The real estate industry was sent into a frenzy on March 15 when the National Association of Realtors settled a lawsuit with homeowners across the nation for $418 million.
The plaintiffs argued that the standard 5% to 6% that most real estate agents charge violated antitrust laws and kept home prices expensive, which has led to speculation of a decrease in home prices nationwide.
Homeowners across the country have accused the NAR of plotting to defraud buyers and sellers by imposing unjustifiably high commissions in a flurry of class-action lawsuits.
However, Durango Area Association of Realtors President Kayden Hyson says this news has been misrepresented, especially as it pertains to real estate commission rates.
“There has never been a 6% mandatory commission,” he said. “Commissions have always been able to be negotiated upon whether you’re the buyer or the seller.”
This has been something that Hyson says has been misrepresented in early media reports about the settlement. He said it’s unlikely that any major changes will happen as a result of the lawsuit.
In 2023, the average cost of a Durango in-town home was $885,022, meaning the average 6% commission rate would equate to roughly $53,100.
Instead, the NAR will likely update the language in buyers-agent transactions so clients have a better understanding of what real estate commission rates entail.
“Each agent is going to be different in what they offer,” Hyson said. “And it all comes down to just different services each of us offer.”
The NAR released more information about commission rates on March 19.
“The National Association of Realtors does not set commissions – they are negotiable,” the NAR said in the release. “The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation.”
As far as commission policies go, Hyson said clients could elect not to pay their Realtor commission. But more than anything, sellers are lucky to be in the Colorado market, he said.
“Colorado Association of Realtors fights endlessly, endlessly and collectively to develop standardized forms, rules and regulations,” he said.
In compliance with Colorado Division of Real Estate, brokers are required to use Commission-approved contracts and forms as appropriate to a transaction or circumstance.
If a broker uses a contract written up by an attorney, they assume all responsibility to disclose the details of that contract, such as commission rates, to their client.
Hyson said this ruling is more impactful in states where real estate contracts are less regulated.
“In all of the lawsuits and all the copycat lawsuits, not one Colorado case was ever mentioned nor threatened to be mentioned,” he said.
At the state level, Colorado Division of Real Estate Executive Director Marcia Waters said only time will tell if the decision impacts the number of prospective Realtors seeking a license.
“Colorado law actually doesn’t prohibit the seller from paying the buyer side of the commission, anybody can pay a broker’s commission as long as the client authorizes it,” she said.
She said residents often will obtain their real estate license just to make transactions on their own, rather than entering the profession.
Hyson said the Colorado Association of Realtors is more consumer-based.
“It’s very clear in the standardized form on who’s responsible to pay the commission, whether it’s a percentage or a flat rate,” he said.
The NAR will pay out the settlement, still subjected to court approval, to the plaintiffs over the next four years, the group said in its news release. Lawyers expect the deal to be filed in the next few weeks, The New York Times reported.
Changes on a national scale are expected to take effect in the next four to six months.
tbrown@durangoherald.com
