, an agent/broker/company may only act as a an agent of the BUYER ONLY if that agent/broker/company is truly an agent of the BUYER ONLY (and doesn't also represent the Seller). This is just another reminder that if a brokerage represents a Seller, that brokerage must not claim to be the Buyer's exclusive agent (even if different associate licensees are involved with each client).

Here is the last piece of the page.  If your brain has already turned to mush, bookmark this page and come back to read this last section later. If a lightbulb hasn't gone off in your head by now you need to read this last section with a clear mind. This section lists several interesting reminders about agency. I am not going to review them all (just as I have skipped reviewing many sentences throughout this entire post). As a reminder to you, this post is not designed to be legal advice. I am not a lawyer. I am a real estate agent, a REALTOR® (member of the National Association of REALTORS®, the California Association of REALTORS®, and the San Diego Association of REALTORS®), a California Broker, an exclusive buyer agent, a member of the National Association of Exclusive Buyer Agents, an Accredited Buyer Representive (special designation for agents that have completed special courses and requirements to be designated an ABR), etc. BUT I AM NOT A LAWYER. If you are looking for legal advice, call a lawyer.

Wow! Now that I got that out of the way... check out the highlighted section below. Read it, and then read it again. Does it make any sense to you to hire an agent to help you purchase a home who could possibly end up being a dual agent? Do you want an agent who has to hide behind forms and be careful about what he/she can/cannot disclose to you about the seller's motivations... OR do you want an agent who is 100% working for you to help you obtain the best price and terms possible, who is able to share with you any information he/she finds out about the property, seller, etc. to help you make an informed decision?

Here is what IS NOT written in this disclosure form (but is recognized in other California Association of REALTORS® forms such as the "Buyer Representation Agreement - Exclusive," which will be written about and reviewed in a future post on this blog): Buyers have an option to work with a Company/Broker that never represents Sellers. It's called Exclusive Buyer Agency. This is the only way a San Diego home buyer can be certain to avoid a dual agency situation. I hope this post was helpful to you. I hope you now have a better understanding of the form that you will sign first when working with a real estate agent in San Diego. This is just the tip of the iceberg, so check back often for more posts on similar topics. I am committing with this blog to write about important topics for buyers only. If you are a prospective San Diego home buyer, I hope you enjoy the blog!