BOULDER — Real estate agents, there’s no need to worry. You’ll continue to get paid for your work, real estate experts told attendees at the BizWest Annual Boulder Valley Real Estate Conference on Thursday.
Committees were the theme of one of the sessions at the summit, held at the Embassy Suites Hotel in Boulder. The session grew out of a developing news story about a Midwestern homebuyer who successfully sued his real estate agent and the National Association of Realtors over how commissions were determined.
In the past few days, a jury in this case found NAR, Home Services of America and Keller Williams real estate brokers guilty of conspiring to inflate real estate commissions. They valued a $1.78 billion judgment against these entities. Previously, Re/Max and Anywhere Realty agreed to a $139 million settlement in the case.
The case concerned how brokerage commissions, specifically the share of sales commissions paid to the buyer’s real estate agent, should be evaluated. NAR’s clear cooperation rules require real estate sellers to include a commission for the buyer’s agent (usually a portion of the overall real estate commission). Buyer’s agent commissions are visible to the buyer’s agent but may not be visible to the purchaser of the property.
The lawsuit alleged that the fees artificially inflate home prices by encouraging buyer agents to steer buyers toward properties that offer coverage. The lawsuit also alleges that the sellers were not aware that they could negotiate the fees they would ultimately pay.
The concept of real estate commissions has long been debated among real estate agents and their clients. Duane Duggan, an agent with Re/Max in Boulder who moderated a panel discussion on the topic, said he was taught early in his career that commissions are transaction fees. “It’s the transaction that pays the fee, not the buyer or seller,” he said.
Still, on the topic of fees and commissions, real estate professionals need to clearly disclose what is being charged and who is paying what. Colorado real estate contracts are written by regulators and contain language to help regulators do just that. Real estate agents were advised to help their customers understand the language.
John Goodman, an attorney at Frascona, Joyner, Goodman & Greenstein, said the slow-moving case just decided is important to “astronomers noticing meteors entering our solar system and predicting when they will reach Earth. “It’s like trying to decide if there’s going to be a collision or not.” ”
Now, real estate agents want to know how this ruling will affect them. A real estate agent in the audience asked about Friday’s appointment and how to approach it.
“This judgment is only about 60% of the story in this case. We are waiting for the court to issue injunctive relief, or a ‘variation of practice order,'” he said. “Look at the settlement agreement that Re/Max and Anywhere have entered into to see what changes will occur. The changes to the practice order will not be any less than what the companies have already agreed to,” Goodman said.
“These settlement agreements require more transparency between brokers and their customers.
A franchisor cannot require its franchisees to be real estate agents or require its agents to be real estate agents,” he said.
Boulder’s Re/Max has already told real estate agents that they don’t need a formal real estate agent designation to become a real estate agent. You also don’t need to be a member of NAR or your local real estate association. Re/Max and others support the ethical guidelines that NAR and local organizations require of their members.
Mr Goodman said real estate agents can still encourage clients to pay co-op commissions (a portion of the commission paid to the buyer’s agent) and outlined the arguments real estate agents could use against their clients.
He said it was in the seller’s best interest to keep the pool of potential buyers as large as possible. If buyers are required to pay a portion of the sales commission, offers on the property are likely to be lower than they otherwise would be, he said.
Or, if a buyer tries to buy a property for more than they can afford, “cash is so limited that they may have to borrow more, which could result in higher loan interest rates and higher mortgage insurance premiums.” “There is,” Goodman said. ,” he said. “As a seller, you don’t want to drive up costs for buyers and reduce the pool of potential buyers.”
“You want to focus on the net. If you pay the broker on the other side, you will likely earn more and the net amount will be the same. So why would you want to artificially reduce the number of buyers?” “Is that so?” he asked.
Amy Aschenbrenner, vice president of government affairs for Borough Realtors, a Boulder/Longmont real estate agent association, said the recently decided fee lawsuits are just the beginning. Five more lawsuits are currently being filed, and “it’s not going to stop there,” she said. “It will change the structure of the real estate industry as we know it today.”
The solution, she said, is “to have a conversation” with customers and, in the commercial real estate world, “to have a conversation with tenants.”
It should be made clear that commissions are negotiable and that in the process real estate agents can “show your value to your clients.”
Jay Kalinsky, owner of Re/Max of Boulder and Re/Max Elevate, said that in the industry you don’t have to be a licensed real estate agent to sell real estate, so in the industry you don’t have to be a licensed real estate agent to sell real estate. We predicted that agents would decrease.
“I think some great things will come out of these lawsuits. I don’t think there will be price fixing. I think there will be more transparency. In many cases, clients are just confused. We’re not (selling or buying real estate), so improving the way we communicate will be key,” Kalinsky said. “Those who are professional and can articulate their values will do very well.”