For the past few years, the real estate industry has been at the center of a media firestorm claiming real estate professionals fixed prices, colluded to keep commissions high, and forced sellers to offer cooperative commissions. This practice, they argued, prevented buyers from negotiating how much they were willing to pay for representation and in turn, forced sellers to pay too high commissions.

 

Reality shows like “Million Dollar Listing” and “Selling Sunset” perpetuate the perception that real estate professionals’ incomes are grossly inflated, when in reality, the average real estate salesperson earns $46,000 per year or approximately $82,000 per year in New Jersey. That misperception may have helped fuel a class action lawsuit aimed at diminishing home sale commissions by decoupling compensation. This lawsuit resulted in a $418 million settlement by the National Association of Realtors (NAR) that required multiple adjustments to the way real estate professionals would work going forward, including the use of agency agreements for all real estate transactions and cooperative compensation disappearing from the MLS.

 

New Jersey Realtors, the state real estate association, jumped into action and championed a bill that would enhance real estate transaction transparency and protect consumers in New Jersey. After passing the legislature unanimously, Governor Murphy signed Bill S3192/A4454 or the Consumer Protection Enhancement Act into law on August 1st, 2024.

 

The New Jersey Real Estate Consumer Protection Enhancement Act strengthens both consumer and real estate licensee protections by requiring the following six major changes:

 

All real estate transactions now require brokerage agreements. As always, sellers and landlords must sign listing agreements before a brokerage begins marketing their property for sale or rent. Now, buyers and tenants must sign agency agreements with sales professionals before touring a property. This practice ensures that all parties are aware of the services provided throughout the transaction and the compensation the parties negotiated.

Before a buyer signs an offer to purchase contract, they must receive a fully completed Seller’s Property Condition Disclosure. The Department of Community Affairs document asks detailed questions about the structure and mechanics of the property and requires specific flood risk disclosure (resulting from the Flood Disclosure Law, March 2024). For Sale by Owner (FSBO), bank/REO and estate administrators are no longer exempt. This change will ensure buyers are more fully aware of a property’s condition before submitting an offer.

Listing agents must explicitly disclose who they represent when hosting an Open House. Required disclosures must be posted on the front door or by the sign in sheets.

In Dual Agency, a brokerage is able to “designate” or appoint an agent to represent either the buyer or the seller in a transaction, ensuring that all parties receive full fiduciary and advice. Previously, in Dual Agency, the agent would not be able to advise on price and terms because it was assumed that they had full knowledge of the other party’s motivations and financial requirements.

 

In line with the NAR settlement, it is no longer allowable for a brokerage to disclose compensation through a Multiple Listing Service (MLS). Agents will negotiate compensation separately with their seller clients and buyer clients. Who pays who will be negotiated as part of the total purchase offer. This will not preclude sellers from paying buyer agent commissions through seller concessions or credits towards buyer closing costs. Likewise, sellers may choose only to pay the listing agent, and the buyer may pay their representative separately.

 

License renewal continuing education requirements will now include classes on “Agency” (one credit hour). This will ensure that licensees are fully versed in all forms of representation available to consumers in New Jersey.

 

While change brings challenges, it can also bring opportunity. The Consumer Protection Enhancement Act will allow real estate licensees to demonstrate their value, help consumers better understand the value of representation in a real estate transaction, and ensure greater transparency. I’m certain, with additional training and a few months of practice, we will all feel more comfortable with the changes and more confident articulating our value to consumers.  

 The real value of a real estate professional is not to provide access to a property, rather it’s to help our consumers avoid costly mistakes when making what may be the greatest financial investment of their lives.