There’s a new New Jersey state bill that’s passed the assembly and senate (NJ S3192/A4454) and is now on Governor Phil Murphy’s desk for signature into law… and it’s drastically improving the protections and information for consumers when it comes to working with a real estate agent or brokerage firm at any point in a relationship. Whether you’re a buyer or a seller, this bill is a HUGE win for you offering you increased transparency during your entire relationship with a real estate agent.

It’s a large bill so I’m going to break it down for you as best as I can. Here’s what you need to know as a buyer or seller in New Jersey come August 1st.

Disclaimer: I am not an attorney. I’m simply an real estate licensee reading state legislature and interpreting it to my best ability to all of you. For full interpretation of your rights under this new act, please contact a real estate attorney.

THE HIGHLIGHTS (;TLDR)

1. Agents have additional duties they must perform for you, as part of their representation, or the public. They now must:
   • Strictly adhere to the laws of agency and the principles governing fiduciary relationships
   • Exercise reasonable skill and care
   • Deal honestly and in good faith
   • Present all written offers and counteroffers in a timely matter and provide written confirmation of receipt to the other party or agent (unless otherwise directed in writing by the principal)
   • Obtain a completed and signed Property Condition Disclosure Statement, when the principal is the seller
   • Disclose all material information known by the agent/brokerage with reasonable effort to ascertain the information, and reveal to all parties, concerning the physical condition of the property for sale
   • Provide and accounting to the principal in a timely manner for all money and property received from any party to the transaction
   • Provide a Consumer Information Statement and obtain a signed acknowledgement of receipt by the same party
   • Disclose, in writing before or up to the time the brokerage signs a service agreement, how an agent/brokerage is representing the client (agency) and the terms of compensation for both the represented party and to any firm representing a different party
   • make reasonable efforts to obtain material information on property condition for every property a brokerage firm accepts agency or transaction broker on, and obtain financial qualifications of every person whom the brokerage submits submits an offer to the principal
2. Clear and specific establishing circumstances that define when a licensee is working as a seller’s agent, buyer’s agent, designated agent, disclosed dual agent, or as a transaction broker
3. Clear and specific terms of brokerage service agreements including the term, agency, and compensation
4. A buyer or seller shall not be liable for an act, error or omission by an agent arising out of their relationship
5. Charges against brokerage firms and or the principal in regards to knowledge of known facts
6. The ways in which a brokerage may be paid compensation
7. Open Houses MUST display a sign at the entrance or sign in sheet clearly advising potential buyers of the representation that is in place
8. 50% or more of an agent’s continuing education must be in core topics such as agency, disclosure, legal issues, ethics, fair housing, rules and regulations, and more with one hour dedicated solely to agency.

THE BREAKDOWN

Agency

Previously only four, there are now five different types of real estate agency representation in New Jersey: seller’s agent, buyer’s agent, disclosed dual agent, designated agent, and transaction broker. It’s important to remember that an agency relationship is with the brokerage firm itself; with the licensee (broker, broker-salesperson, salesperson) acting as a representative of the brokerage. This can become confusing when dual agency and the new designated agency comes into play. An easy way to understand each of them is that in dual agency, the agent is representing both (dual) parties equally. Separately in designated agency, the brokerage is representing both parties however one agent is designated to represent the seller solely and a different agent is designated to represent the buyer solely. Here’s the acts definitions of each type of agency:

A seller’s agent is a brokerage firm, and any affiliated licensees with the broker, who has an agency relationship with a seller and whom only works with a seller and to whom the brokerage owes fiduciary duties to.

A buyer’s agent is a brokerage firm, and any affiliated licensees with the broker, who has an agency relationship with a buyer and whom only works with a seller and to whom the brokerage owes fiduciary duties to.

A designated agent is where in any transaction that the seller’s agent and the buyer’s agent are affiliated with the same brokerage firm, or are the same licensee within the firm, the brokerage designates one licensee to the solely represent the seller and one licensee solely represent to the buyer.

A disclosed dual agent is where a brokerage firm, and any affiliated licensees with the broker, has an agency relationship with both the buyer and the seller in the same transaction.

A transaction broker is where a brokerage, and any affiliated licensees with the broker, work with a buyer or seller without representing anyone and has no agency relationship and owes no fiduciary duties to either party to the transaction.

