FAQ

Iowa Buyer Agreements

MLS Changes

Admin Rule Changes

Consumer Resources

Additional Resources

The NAR settlement ushered in a number of changes for the real estate industry. Iowa REALTORS® is dedicated to providing members with resources as we traverse this changes. Below are answers to Iowa-specific frequently asked questions. If you have additional questions, please reach our to our Broker Legal Hotline. 

A: NAR and plaintiffs have reached a proposed settlement agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions by the Sitzer/Burnett case and other broker commission lawsuits. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned Multiple Listing Services (MLSs), and all brokerages with an NAR member Do you as principal that had a residential transaction volume in 2022 of $2 billion or below. The settlement is subject to court approval.

A: There are two primary practice changes for REALTOR® members:

A written agreement must be signed prior to showing a property to a client. 

 Removal of cooperative compensation from the MLS and any associated fields. 

A: Iowa took proactive steps to help standardize the process of usage of written agreement prior to showing a property to clients and make buyer agreements a mandatory element of Iowa’s real estate transaction process. IAR believed it best to create transparency in the marketplace and protections for REALTORS® and consumers by requiring the usage of buyer agreements. 

As of July 1, 2024, all Iowa real estate licensees are required to enter into a buyer agreement prior to showing a property in the state of Iowa. All buyer agreements must contain the provisions outlined in 543B.56A Additionally, the new law passed in the 2024 legislative session also requires that all listing and buyer agreements have a section reviewing broker’s compensation under the brokerage agreement, compensation must be conspicuously displayed, and there must be a disclaimer that compensation, fees, and commission rates are not set by law and are fully negotiable. 

The usage of buyer agreements will be a mandatory requirement for all licensees in the state of Iowa. Failure to comply with this requirement would be a violation of Iowa real estate law and a real estate licensee  could receive penalties from the Iowa Real Estate Commission.

A: The NAR settlement requires the removal of cooperative compensation from the MLS. Compensation cannot be input into the system in any capacity. This includes placing remarks about compensation in agent or public remarks.

However, cooperative compensation has not gone away. It has just moved off the MLS and is now  negotiated and communicated in different ways. The NAR settlement states that REALTORS® can continue to communicate cooperative compensation through negotiations with other real estate professionals. Additionally, REALTORS® are permitted to display seller concessions on the MLS, if any occur. 

In Iowa, IAR took numerous steps to open up laws and rules to make sure there is accessibility in how REALTOR® compensation is handled.. IAR recommended to the Iowa Real Estate Commission several changes to make negotiations of compensation easier for agents and the consumer. For example, there was a prohibition in Iowa law that did not allow real estate licensees to place compensation into a purchase agreement, even if requested by the buyers and sellers.With the adoption of these proposed rules in late 2024, a buyer can now place their obligated contracted professional fee from the buyer agreement into a purchase agreement as a negotiable item as part of the transaction. This is one of several examples of opening up the process to make negotiated compensation an easier practice in Iowa. 

There are more changes that will likely need to occur in the future to ensure the real estate industry in Iowa remains strong. IAR continues to collaborate with various stakeholders to review practice changes with other entities, such as banks, credit unions, settlement companies, attorneys, and more to help IAR members navigate changes to the real estate industry in Iowa.

A: No, there is a complete ban from cooperative compensation being input in any form on the MLS. Further, the NAR settlement forbids any association managed MLS from assisting a third party entity in collecting and showing cooperative compensation data. Seller concessions are permissible in the MLS under the NAR settlement.  

A: The NAR settlement allows for brokers to communicate in a variety of ways related to cooperative compensation, such as phone calls, emails, text messages, mail, and displays on brokers personal websites. However, any displays of cooperative compensation will only be advertisements and are not binding offers of cooperative compensation. 

IAR recommends that the best practice moving forward is to have REALTOR® to REALTOR® conversations related to whether cooperative compensation is being offered on a specific listed property. With the removal of cooperative compensation from the MLS, each transaction will likely need cooperative compensation agreements in place between brokers or have compensation included as a negotiable item in the offer to purchase. Communicating with the brokers directly will help establish the relationship between REALTORS® and help clarify if any negotiations need to take place related to cooperative compensation.

A: NAR released definitions related to what constitutes a showing that would trigger the need for written agreement: 

“Touring a home means when the buyer and/or the MLS participant, or other agent, at the direction of the MLS participant working with the buyer, enter(s) the house. This includes when the MLS participant or other agent, at the direction of the MLS participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.”

IAR recommends the above definition of touring for usage of what constitutes a showing for Iowa law. While Iowa law does not have a specific definition at this time, IAR is  working to define showing to include the above. Further, we are working with the Iowa Real Estate Commission to clarify administrative rules related to showings and unrepresented buyers which will be discussed below. 

Please note, open houses are not considered a showing.  Additionally, IAR extends this interpretation to auctions as well. A licensee who is managing an auction will need to have a buyer agreement signed by the buyer if the licensee helps the buyer prepare the offer for the property.

