NAR Anti-Trust Settlement: What Does it Mean?

Unless you’ve sworn off news and social media, you have no doubt heard about the pending National Association of REALTORS® (NAR) anti-trust settlement. There is a lot of information being passed around, but what does it really mean for consumers as well as the real estate industry in Colorado?

Unlike some states across the country where costs and fees are not clearly presented to the public, Colorado has been quite progressive in drafting contracts that clearly spell out costs  and fees related to the sale of property.

Therefore, the final resolution—which is yet to be approved and will not take effect until later this year—is not expected to significantly transform local brokerage practices in Colorado, but it will bring about some changes:

Buyer Broker compensation will no longer be allowed to be advertised in the MLS.

The MLS or Multiple Listing System—also known as REColorado in the Denver Metro area—is where all homes are listed. It has always advertised a percentage or dollar amount that a Listing Agent has agreed with the Seller to pay to a Buyer Agent upon closing. Many people are interpreting this to mean that a Seller will no longer “have to” pay a Buyer Agent. In truth, commissions have for decades been a negotiated fee that is included in the sales price of a property, which allows a buyer to finance the costs of the brokerage services into their mortgage. Commissions have always been negotiable, as is evidenced by discount brokerages across the metro area. Sellers have never been required to pay a Buyer Agent a set amount. It has always been a fee that the Seller would negotiate upfront with the Listing Agent in the Exclusive Right to Sell Listing Agreement Section 7.1.1. And that will not change. What will change: the compensation that the Listing Agent and Seller have agreed to pay a Buyer Agent can no longer be advertised in MLS.

An Agent must have a written Buyer Representation Agreement in place with Buyers prior to showing them any homes.

As long as we have been in business (which is over 20 years!), there have been Exclusive Right to Buy Listing Contracts that we have signed with Buyer clients outlining our duties and obligations to our clients as well as our compensation. However, there has never been a requirement for when this document needed to be executed. Some agents have traditionally had clients sign it before they start working together, and some agents have routinely had clients sign it upon making an offer on a property. Under the Settlement, a Buyer Representation Agreement outlining compensation and services will have to be signed prior to touring a buyer though any home. This agreement will allow buyer agents to negotiate settlement of their fees through the real estate transaction.

The Buyer Agent’s success fee or compensation must be specific and agreed-to in the Agreement between Agent and Buyer and cannot be a variable amount.

Buyer Agents cannot state in the Exclusive Right to Buy Listing Contract that they will be paid whatever amount the Listing Agent and/or Seller is offering as compensation, nor that they will accept a range of compensation. The Buyer Agent and Buyer must agree up front, prior to touring any homes, exactly how much the Buyer Agent will be paid. Depending on how the Exclusive Right to Buy Agreement is filled out, the Buyer may still direct the Buyer Agent to negotiate buyer-broker compensation to be included and paid through the transaction, or the Buyer may opt to pay the fee themselves. These scenarios are currently options in today’s Exclusive Right to Buy Agreements.

Sometime later this year, once the final court settlement is approved, we will learn more, and you can count on us to keep you informed. Once the hype dies down, we do not anticipate this will be a major upset to our real estate market or to Buyers and Sellers. An important message we want to share is this: both Buyers and Sellers need and deserve the best representation possible as they negotiate the largest purchase or sale in which most people will ever engage. At The Steller Group, we are full-time, educated, and experienced agents who provide topnotch service to the clients we serve. That will never change, regardless of whatever changes in our market.

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