What the NAR Settlement and Real Estate Consumer Protection Enhancement Act Means for You

In October 2023, the National Association of Realtors (NAR) was found liable by a federal jury of making home sellers pay excessive commission fees. Following a settlement between the NAR and the federal government, many new changes are forthcoming to how residential real estate transactions will be performed nationwide, including, among other things, the abolition of requiring sellers’ agents to make an offer of compensation to buyers’ agents. In the wake of this settlement, New Jersey Gov. Phil Murphy signed into law the Real Estate Consumer Protection Enhancement Act. The law, which took effect on August 1, 2024, will purportedly enhance transparency and promote more efficient decision-making by principals with respect to residential real estate transactions in the following ways:

1. Creating a designated agency relationship, which allows a buyer’s agent and a seller’s agent to be affiliated with the same brokerage firm. Should parties choose to engage in a designated agency relationship, consent must be obtained from all parties and disclosed in all agency disclosures.
2. Mandating brokerage services agreements before, or as soon as reasonably practical after, a brokerage firm commences services to, or on behalf of, a buyer and seller. This rule does not apply to commercial real estate transactions. A brokerage services agreement must include the following information:
   1. The term of the agreement;
   2. A clear statement that the brokerage firm is serving as a buyer’s and/or seller’s agent;
   3. Whether the agency relationship is exclusive or non-exclusive;
   4. Whether the buyer or seller consents to dual or designated agency, if necessary;
   5. Whether the buyer or seller consents to the broker acting as a disclosed dual agent, if necessary;
   6. The brokerage firm’s compensation, and how the compensation is calculated; and
   7. A statement that the broker’s compensation is fully negotiable and not set by law.
3. All sellers must provide buyers with a signed property condition disclosure statement prior to there being a binding sales contract and before the buyer becomes contractually obligated for the purchase of a residential property.
4. All brokerage services agreements must include how brokerage firm compensation is calculated and include a disclosure that expressly states that broker compensation is fully negotiable and not set by law.
5. Sellers’ agents may not disclose in the Multiple Listing Service database whether the seller authorized sharing of compensation with cooperating sub-agents, transaction brokers, or buyer agents, including the amount of the shared compensation to any serve that prohibits offers from being displayed.
6. At all residential property showings open to the public, signage must be posted at the entrance or on sign-in sheets clearly indicating to prospective buyers that the hosting brokerage firm represents the seller only and has no relationship with the prospective buyer (except in instances of disclosed dual or designated agent). All brokers must be cognizant that the law includes a specific paragraph that must be included in all signage for public real estate open houses.
7. Requiring that all brokers, broker-salespersons, and salespersons complete continuing education courses on agency to renew licenses every two years.

Although this law was recently adopted in New Jersey, parties can anticipate similar laws being passed nationwide resulting from the NAR settlement, which took effect on August 17, 2024. Changes from the settlement include prohibitions on agent compensation from being included on multiple listing services (though compensation details may be disclosed in person or over the phone) and disclosure by buyers’ agents of compensation to prospective homebuyers via a written buyer agreement before touring properties. The latter rule had been adopted by 18 states, not including New York and New Jersey.