A: Yes, there are still certain ministerial acts that REALTORS can complete on behalf of unrepresented parties. These include responding to telephonic inquiries from consumers regarding the availability and pricing of brokerage services, attending open houses and responding to general factual questions about the property, and describing the facts and features of the property in response to a consumer inquiry.  

Iowa REALTORS® interpretation is that Iowa law does prohibit preparing an offer on behalf of an unrepresented buyer. The Iowa Code requires that a buyer agreement be in place “...before showing a property to a buyer or, if no property is shown to a buyer, before making an offer on a property on behalf of a buyer.” To the extent that unrepresented buyers in the past could have REALTORS for the seller draft purchase agreements on the buyer’s behalf, REALTORS are now prohibited from doing so without a signed buyer agreement in place. This also necessitates agency disclosures. 

Otherwise, unrepresented buyers retain the right to present their own offers, prepared by them, or to have an attorney or another REALTOR prepare an offer on their behalf. 

NAR has provided the following guidance related to ministerial acts with the NAR settlement: Is a written buyer agreement required when MLS participants perform ministerial acts?

Yes. The obligation is triggered once the MLS participant is working with that buyer and has taken them to tour a home, regardless of what other acts the MLS participant performs.

But an MLS participant performing only ministerial acts — without the expectation of being paid for those acts and who has not taken the buyer to tour a home — is not working for the buyer. 

However, IAR advises that the interpretation by NAR does not fully cover the scope of Iowa law. Iowa law states that if no showing occurs, then a buyer agreement must be in place before drafting an offer on the Buyer’s behalf. Therefore, if an unrepresented buyer seeks the assistance of a listing agent to prepare an offer on a property, there must be a buyer agreement in place. Other documents could be done under the NAR guidance, but specifically preparation of an offer on a property must require a buyer agreement in place. 

A: In a case where there are two competing EBAs, the buyer’s agent with the EBA that makes the offer on the property would be the agent who would secure any cooperative compensation or other compensation from the real estate transaction. The agent with the other valid EBA who did not prepare the offer would be able to sue the buyer for breach of contract and seek out damages. 

A: No. That would be an antitrust violation. There should be no pre-arranged agreements between brokers for some sort of standard set fee. As each transaction might have unique negotiated elements, the standards of practice should be buyer agents reaching out to each respective listing broker and having communication on whether cooperative compensation is being offered and negotiating on each real estate transaction. 

A: NAR notes that it is permissible for listing brokers to advertise an offer of compensation via social media. 

However, IAR recommends the best practice for discussing cooperative compensation is REALTOR® to REALTOR® conversations. 

A: Yes. IAR worked with its commercial brokers to make sure that rental and leasing was not part of the mandatory requirements of usage of buyer agreements. Buyer agreements are only for the purchase and sale of real estate. 

However, commercial and residential real estate licensees work under the same license. Commercial agents will need to have a buyer agreement in place prior to showing clients commercial properties for sale.

A: No. IAR worked with property managers to make sure that rental and leasing was not part of the mandatory requirements of usage of buyer agreements. Buyer agreements are only for the purchase and sale of real estate. Buyer agreements will not be a mandatory requirement of property management. 

 A: At this time, if there is a leftover difference between what is offered in compensation to the cooperative buyer agent, it would be up to the listing agreement itself as to how that additional money would be dispersed. IAR recommends that listing agreements are changed to determine where any additional leftover compensation is directed, either to the listing agent or back to the seller. 

A: No, it would not be permissible to negotiate for a higher professional service fee in a buyer agreement if the cooperative compensation is higher than the negotiated fee. 

A: IAR highly recommends that you do not put zero for a professional fee in the buyer agreement. If an agent puts in zero, they are contracting for zero payment. The NAR settlement also is clarified to mean: 

NAR policy will not dictate the compensation agreed between buyers and buyer brokers (e.g., $0, X flat fee, X percent, X hourly rate).

Under the settlement, any compensation agreed to must be objectively ascertainable and not open-ended. For example, the range cannot be “buyer broker compensation shall be whatever amount the seller is offering to the buyer.”

A buyer agent must have a specific rate or fee number placed in their contracts per the NAR settlement. 

A: There is nothing in Iowa law, rules, or the NAR settlement that states an agent must use an exclusive buyer agreement. Non-exclusive is permissible. 

A: While IAR may recommend some changes to practice in the upcoming months, a few current recommendations include aligning compensation sections with changes to cooperative compensation. Listing agreements will likely need to be tweaked to allow for clearly defining this process and indicating that there may be some fluctuation in the cooperative compensation on the buyer side. Listing agreements will also need to include a disclosure that compensation is negotiable and not set by law.

A: Yes, agency disclosure and its associated process has not changed. An agent for a buyer or seller will still need to provide verbal agency disclosure upon providing specific assistance and provide written agency disclosure prior to making an offer or accepting an offer. This requirement runs in addition to the requirements of signing a listing agreement or buyer agreement. 

