• 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. 

As of July 1, 2024, all Iowa real estate licensees will be required to enter into a buyer agreement prior to showing a property in the state of Iowa. The buyer agreement will have minimum requirements under Iowa Code 543B.56A that will be necessary in all buyer agreements. Additionally, the new law passed in the 2024 legislative session will also require that all listing and buyer agreements to have a section reviewing broker’s compensation under the brokerage agreement, it 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 a licensee’s real estate license and they could receive penalties from the Iowa Real Estate Commission. 

However, cooperative compensation will not be going away. It is just moving off the MLS and will be 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® will be permitted to display seller concessions on the MLS, if any occur. 

In Iowa, IAR has taken numerous steps to try and open up laws and rules to make sure there is accessibility in how REALTOR® compensation is handled in the future. 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. If the proposed rules are adopted, a buyer could 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 over the coming months. IAR is collaborating with various stakeholders to review practice changes and discuss cooperative compensation with other entities, such as banks, credit unions, settlement companies, attorneys, and more to help IAR members navigate changes to cooperative compensation outside of the MLS. 

 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 advertisement and 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 off the MLS, each transaction will likely need cooperative compensation agreements in place between brokers. 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. 

“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 for usage of what constitutes a showing for Iowa law. While Iowa law does not have a specific definition at this time, IAR will be working to define showing to include the above. Further, we will work 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. 

“The “working with” language is intended to distinguish MLS participants who provide brokerage services to a buyer — such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS participants who simply market their services or just talk to a buyer — like at an open house or by providing an unrepresented buyer access to a house they have listed.

If the MLS participant is working only as an agent or subagent of the seller, then the participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.

Authorized dual agents, on the other hand, work with the buyer (and the seller).”

IAR advises agents to use the guidance above. In the case of an unrepresented buyer coming to your listing, you can provide access to the home and provide answers to questions on the home. However, Iowa law requires that a buyer agreement must be in place prior to making an offer. If your assistance goes beyond showing the property and moves towards the preparation of documents, especially a purchase agreement, then an agent will need to prepare a buyer agreement and discuss dual agency. 

• 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. 

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 an offer is made. 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. 

At this time, potential unrepresented buyers could seek out the assistance of an attorney to help them prepare an offer or represent themselves in a transaction. IAR is reviewing whether there needs to be exceptions made to this practice in Iowa law or administrative code. 

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

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. 

• 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: 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 at 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. The home search for these individuals could narrow to listed homes that are offering cooperative compensation. It may restrict the search, but helps alleviate concerns of buyers needing to pay a buyer agent’s professional fee. REALTOR® members should in no way steer buyers towards particular homes, but carefully discuss financing options with their buyers to help them fully understand their home buying options. 

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: A buyer 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 would need 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. 

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.