Duties of a Buyer’s Agent

In addition to the duties provided for under current law, the duties of a buyer’s agent (not working as a transaction broker) shall include the following, which may not be waived, except in circumstances listed below:

1. be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction and to exercise primary devotion to the buyer’s interests
2. to timely disclose to the buyer any actual or potential conflicts of interest which the buyer’s agent may reasonably anticipate
3. to advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise
4. to not disclose confidential information from or about the buyer, except under subpoena, court order or otherwise as provided by law, or as expressly authorized by the buyer, even after termination of the agency relationship
5. unless otherwise agreed to in writing, to make a good faith and continuous effort to find a property for the buyer, except that a buyer’s agent is not obligated to seek additional properties to purchase while a buyer is a party to an existing contract to purchase that is no longer subject to the attorney-review period, if applicable, and
6. any other additional duties that are agreed to in writing signed by a buyer’s agent or other authorized representative of the brokerage firm
   • the showing of a property in which a buyer is interested to other prospective buyers by a buyer’s agent shall not breach the duty of loyalty to the buyer or create a conflict of interest

Duties of a Seller’s Agent

In addition to the duties provided for under current law, the duties of a seller’s agent (not working as a transaction broker) shall include the following, which may not be waived, except in circumstances listed below:

1. to be loyal to the seller by taking no action that is adverse or detrimental to the seller’s interest in a transaction and to exercise primary devotion to the seller’s interests
2. to timely disclose to the buyer any actual or potential conflicts of interest which the seller’s agent may reasonably anticipate
3. to advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise
4. to not disclose confidential information from or about the seller, except under subpoena, court order or otherwise as provided by law, or as expressly authorized by the seller, even after termination of the agency relationship
5. unless otherwise agreed to in writing, to make a good faith and continuous effort to find a buyer for the property, except that a seller’s agent is not obligated to seek additional offers to purchase while a buyer is a party to an existing contract to purchase that is no longer subject to the attorney-review period, if applicable, and
6. any other additional duties that are agreed to in writing signed by a seller’s agent or other authorized representative of the brokerage firm
   • the showing of properties not owned by the seller to prospective buyers or the listing of competing properties for sale by a seller’s agent shall not breach the duty of loyalty to the seller or create a conflict of interest

Duties of a Disclosed Dual Agent

A brokerage firm, and any affiliated licensees with the brokerage, may act as a disclosed dual agent only with the informed consent of both parties to the transaction as set forth in the brokerage services agreements signed by the buyer and the seller, respectively.

In addition to the duties provided for under current law, the duties of a disclosed dual agent (not working as a transaction broker) shall include the following, which may not be waived, except in circumstances listed below:

1. to take no action that is adverse or detrimental to either party’s interest in a transaction
2. to timely disclose to both parties any actual or potential conflicts of interest which the disclosed dual agent may reasonably anticipate
3. to advise both parties to seek expert advice on matters relating to the transaction that are beyond the disclosed dual agent’s expertise
4. not to disclose any confidential information from or about either party, except under subpoena, court order or otherwise provided by law, or as expressly authorized by the party, even after termination of the relationship
5. unless otherwise agreed to in writing with the seller, to make a good faith and continuous effort to find a buyer for the property, except that a disclosed dual agent is not obligated to seek additional offers to purchase the property while the property is subject to an existing contract for sale that is no longer subject to the attorney-review period, if applicable
6. unless otherwise agreed to in writing, to make a good faith and continuous effort to find a buyer for the property, except that a seller’s agent is not obligated to seek additional offers to purchase while a buyer is a party to an existing contract to purchase that is no longer subject to the attorney-review period, if applicable, and
7. any other additional duties that are agreed to in writing signed by a disclosed dual agent or other authorized representative of the brokerage firm and each of the parties
   • a broker, broker-salesperson or salesperson acting as a disclosed dual agent in a real estate transaction shall be deemed to be acting in the same capacity with the buyer and the seller as a dual agent and may receive compensation through its brokerage firm from either or both the buyer and seller provided that the sources and amounts of compensation are disclosed in writing to the buyer and the seller
   • the showing of properties not owned by the seller to prospective buyers or the listing of competing properties for sale by a disclosed dual agent does not constitute action that is adverse or detrimental to the seller or create a conflict of interest
   • the showing of a property in which a buyer is interested to other prospective buyers or the presentation of additional offers to purchase the property while the property is subject to a transaction in which a disclosed dual agent is involved does not constitute action that is adverse or detrimental to the buyer or create a conflict of interest

Duties of a Designated Agent

In a transaction in which a different agent (broker, broker-salesperson, salesperson) is designated as a designated agent by the brokerage firm, the agents shall be designated agents. Each designated agent shall represent the party with whom the designated agent has an agency relationship. For the purposes of designated agency, the seller’s designated agent and the buyer’s designated agent are not dual agents and owe fiduciary duties solely to their respective principles. A written designated agency agreement must be entered into in order for designated agency to take effect. The designated agent may receive compensation through its brokerage firm from either or both parties provided that the sources and amounts of compensation are disclosed in writing to the buyer and the seller.

