New real estate rules in New Jersey give buyers and sellers more leverage starting Aug. 1

The Real Estate Consumer Protection Enhancement Act , which is meant to create a more transparent and buyer-friendly housing market, officially went into effect in New Jersey Aug. 1, resulting in several new regulations for the real estate market.

These guidelines — which apply to residential and commercial sales, as well as rentals — were introduced after a federal ruling said that the National Association of Realtors was allegedly forcing home sellers to pay excessive fees in real estate transactions . It was signed by Gov. Phil Murphy last month.

"Best practices will evolve as we get more guidance on the practicalities of it and as we see how this all works out in the marketplace," said Laura Gill, leader of The Gill Group at Keller Williams Village Square Realty. "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."

If you are, or are soon to be, a buyer, seller or renter in New Jersey, here's what you need to know:

Mandatory Buyer Representation Agreements

Previously just a recommendation, buyers and tenants are now required to sign a mandatory Buyer Representation Agreement with their real estate agent before starting the homebuying process, according to the legislation. This document will outline the responsibilities of your real estate agent, how they will be compensated for their work and allow them to legally advocate for you throughout the process.

Gill said that going forward, buyers and renters will not be able to privately tour a property unless they have this signed agreement. Since open houses are public, though, agreements are not required to attend them, but you will need to provide a copy of the agreement if you have one.

"There's some gray areas with this," she said. "So this, open houses, may be an area of real estate that ends up phasing out."

Because the Buyer Representation Agreement will also outline how a real estate agent will be compensated, this leaves room for the potential of a buyer being responsible for paying their real estate agent's commission.

"What these Buyer Representation Agreements state that if for some reason the seller does not agree to pay for a buyer's agency commission, the buyer may be responsible for paying that commission now," Gill said. "We don't actually expect buyers to be paying this. In fact, if a seller were not offering it, we would expect to just write that commission into the contract. It will just become part of the offer and something else that is negotiated."

Additionally, she said that commission information will no longer be published on the New Jersey Multiple Listing Service, meaning that buying agents will have to reach out to see agents to know is being offered in terms of compensation.

Seller's Property Condition Disclosure forms now required

Seller's and landlords are now required to complete and sign a Seller's Property Condition Disclosure Form. This document will be used to outline details of the property, as well as any history of issues the property may have. Buyers and renters, and their respective representation, can consult this document before they decide to buy or rent a property.

Designated Agency is now permitted

Gill said that as part of this legislation, New Jersey now allows what is known as designated agency or "appointed agency." This means that the managing broker of a real estate agency will now be allowed to choose an agent within their listing office to represent the buyer or seller.

Listing agents must disclose representation at open houses

At open houses, listing agents are now also required to post a disclosure of representation throughout the event. This means that there will now be signs at open houses that clearly state who the listing agent represents, which is the home's seller.

What this means for buyers and tips

"I think in the very short term, there's going to be a lot of confusion over this because there hasn't been a lot of guidance over which forms and which versions of forms are completely required," Gill said. "I think there's going to be a big adjustment period. Buyers are not used to signing legal agreement before seeing a property and agents are not used to having to get these legal documents signed."

Gill said she believes that it's now more important than ever to choose the right real estate agent to represent you. Because a Buyer Representation Agreement is a binding contract, she said it's important to ensure that you find someone with extensive market knowledge, good negotiating skills and who has the right relationships with other professionals in the industry.

Through these new regulations, Gill said seller's are getting an added benefit of not having to worry about entertaining buyers who may not be serious because of these required agreements. But she said that there are several benefits for buyers as well, because these regulations are putting more transparency and legal protections in place for buyers.

"You'll have somebody that really is working for you and focused on finding you the right property," she said. "These agreements also cover properties that are for sale by owner, or exclusive properties that are not listed on the MLS, so it's really for everything."

Maddie McGay is the real estate reporter for NorthJersey.com and The Record, covering all things worth celebrating about living in North Jersey. Find her on Instagram @maddiemcgay , on X @maddiemcgayy , and sign up for her North Jersey Living newsletter. Do you have a tip, trend or terrific house she should know about? Email her at MMcGay@gannett .

This article originally appeared on NorthJersey.com: New real estate rules in New Jersey give buyers and sellers more leverage starting Aug. 1