Alabama real estate transaction rules

Written buyer agency / buyer agreement: when it must be signed and what it must say

Since Apr. 18, 2025 (Act 2025-59), a signed brokerage agreement is required before submitting an offer. A showing does not require one.

• Before any brokerage service, including showing a property, the licensee must give the buyer the RECAD disclosure and the company's Agency Disclosure Office Policy, and AREC asks that receipt be documented. A seller's agent hosting an open house is not covered by this step.
• A consumer “may not be required” to sign a written brokerage agreement just to be shown a property. A written brokerage agreement is required before the licensee lists a property or submits an offer on a consumer's behalf for compensation.
• Without a signed brokerage agreement, the licensee is presumed to be a “transaction facilitator” for an unrepresented party. Before October 1, 2025, this role was called a “transaction broker” (Act 2025-380; RECAD form in r. 790-X-3-.13).
• These steps do not apply when the consumer is a business or governmental entity.

Are escalation clauses allowed, and who may draft them?

No AREC rule on escalation clauses was found. Alabama REALTORS® has published a Purchase Price Escalation Addendum.

• We found no Alabama statute or AREC rule that specifically addresses escalation clauses.
• Alabama REALTORS® (AAR) announced a Purchase Price Escalation Addendum form in 2021. Its guidance stresses verifiable, bona fide competing offers, excluding offers from the seller's relatives, and setting a ceiling price. We have not reviewed the current edition of the form, which is member-only. Not verified yet.
• General AREC duties still apply: present all written offers in a timely and truthful way, and keep confidential information confidential unless disclosure is authorized in writing or another exception applies (RECAD form, r. 790-X-3-.13).

Must a licensed attorney handle the closing?

No statute requiring an attorney at closing was found. Drafting deeds and similar instruments for others is the practice of law.

• Ala. Code § 34-3-6 defines the practice of law to include, for compensation, drawing or helping draw documents affecting secular rights. Title and abstract companies may not prepare deeds, conveyances, or mortgages unless they have a proprietary interest in the property, though they may prepare simple affidavits for their own title-policy files.
• We found no Alabama statute or rule requiring that an attorney conduct the closing itself. Not verified yet.

Who holds the deposit and how fast it must be deposited

Brokers deposit cash immediately. A check is deposited when the contract says, or when the offer becomes a contract if it is silent. Disbursement is due within 7 business days of closing.

• Trust funds must be held in a separate federally insured account at a financial institution in Alabama. The qualifying broker must be a customer of the institution and an authorized signer (Ala. Admin. Code r. 790-X-3-.03(1)).
• Salespersons and associate brokers must turn trust funds over to their qualifying broker immediately (r. 790-X-3-.03(2)).
• Cash must be deposited immediately. An earnest money check is deposited when the contract says it should be. If the contract doesn't specify a time, the check is deposited when the offer becomes a contract (r. 790-X-3-.03(3)).
• After closing, trust funds must be disbursed within 7 business days. If the deal ends without closing or the parties disagree, the broker may disburse only under a written agreement signed by all parties or a court order (r. 790-X-3-.03(5)).
• The rule was last amended effective April 14, 2025.

Can one broker represent both sides, and on what terms?

Since Oct. 1, 2025 (Act 2025-380), dual agency requires the informed written consent of all parties. Brokers may designate single agents within one firm instead.

• Act 2025-380 (HB 382), effective October 1, 2025, ended “limited consensual dual agency.” A dual agent is now an individual licensee acting as agent for both buyer and seller. This is allowed only with the written, informed consent of all parties.
• New designated single agency: when two or more licensees under the same qualifying broker have separate agency agreements with different parties to the same transaction, the qualifying broker may designate each as a single agent for their own client. The designation must be in writing and made as soon as reasonably possible. A designated single agent is not a dual agent.
• The former “transaction broker” role is now called “transaction facilitator”: a licensee who assists customers without being their agent or advocate.
• The RECAD Brokerage Services Disclosure text in r. 790-X-3-.13 reflects these changes. It was amended effective February 14, 2026.

Key required seller disclosures

Alabama is a caveat emptor state for sellers. Licensees, however, must disclose known latent or significant defects.

• Under RECAD as amended by Act 2025-380, a licensee may not misrepresent, or fail to disclose to a potential purchaser or lessee, any latent structural defect or other defect known to the licensee. “Defects” means significant ones that a reasonable and prudent person would consider in deciding whether to buy, not trivial ones (Ala. Code § 34-27-36, as amended). Note: our copy of the enrolled bill mixes struck and inserted text, so check the codified section for exact wording.
• Alabama REALTORS® describes Alabama as a caveat emptor (buyer beware) state. We found no statute requiring sellers of existing homes to complete a statewide condition disclosure form, but we have not confirmed this from case law or an official source. Not verified yet.
• Federal rule: for most housing built before 1978, sellers must give the lead-based paint disclosure.

The standard inspection, due diligence, or option period in the common state form

AAR Residential Purchase Agreement: 14-day default inspection period, plus a negotiated secondary inspection date.

• Alabama REALTORS® says that under its Residential Purchase Agreement, the default initial Inspection Period is 14 days from the Agreement Acceptance Date. Radon, sewer/septic, wood-infestation (termite) reports, and surveys need a negotiated “Secondary Inspection Date.”
• A buyer who misses the inspection deadline loses the inspection contingency (per AAR).
• AAR's article is dated February 2025, and the form was revised in June 2025. We have not checked these terms against the current member-only form. Regional associations may use other forms. Not verified yet against the current form.