In 2019, a $1.8 billion lawsuit was filed against NAR and real estate brokerages alleging collusion to increase sale prices to cover seller-paid buyer agent commissions. This prompted a reevaluation of traditional models, particularly in states like Colorado.
As of July 2024, real estate agents in Colorado are prohibited from advertising whether or not the seller offers to pay a buyer agent commission. This means the seller can still offer a buyer agent commission; it can not be listed on the Multiple Listing Source (MLS). This change marks a significant shift in commission and communication to a potential buyer and buyer agent. The lawsuit never prohibited sellers from paying buyer agent commissions. The media has released articles prompting sellers to reconsider their approach to compensating buyer agents, not the lawsuit.
It’s important to clarify that sellers have never been obligated to pay buyer-agent commissions. This distinction led to the creation of the For Sale by Owner (FSBO) industry. However, sellers opting for professional realtor services are responsible for compensating the listing agent, while buyer-agent commissions have always been negotiable and at the seller’s discretion.
Post-NAR lawsuit, the decoupling of the listing agent and buyer agent commissions has become the norm. This means that the listing broker and seller can choose not to pay a buyer agent while still receiving a commission, posing challenges for buyers navigating homes with varying commission structures.
What does this mean for sellers listing their homes?
In Colorado, buyers and realtors enter into a contract known as the “Exclusive Right to Buy Listing Contract.” Within this agreement, a clause specifies that the buyer is responsible for paying any portion of the brokerage fee not covered by the seller. This places buyers in a challenging position, especially when comparing properties with differing commission structures.
A buyer is considering two $500,000 homes. One covers the buyer agent commission; the other doesn’t, requiring an extra $15,000. This can affect the buyer’s decision, disadvantaging sellers who don’t offer commissions. US Veterans using VA loans can’t give their buyer agent any money under any circumstances.
Another option available to the buyer entails terminating the contract previously established with their buyer agent and engaging with the listing agent. Dual representation involves a conflict of interest as the agent cannot simultaneously provide full representation to both parties. Alternatively, buyers may transition their brokerage representation to a (Transaction Broker). Like a neutral third party, a Transaction Broker operates without a fiduciary duty to the buyer or the seller. This arrangement resembles the sharing of legal counsel in legal proceedings, where the lawyer cannot offer advice but merely presents the opposing party’s requests.
While understanding sellers’ concerns about buyer agent fees, it’s essential to recognize the value that professional buyer agents bring. Not all agents may meet expectations, but those who provide exceptional service deserve fair compensation.
Navigating this disruption requires a balanced approach. Sellers should consider hiring professional listing agents who are informed about the pros and cons of paying buyer agents. In contrast, buyers should prioritize hiring professional agents with fiduciary responsibility and outstanding service.
Ultimately, consumers can drive positive change in the real estate industry by hiring professional agents passionate about helping their clients. This approach can help push out part-time agents who contribute to most problems in the market.
In conclusion, the NAR lawsuit has prompted significant changes in buyer agent commissions in Colorado. By understanding these shifts and making informed decisions, sellers and buyers can navigate the evolving real estate landscape effectively.
Published by Casey Fortune with Fortune Realty
