You’ve likely wondered how the changes to the real estate industry could impact you, your friends, and your family here in Iowa City and in surrounding communities up and down the growing Corridor. Hundreds of articles and opinion pieces have been written at the national level about the new real estate regulations that will go into effect this year across the country.
If you’ve only heard rumblings about the news or are in the dark about the why behind the upcoming changes. We’re here to set the record straight. Let’s rewind.
In October 2023, the Missouri federal court ruled in favor of a group of home sellers against the National Association of REALTORS® (NAR) as well as multiple national real estate brokerages. The plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates. On March 15, 2024, NAR reached an agreement with the plaintiffs that has since gotten preliminary approval as the final hearing is set for November 2024. The Settlement is set to include changes to real estate transactions, but also will provide additional transparency to the choices buyers and sellers have regarding real estate services.
But what will it mean for buyers and sellers who live in the greater Iowa City area?
First, we want to provide some local context. In Iowa, discussions about the proposed national changes were already in the works last year with the intention of adopting them as standard practice. Those changes were simply accelerated by the new National Association of REALTORS® (NAR) requirements introduced at the federal level—meaning both will be implemented this summer.
What many don’t know is that Urban Acres has been ahead of the curve when it comes to pushing for greater transparency for buyers and sellers industry-wide.
In fact, as Iowa City’s #1 real estate agency, Urban Acres has been a leading voice and advocate for buyers and sellers on the statewide and national levels. It’s one of the reasons our agents have stepped up to hold prominent leadership positions in organizations such as The Iowa Association of REALTORS® (IAR) and Iowa City Area Association of REALTORS® (ICAAR).
Urban Acres agent Shaner Magalhães is the 2024 IAR President, an organization that serves more than 8,000 real estate professionals in Iowa through its resources of services and opportunities. Additionally, our brokerage has six agents who hold president-elect, board, director, and committee positions in ICAAR.
As a company, we believe these new regulations are good news for buyers and sellers because they will make transparency a standard in the real estate industry.
Some agencies, like Urban Acres, already had transparency baked into our services and our relationships with clients. When we opened our doors in 2015, we made a commitment to buyers and sellers to not only be a locally owned and operated agency but to ensure integrity and value are infused into everything we do.
What does that mean? It means we already had practices in place to go above and beyond to guide buyers and sellers through a detailed understanding of what it means when they work with Urban Acres agents. In other words, the real value behind working with an experienced agent who knows how to get the job done and get it done right.
Our agents know real estate like the back of their hand. They work hard and have deep experience in their field. They also have developed shared resources they know and trust and have always been willing to share them with clients. Above all, we have always believed in advocating for our clients—before, during, and after the purchase or sale. Because, in all transparency, it’s in our best interest to look out for your best interests.
While REALTORS® have always had the best interests of buyers and sellers, it seems that there is still a greater opportunity to bring more transparency to the industry, which is why changes are coming to the real estate sector. NAR has been called upon to bring clarity back for buyers and sellers—and to ensure that transparency and integrity are at the forefront of the industry.
The trickiest part for those not working in the real estate industry is interpreting the new regulations. Much of what you will read is written in language that includes a lot of inside real estate knowledge. Let’s break down some of the upcoming policy changes that are most relevant to you as a buyer and seller. Two that rise to the top: REALTOR® compensation and buyer agreements. Let’s start with the NAR policy statements and then talk about what they mean.
According to NAR, the following practice changes within the revised policy will be implemented as soon as this summer:
NAR Policy Change: Eliminate and prohibit any requirement of offers of compensation in the Multiple Listing Service (MLS) between listing brokers or sellers to buyer brokers or other buyer representatives.
What It Means: Compensation for any transaction participants (REALTORS®, sellers, etc.) will no longer be included on the MLS.
Note: The MLS, which stands for Multiple Listing Service, is a database for real estate agents to post listings for sale. This platform also feeds listings to real estate websites.
NAR Policy Change: Require compensation disclosures to sellers as well as prospective sellers and buyers.
What It Means: REALTOR® compensation will be an upfront conversation between REALTORS® and buyers/sellers.
NAR Policy Change: Require MLS participants working with a buyer to enter into a written agreement with the buyer prior to touring a property OR prior to an offer being put in on a home if there was no showing.
What It Means: When a buyer contacts a REALTOR®, a contract must be signed before said REALTOR® can show any homes to the buyer. (Read on to discover everything covered in the contract!)
Compensation
The compensation piece is something most buyers and sellers want to know more about because it directly impacts their bottom line cost in doing business with an agent.