A: No, there is a specific exception in Iowa law that says listing agents do not need to obtain a buyer agreement from individuals attending an open house. 

A: This is a difficult question that may arise more in the coming months. With consumers more aware of the NAR settlement and lawsuits, you may see an increase in no cooperative compensation being offered by the seller. This would put first-time homebuyers and homebuyers with low and moderate income at a severe disadvantage, as they would not have access to quality representation in the home buying process if they cannot obtain cooperative compensation. 

NAR made numerous attempts in court to argue that the move away from cooperative compensation would hurt first-time homebuyers and homebuyers with low income or moderate means. A jury of consumers did not find the arguments persuasive. 

There are some mechanisms in place that could help you navigate the home buying process with first-time homebuyers or low and moderate income homebuyers such as including compensation as a negotiable item in the purchase agreement. 

There may be instances where a REALTOR® may have to decide whether to forgo or reduce accepting a fee to allow a buyer access to a desired home. That will be a business decision a REALTOR® must make in the course of their practice. 

IAR highly recommends that REALTORS® take the time to discuss the potential impacts of a buyer needing to pay a fee if seller's concessions or cooperative compensation is not able to be secured in the home buying process. 

A: Yes, with the new rule changes approved by the IREC,compensation can be a negotiable part of the purchase agreement between the buyer and seller.

A: Dual agency has not been changed in the state of Iowa. The process will continue and all necessary disclosures and signatures between the parties will need to occur prior to dual agency representation. 

A: A buyer's agent or listing agent will have a negotiated rate of compensation from their client for what they will be paid for the transaction. 

On the buyer side, the NAR settlement forbids receiving compensation higher than what is contracted for in the buyer agreement. Therefore, a buyer agent will likely state their rate as it would be the highest amount they could obtain. A buyer’s agent is incentivized to maximize their ask the first time to help obtain as much compensation as possible from the seller or cooperative compensation. 

On the listing side, the listing agent needs to maintain honesty in their conversations with other brokers related to the proposed cooperative compensation fee or face backlash from the public and other REALTORS® about bad business practices. 

However, there is nothing in state law or NAR Code of Ethics that would require disclosure of a listing agreement or buyer agreement to another party.

A: Generally, yes. A buyer agreement or listing agreement belongs to the broker. So all agents working under a brokerage agreement would be available to assist and have some level of fiduciary duties toward the client. 

The situation slightly differs for those brokerages that use appointed agency. A broker would need to have multiple agents assigned to a client to avoid issues with a particular agent being gone and no coverage is available to cover a client.

A: At this time, IAR is working with local lenders in the state of Iowa to fully understand all the nuances of the lending process and the changes to cooperative compensation. 

At the federal level, IAR highly recommends that members go to facts.realtor to find the most up to date information on the changes to conventional lending, VA loans, FHA loans, and other loan types. 

A: Usage of buyer agreements is a mandatory requirement in Iowa law that began on July 1, 2024. Not using a buyer agreement in accordance with the law puts you at risk of discipline from the Iowa Real Estate Commission

A: The Iowa REALTORS forms library contains updated forms to ensure you are compliant with the settlement and law changes including a broker to broker compensation form and cancelation form. These forms can be found on Form Simplicity.

On July 1, 2024, the Real Estate Transparency Act took effect requiring all real estate licensees to use a buyer agreement with their clients. 

Iowa REALTORS® proactively introduced and passed this legislation to ensure licensees in the state were prepared for the future of real estate. This law requires that a buyer agreement be signed prior to showing a property or prior to an offer being made if no property is shown. The legislation was passed as SF2291and later amended through HF2326.

The Real Estate Transparency Act: 

On August 17, 2024, REALTORS® saw perhaps the largest changes to come from the NAR proposed settlement: the removal of cooperative compensation from the MLS. Per the NAR proposed settlement there is a complete ban from compensation being input into any field on the MLS.

Compensation was removed from:

Additionally, MLS’s are forbidden from assisting in the aggregation of any cooperative compensation data or exporting information to third parties.

Please note that cooperative compensation can remain on individual websites and brokerages, and can be negotiated between parties, just outside of the MLS. 

August 17 was the deadline for these removals. The actual date of removal for your MLS or local board varied. Check with your MLS for information.

Important notes on offers of compensation:  Real estate commissions are negotiable, have always been negotiable and will remain negotiable in the future. REALTORS® have been and will remain able to set their commission based on their own business practices. If you are approached with this misguided assumption, please reiterate and continue to practice that compensation is negotiable.

Following the release of the NAR proposed settlement, IAR leadership and staff recommended to the Iowa Real Estate Commission several changes to make negotiations of compensation easier for agents and the consumer.

The  changes include:

The IREC accepted and approved the recommended rules. Changes took effect on August 14, 2024. 

Iowa REALTORS® is dedicated to keeping members informed on real estate industry changes. As the real estate landscape continues to change you may find additional resources at facts.realtor - NAR's home base for all settlement-related news and resources.