If you’re navigating the real estate market in 2024, two major developments—the NAR Settlement Agreement and New Jersey’s Real Estate Consumer Protection Enhancement Act (CPEA) — are changing the way residential transactions work. Whether you’re buying or selling, these new rules impact agent compensation, transparency, and your rights throughout the process.
What Is the NAR Settlement?
In October 2023, the National Association of REALTORS® (NAR) settled a class-action lawsuit that reshaped real estate practices across the U.S. The lawsuit centered on commissions, particularly the requirement for sellers to pay the buyer's agent's commission.
To resolve this, NAR agreed to the following key changes:
End of Mandatory Buyer Agent Commissions: Sellers are no longer required to offer compensation to the buyer’s agent. This eliminates the old standard where sellers typically covered both their agent’s and the buyer’s agent's fees. Now, buyers may need to negotiate or pay their agent directly, which brings more transparency to commission costs.
Compensation Off-MLS: Offers of compensation will no longer be displayed in Multiple Listing Services (MLS). Instead, these details must be negotiated privately between the buyer and seller and communicated off-MLS. This gives both parties more control over how much they’re willing to pay and to whom.
Written Buyer Agreements: Starting August 2024, real estate agents must have a written agreement with buyers before showing homes. This formalizes the buyer-agent relationship and clarifies compensation terms, ensuring transparency upfront. Buyers will know exactly what services they’re getting and how much they’ll be paying their agent.
New Jersey’s Real Estate Consumer Protection Enhancement Act (CPEA)
Following the NAR settlement, New Jersey took additional steps to enhance consumer protection through the CPEA, signed into law in July 2024 and effective August 1, 2024.
The law introduces several important changes:
Mandatory Property Disclosures: Sellers must provide a signed property condition disclosure before any sales contract becomes binding. This helps buyers make informed decisions by revealing any known issues with the property early in the process.
Designated Agency: The CPEA allows each real estate agent representing both the buyer and seller to work for the same brokerage. This “designated agency” arrangement requires written consent from both parties to ensure transparency and maintain fiduciary duties.
Brokerage Compensation Transparency: The law mandates that all brokerage services agreements clearly disclose how agents are compensated and that commission rates are fully negotiable, ensuring both buyers and sellers know that no compensation is set by law. This rule mirrors changes from the NAR settlement, promoting clearer communication about costs.
Open House Signage Requirements: New rules require listing agents to post clear signage during open houses, specifying that they represent the seller unless otherwise stated. This is designed to avoid confusion, especially for buyers who might otherwise assume the agent is working for them as well.
Impact on Buyers and Sellers
For Buyers:
Increased Transparency: Buyers will now know upfront how their agent is compensated and what services they’ll receive, thanks to mandatory written agreements. However, buyers may need to negotiate compensation with their agent, as sellers are no longer required to cover these costs automatically.
Potential Cost Shifts: With the end of mandatory seller-paid commissions, buyers might have to shoulder more of the agent's fees, which means factoring these costs into your overall budget.
For Sellers:
More Flexibility: Sellers now have more control over what they offer in terms of buyer agent compensation. This could reduce overall transaction costs but may also require negotiating these terms with potential buyers.
New Disclosure Responsibilities: Sellers must provide a property condition disclosure before a deal is finalized, which means you’ll need to be more transparent about your home’s condition. This added step reduces the risk of legal complications later.
Both the NAR Settlement and New Jersey’s CPEA are designed to promote transparency, negotiation, and fairness in real estate transactions. Buyers and sellers will need to adapt to these new rules, which shift some of the responsibility for commissions and disclosures.
If you’re planning to buy or sell a home, it’s more important than ever to work with a knowledgeable real estate agent who can help you navigate these changes.
Contact me today to understand how these new rules will affect your transaction and ensure you’re making the best decisions for your situation.
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