As we dive into this, we thought you might find it interesting to know a little about the history of compensation in real estate. Believe it or not, the average commission charged to sellers for splitting among buyers and sellers’ agents originates back to the 1940s, but it’s by no means a fixed fee. According to Forbes, in the 1950s, a Supreme Court decision found brokers requiring the fixed fee to be in violation of antitrust laws. After that decision, the language surrounding these fees began to alter, essentially calling the commission the “suggested” or “recommended” amount. While the language has changed over the years, multiple practices have held true; average has remained the same as well as the fact that commissions are, and always have been, negotiable.
With the NAR’s recent policy change bringing more clarity to the topic of commissions being negotiable, we can expect buyers and sellers alike to begin asking more questions about the fees they’re paying REALTORS® and the services they’re getting in return. For those agents cutting corners, this consequence could end up being detrimental.
Seasoned and experienced agents who can both convey and prove their value and those with longstanding relationships in their industry as well as with other local professionals in the area will rise to the top. Sound familiar? It should!
When you work with Urban Acres, you’re getting someone who will educate you on the market, advise you on offers, review contracts, negotiate, coordinate and review inspections (plus, oversee and coordinate repairs, when necessary), process closings, and plenty more. On the flip side, you’re also getting an advocate who will go out of their way to make sure you’re prepared for the real estate journey ahead! And while most of these, if not all of these, will happen in every transaction, you’re also getting a customized, full-service experience from conception to closing.
As for resources, Urban Acres is rooted in them. As an agent-owned company composed of the neighbors you see walking down the street or at school pick-up, the investment you make in us goes right back to the community. When we recommend a plumber, electrician, or remodeler, we’re giving you the inside scoop on our tried, true, and tested connections.
Exclusive Buyer Agreement
The other piece of legislation is the requirement of the buyer agreement. Historically, a buyer agreement has been a suggestion rather than a requirement, nationally or in the state of Iowa. As we mentioned, The Iowa Association of REALTORS® (IAR) had already been anticipating some of these national changes when they were accelerated by the new NAR policy changes. The IAR released a Buyer Agreement in February 2024 to be used widely by members, local boards/associations, and brokerages. This contract, which requires buyers’ signatures before viewing a home with an agent, will be mandatory in the state of Iowa starting July 1.
“The [buyer agreement] aims to help elevate the real estate business by creating contractual relationships, explaining REALTOR® value propositions to buyers, and protecting member interests in the transactions, “ says the IAR. The form can be broken down into five major components: Exclusivity, Retainer Period, and Proactive Period; Duties & Obligations; Dual Agency & Competing Buyers; Broker Compensation; and Standard Language.”
Magalhães told The Gazette, that while real estate agents will have to adjust to do some things differently, “these are probably things that should have been done proactively anyway in the real estate industry.”
It’s important to note that the timeframe of the Buyer Agreement is something you will establish with your REALTOR® depending on your real estate goals. Buyers looking for the right match who aren’t in a rush may opt for a 12-month contract, buyers with an immediate need or short timeframe may opt for between 3 and 6 months, or a 7-day contract may make sense for out-of-town buyers who want to explore the area before committing.
With the need to sign a contract before property showings, the real estate industry will likely see a resurgence of deeper relationships between agents and clients. While the contract is a requirement, it is by no means rigid. It instead gives buyers and agents a starting point for conversations. Buyers and agents will have to sit down prior to showings and will have the opportunity to get to know each other, giving buyers a chance to describe in detail their wants and needs of a home, as well as the chance for agents to explain their process and offerings while setting expectations.
For seasoned buyers, this agreement won’t contain any groundbreaking changes, however, outlining the details of the buyer-agent relationship will be especially beneficial for first-time buyers who otherwise may not know what to expect in terms of responsibilities, timelines, compensation, and more when purchasing a home.
Staying on Top
Many of these changes aren’t new concepts to Urban Acres, and with additional NAR policy adjustments on the horizon, we’re more than on top of them.
Earlier this year agents, Shaner Magalhães, Phil O’Brien, Sean McIntyre, and Brooke Kauffman represented Urban Acres at the 2024 Iowa Association of REALTORS® Capitol Conference in Des Moines to engage in conversations with Iowa legislators to continue advocacy for homeowner rights.
It’s why Urban agents continue to feel a responsibility to get involved in the conversation on a statewide and national level. Here are some of our agents who hold leadership positions in Iowa real estate:
Shaner Magalhães – 2024 IAR President
Phil O’Brien – 2024 ICAAR President-Elect
Jenna Poch – 2024 ICAAR Board of Directors
Sean McIntyre– 2024 ICAAR Board of Directors and MLS Committee Chair
Cathy Pugh – 2024 ICAAR Bylaws & Forms Committee Chair
Becky Halsch – 2024 ICAAR Member Services Committee Chair
Brooke Kauffman – 2024 ICAAR Political Affairs Committee Chair
We’re not just ahead of the curve, we’re helping shape the curve. Do you have any questions about upcoming changes in Iowa real estate? Ask an agent!
