Why Buyers and Sellers Should Carefully Review Listing Agreements and Standard Real Estate Forms Before Signing

Intro

Most buyers and sellers focus their attention on price, timing, and contingencies. Far fewer pay close attention to the brokerage agreements and standardized forms that govern how disputes will be resolved if something goes wrong. In California, widely used real estate forms—particularly listing agreements and buyer-broker agreements—now increasingly include arbitration clauses, class action waivers, and dispute-resolution provisions that materially affect legal rights. Presidio Law Firm LLP advises buyers and sellers to review these documents carefully before signing, especially as brokerage practices evolve in the wake of recent commission litigation.

Standard Forms Are Not Neutral or Mandatory

California Association of Realtors (CAR) forms are commonly described as “standard,” but that label can be misleading. These forms are drafted to serve industry participants broadly and are often revised in response to litigation risk faced by brokerages—not to protect individual buyers or sellers.

Use of a standard form does not mean the terms are non-negotiable, advisable, or aligned with a client’s interests in every transaction.

Listing Agreements and Buyer-Broker Agreements Carry Independent Risk

Many buyers and sellers treat brokerage agreements as procedural paperwork rather than substantive contracts. In reality, these agreements often contain provisions that govern compensation, dispute resolution, remedies, and attorney fees—sometimes more aggressively than the purchase agreement itself.

Because brokerage agreements are signed earlier in the process, clients may commit to binding terms before understanding the full scope of the transaction or potential disputes.

Arbitration Clauses and Class Action Waivers

One of the most significant developments in recent years is the expanded use of arbitration provisions and class action waivers in brokerage agreements. These clauses may require clients to resolve disputes in private arbitration rather than court and may prohibit participation in class or collective actions entirely.

While arbitration can be appropriate in some contexts, it also limits procedural protections, discovery rights, appellate review, and transparency. Class action waivers, in particular, can prevent clients from pursuing claims that are only economically viable when brought collectively.

These provisions disproportionately benefit large brokerages by reducing exposure and litigation risk.

Why These Provisions Are Often Overlooked

Arbitration and waiver provisions are frequently embedded deep within lengthy forms and presented as routine. Clients are often told that the forms are “required” or that changes are not possible.

In practice, many of these provisions are negotiable or can be stricken, modified, or clarified—especially when raised before the transaction gains momentum.

Dispute Resolution Terms Often Favor the Brokerage

Dispute-resolution clauses may impose shortened limitation periods, restrict available remedies, or allocate costs in ways that disadvantage clients. Some provisions require mediation or arbitration even where statutory rights would otherwise allow court litigation.

Buyers and sellers should understand that agreeing to these terms affects not only how disputes are resolved, but whether certain claims can be pursued at all.

Interaction With Recent Commission Litigation

In response to class action litigation challenging commission practices, some brokerages have revised their agreements to include stronger waivers and dispute-resolution provisions. These changes are designed to limit future exposure, not to enhance client protection.

Clients signing revised forms may unknowingly waive rights that were preserved in prior versions of the same agreements.

Purchase Agreements Are Not the Only Contracts That Matter

Even sophisticated clients sometimes focus exclusively on the purchase and sale agreement while overlooking brokerage contracts signed earlier. This can be a mistake. Disputes often arise between clients and agents or brokers rather than between buyers and sellers.

The governing terms for those disputes are typically found in the listing or buyer-broker agreement—not the purchase contract.

Why “Everyone Signs These” Is Not a Good Reason

The fact that a form is widely used does not mean it is advisable. Many provisions exist because they have not been challenged, not because they are fair.

Clients should resist pressure to sign quickly without review, particularly where provisions affect fundamental rights to seek relief.

When Legal Review Is Especially Important

Advance review is particularly important in high-value transactions, competitive markets where pressure is intense, and situations involving new or revised brokerage forms.

A brief review before signing can prevent years of constrained remedies if a dispute arises later.

Review Does Not Mean Delay

Careful review does not require delaying the transaction. In most cases, identifying and addressing problematic provisions can be done efficiently and without disrupting escrow.

What matters is timing—review should occur before commitments are made irreversible.

Closing

Real estate transactions involve more than price and property condition. The contracts governing representation and dispute resolution can have lasting consequences if conflicts arise. As brokerage agreements evolve to protect industry participants from litigation risk, buyers and sellers must be equally attentive to protecting their own rights. Presidio Law Firm LLP works with clients to review and evaluate real estate agreements before signing, helping ensure that efficiency today does not come at the expense of legal leverage tomorrow.