Since the National Association of Realtors (“NAR”) announced a proposed settlement last week in response to multiple class action lawsuits in many states (none were filed in Colorado), there remain more questions than answers. Fundamentally, we at Nelson Walley Real Estate are excited for these sweeping changes, as we believe they will usher in long-overdue disruptions to our industry and ultimately will provide significant benefit to consumers. Navigating from our status quo to whatever these new norms evolve into will take an expertise that we are ready to provide, so please don’t hesitate to reach out to any member of our team if we can help you understand how all of this might effect YOU.
Debbie and I are staying ahead of the curve in understanding what this broad ranging proposed settlement will mean, via daily updates from our legal team, digesting the multitude of online news reporting and analysis, and processing the official communications from the NAR, the Colorado Association of Realtors, and our local realtor association. And as such, we offer the below summary with the facts to the best of our knowledge as of today. - This is a proposed settlement. It has not been approved. Therefore our only option is to continue with business as usual until such time as the settlement is finalized, and any resulting changes are implemented.
- The earliest we have been told that any changes could trickle down to the Summit County real estate market is June or July.
- Anyone planning to do a transaction before June or July is therefore unaffected by this settlement.
- There is also the very distinct possibility that it could take much longer for any approved changes to reach local markets. Case in point, the previous nationwide change dictated by the NAR was a few years ago with the Clear Cooperation rule. This took roughly 18 months after it was approved at the national level until it was finally integrated here in Colorado at the state and local levels.
The most significant changes this settlement might bring are:
- Commissions will no longer be allowed to be displayed on local multiple listing services. This should help prevent unscrupulous Buyer’s Agents from steering their Buyers to properties paying the highest commission.
- Commissions have been negotiable in Colorado for at least as long as I've been in real estate.
- Everyone at Nelson Walley Real Estate will continue to advise our Sellers that we believe it is in their best interest to empower us to fight for their maximum financial benefit by allowing us to continue sharing some of our commission with a Buyer’s Agent.
- As is the case today, it is however the Seller’s choice how commissions may be shared.
- Only time will tell whether today's common practices continue, or whether Sellers prefer to reduce overall commissions and let a Buyer choose whether they make their Buyers Agent's commission part of their offer.
- As with all negotiations, especially in higher end luxury real estate markets like Summit County, just because a Buyer might request the Seller to pay a commission to their agent doesn’t necessarily mean the Seller will agree do so.
- It could become common practice for the Buyer to pay their Agent directly for their services. In these instances, the commission would become an added Buyer cost outside of the transaction and not covered by a mortgage, resulting in greater costs for the Buyer.
No matter what the details of the approved final settlement might be, Debbie and I foresee a significant reduction in the overall number of Realtors. Currently there are roughly 1,500,000 licensed realtors across America. And here in Summit County we have slightly more than 700 realtors out of a full time population of roughly 31,000 residents. We wouldn’t be surprised if in a few years there were only 800,000 or 900,000 Realtors. According to their report dated January 3, 2024, the Consumer Federation of America estimates that 49% of agents performed one sale or less in the previous year. And 70% of agents did 5 or fewer transactions. So our industry should experience a huge separation of the wheat from the chaff, which will result in a higher quality of service provided by the remaining agents to their clients, and at least theoretically (time will surely tell!) a significant reduction in the cost to sell one’s home.