NAR Settlement

So, what happened with the NAR settlement last week? The model that has been used for decades now is that a seller hires an agent to help them sell their house. They agree on a commission for that sale that compensates both the listing agent and buyers agent. The seller’s agent then offers a co-op commission to an agent via the MLS who brings them a potential buyer. This is and always has been spelled out directly in the Colorado approved listing agreement. Sellers have always had the choice on what they want to do as mandated by the Colorado Division of Real Estate. The lawsuit/media makes it seem like there was price fixing and that you must pay a buyer’s agent 2.8-3% and that the sellers had no choice. This was never the case and commissions were and are always negotiable, at least in Colorado.  So with the settlement/lawsuit, now advertised co-op fees to buyer’s agents will be a thing of the past. For buyers this could make things much more difficult. IF a seller elects to not offer a buyer’s agent a commission, who pays the buyer’s agent? Probably the buyer. But currently you can’t roll the commission into your loan. So, you need to pay this out of pocket. Which means you have less money to put down on the house. You can write into the contract that the seller will pay your agent a fee, but how will that look in a multi offer situation? What happens if the house does not appraise because of the commission added to the price? Will prices drop 2.8-3% overnight? No. So really the seller is capturing a bigger return while the buyer is possibly paying more. But don’t we have standardized contracts in Colorado where I can write the contract myself and save paying a buyer’s agent? You sure can! And have always been able to do that! But what happens when something goes wrong? Can I go straight to the listing agent? Absolutely!  But the listing agent doesn’t represent you. They can switch to transaction broker where they don’t represent either side or they can treat you as a customer. Dual agency is not legal in Colorado… as it shouldn’t be in my opinion. Either way, you as the buyer end up underrepresented. This is all changing by the day and I’m sure changes are coming to agent structure, lending, etc. There are certainly some bad apples in the real estate industry and change/reform is needed. I just fear for buyers out in the market without representation and the problems that are going to inevitably create and the new lawsuits that will occur as a result. But, is it all doom and gloom as many of the news outlets are portraying? No. I have always worked hard for my buyers and I still plan to do so no matter what happens. I work for my clients, not for a paycheck - though I need to make a living too. This is a really polarizing and interesting topic, and while I am not an attorney, these are some of my thoughts. If you want to chat about it, I am always happy to do that!

 

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