Any time the housing market cools down from blazing hot is a good time to brush up on the safe harbor clause in the C.A.R. Residential Listing Agreement (RLA). Inserting a timeframe in paragraph 3A(2) of the RLA generally entitles you to compensation if certain prospective buyers purchase the listed property after your listing period has already expired.

Multiple Choice Question: Which of the following statements concerning the RLA’s safe harbor clause is false? Pick the best answer:

A. You should try to get as long of a timeframe as possible.
B. You can protect a prospective buyer who has physically entered into and previewed the property, or who has written an offer.
C. You can use the C.A.R. Notice of Prospective Buyers (NPB) for your list of names.
D. You must give the list of the prospective buyers’ names to the seller within 3 days after your listing expires.
E. None of the above. 

Answer: Answer A is a true statement, and not the correct answer. Try to get as long of a timeframe as possible for your safe harbor period — whether it’s 60, 90, 180, or 365 days, or more. As an example, our agents who work in popular second-home destinations will unabashedly insert 365 or more days, because their out-of-town buyers may only come to visit once a year.

Answer B is also a true statement, and not the correct answer. The safe harbor clause applies to prospective buyers and their related entities who have previewed the property or written an offer. It does not apply to people who merely inquire about the property or drive by the property.

Answer C is also a true statement, and not the correct answer. You can use the NPB form to identify the buyers protected under your safe harbor clause. One good tip is to print out a hard copy of the NPB when you take a new listing. Put that NPB at your workspace to remind yourself to keep adding names of prospective buyers to your list as you go. Adding names as you go may be easier than trying to put the entire list together when your listing expires. You can also use your working list to check on people who have indicated an interest in buying your listing.

Answer D is a false statement, and it’s the correct answer. Under the current version of the RLA, you must give the seller your list of prospective buyers before the end of your listing period, not 3 days later. If your listing expires on September 23, 2022 at 11:59 p.m., you must give your NPB to the seller before that date and time. Agents often fail to give their NPB to their seller before their listing expires, which essentially means that their commission is not protected under their safe harbor clause.

Copyright© 2022 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of September 19, 2022. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.