A commission settlement may affect housing market

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The National Association of Realtors settlement, if approved, could change the traditional commission structure for realtors.

COLORADO, USA — If your social media feed includes real estate brokers, you likely saw a lot of hot takes recently about the impact of a settlement involving the National Association of Realtors.

A judge has yet to approve the agreement, which settles a price-fixing lawsuit filed against the trade group – where home sellers accused agents of price fixing commissions. Along with a financial settlement, the agreement also binds the association from offering upfront buyer’s agent commissions on the Multiple Listing Service (MLS) and requires agents or anyone working with a homebuyer to enter into an agreement with them.

Traditionally, most selling agents charge a commission of 5% to 6% of the sale price of the home, splitting that commission with the buyer’s agent. Industry experts said the change in commission structure may lead to more home sellers refusing to pay commissions for buyer’s agents, which could require buyers to pay commission to their agents separately.

“The settlement really substantially doesn’t change much, especially in the Denver market, because buyers and sellers have always had options to use different models and pay different fees,” Libby Levinson-Katz, chair of the market trends committee for the Denver Metro Association of Realtors, said.

“There are some consumers that maybe didn’t understand that there were other options available to them. And now there’s much more transparency.”

Levinson-Katz said it’s too early to tell how much the changes will impact the local housing market, but she said she doesn’t expect to see any seismic changes.

Will the changes bring down the price of homes?

Many experts have speculated that the changes may lead to lower home prices, with sellers not having to pay an extra 3% in commission if they choose not to compensate the buyer’s agent.

But Levinson-Katz disagrees.

“No, it’s not going to change prices in a big way at all because homes are still worth what they’re worth,” she said. “And I think at the end of the day, a seller is still going to be willing to pay an agent if they’re bringing a buyer to the table.”

Ron Throup, associate professor at the University of Denver’s Burns School of Real Estate, agreed that sellers will still want to list a home based on the appraised value.

“You’re moving the cheese around, right,” he said. “Who’s paying for the pieces? And does the seller think ‘Well, I’m selling it for, it’s worth, $800,000. Well, oh, no, I’m only paying 3% commission, I’m going to cut that number.’ No.”

He said sellers who don’t have to pay the 3% fee to a buyer’s agent may have a little more wiggle room in negotiations.

What happens to home buyers?

“I think it’s going to hurt buyers because they’re going to be asked to pay money unless they can get it rolled into the closing costs. Nobody knows the answer to that yet,” Throup said.

Levinson-Katz said it’s still too early to tell if buyers will be in a tight spot. But she said if the burden of paying an agent’s commission out of pocket falls on homebuyers, it could be hard for new buyers to enter the market.

“If that is the case, then yes, this does hurt first-time homebuyers, and, you know, people who don’t have enough for down payment, then maybe they don’t have the best representation for them,” she said.

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A commission settlement may affect housing market

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