Service Agreements are now REQUIRED when working with a seller or a buyer

Previously, service agreements were required between a seller and an agent/brokerage in order for a home to be listed for sale by the agent/brokerage but were optional between a buyer and an agent/brokerage. The new law will require service agreements for both seller and/or buyer representation. These agreements are commonly known as a listing agreement (seller/agent) and a buyer broker agency agreement (buyer/agent). All service agreements must clearly outline the term of the representation, the type of agency representation, any additional duties agreed upon between the principal and the agent/brokerage and the compensation for the agency representation.

Consumer Information Statements MUST be signed

Commonly called the CIS, it clearly defines and outlines the types of agency a principal and brokerage may enter into in New Jersey and formally designates the type or types of agency the principal is engaging the agent/brokerage to act as. It must be included as a part of the brokerage services agreement and shall be provided to any party whom the broker renders real estate services to and any party not represented by the brokerage in a transaction before the party signs an offer.

Property Condition Disclosure Statements MUST be completed

Commonly called the Seller’s Disclosure, previously only the flood risk section of the disclosure was required to be completed. Under the new act, sellers will be required to complete the disclosure in totality, to the best of their knowledge, regarding the condition of the property for sale.

Agents are REQUIRED to disclose material information about the property

Agents are now required by law, not just regulation, to make a reasonable effort to ascertain and disclose all existing material information known by the agent/brokerage, or revealed to the agent by the seller, to any other party to the transaction, when appropriate, regarding the physical condition of the property that is for sale.

For example, let’s say a property is under contract and while it’s in contract the seller discovers squirrels in the attic. The seller remediates the infestation and makes repairs to the property to prevent further infestation. The seller does not want to share this information to the buyer. Because the agent is now in knowledge of this material change to the property, they must disclose to all parties.

Agents must present and communicate written receipt of all offers and counter offers regardless of the property or buyer’s contractual obligations

With the housing market being flooded with multiple offers on properties and buyer’s writing offers on multiple properties at one time, clarifying how presentation is to be made was vital. This section of the act now clearly defines that any offer presented to an agent must be presented to the agent’s principal regardless to whether a property is subject to an existing contract of sale or a buyer is already a party to an existing contract to purchase another property.

Reasonable Efforts for Material Information and Financial Qualification

Agents are now required to undertake reasonable efforts to both obtain material information regarding the condition of every property in which the brokerage accepts and agency relationship. Agents are now also required to undertake reasonable efforts to obtain information concerning the financial qualifications of every person for whom the brokerage submits an offer to the principal.

Signs at open houses MUST be displayed advising potential buyers of the agent’s representation

This one’s a BIG one! The new act states that any residential property showing that is generally open to the public (an Open House) must have a sign posted at the entrance or at the sign-in sheet clearly advising prospective buyers of the following:

1. the brokerage firm hosting the open house represents the seller only
2. the brokerage firm hosting the open house has no relationship with the prospective buyer, except if the buyer does not have an exclusive buyer agency agreement (broker services agreement/broker agency agreement) with another brokerage and agrees to the seller’s agent becoming a dual disclosed agent or designated agent.

The sign shall read the following to avoid doubt and ensure uniformity at open houses across the state:

“ATTENTION PROSPECTIVE PURCHASERS – PLEASE READ THIS SIGN CAREFULLY. This is to advise you that the agent who is conducting this Open House REPRESENTS THE SELLER AND IS REQUIRED BY LAW TO PROMOTE THE INTERESTS OF THE SELLER. ANY INFORMATION YOU GIVE THIS AGENT IS NOT CONSIDERED CONFIDENTIAL under New Jersey law and could be disclosed to the Seller of this property. You, as the Buyer, are entitled to have someone represent you as a Buyer’s Agent if you are interested in this property. The duties of a Buyer’s Agent include helping you evaluate the property, prepare an offer on the property and negotiate in your best interests. If you, as the Buyer, are already exclusively represented by a Buyer’s Agent, you are required to disclose this representation on the sign-in sheet. If you, as the Buyer, are not already exclusively represented by a Buyer’s Agent, please be advised that the Open House agent is not precluded from being a disclosed dual agent or designated agent and can enter into any relationship with you as explained in the Consumer Information Statement.”

Conclusion

If you made it this far, you’ve earned a gold star in life today! 😂 Seriously though, I’m excited to see the changes set forth in this act and grateful for New Jersey REALTORS^® for fighting for enhanced protection and transparency for consumers in New Jersey! If you’re wanting to read the act in it’s totality, you can view it on the New Jersey Legislature’s website here.