This spring, we discussed the settlement of the class-action lawsuit against the National Association of Realtors (NAR). The most far-reaching effect of that settlement, as we noted, was that real estate agent’s sales commissions would be negotiable, which would likely lower them in most cases by a couple of percentage points from where they were.
This was part of the impetus for the state’s Real Estate Consumer Protection Enhancement Act, which took effect on Aug. 1. The law applies to both residential and commercial real estate transactions, including rentals. That means it’s important for just about everyone who’s going through any type of real estate transaction shortly to be familiar with the key parts of the law. Let’s look at two.
Buyer representation agreements are mandatory
While these have always been recommended, it’s now a requirement that a buyer or renter sign one before a real estate agent can help them find a home. This means they can’t tour a home with a buyer without this agreement in place. Open house participation is still unclear.
The agreement outlines, among other things, whether and how much the buyer or renter will compensate them for their services – including whether they’ll pay them a commission. These commissions are more often paid by sellers.
Property condition disclosure must be completed
Both sellers and landlords must complete and sign this document for a buyer or renter to review before they commit to a property. It provides details about the property as well as a disclosure of known issues either present or in the past.
While, not surprisingly, organizations representing real estate agents are less than happy with the new law. As one agent put it, “I’m sure there’s going to be a number of unintended consequences, which is what happens whenever you have a law that’s written by somebody who’s not actually in the business.”
It’s also going to be an adjustment – especially for buyers and renters, who will have new documents they need to review and sign, even though those documents help protect their rights. As everyone adjusts to the new law, it’s more advantageous than ever to have legal guidance if you’re going to be involved in a large real estate transaction.