Colorado real estate: Buyers' commissions change, sellers small impact

Digital Replica Edition

Real Estate | Seismic real estate commission settlement has…

Digital Replica Edition

Trending:

Breaking News

New rules on real estate commissions, including limiting the disclosure of how much sellers were willing to pay buyer agents, were expected to send shockwaves throughout the homebuying process when they rolled out on Aug. 17.

Although some national surveys show residential real estate commissions may be dropping, agents in metro Denver describe few changes, with sellers still covering the full tab for the other side most of the time.

"It feels like business as usual. It was very anti-climactic change when it came down to it," said Cooper Thayer, a Realtor with Keller Williams in Castle Rock. Thayer adds of the 16 or 17 transactions he has done since the change, no buyers have had to come out of pocket.

The National Association of Realtors and several of the country's largest brokerages settled with home sellers who contested the common practice of sellers covering the buyer agent's commission. The settlement came after the industry was hit with a $1.78 billion jury verdict against them last year.

Agents representing buyers were required to have a written agreement in place stating the terms of compensation, something Colorado has long required. Agents were no longer required to put their listings on the local multiple listing service. And listing agents could no longer post the commission a seller was willing to pay to the other side.

In theory, sellers could refuse to pay less or not pay anything, leaving it on a buyer's shoulders, but that hasn't been happening.

"From my perspective, I haven't seen much of a change at all. I have a certain fee I charge and that is what I charge," said Kelly Moye, a Realtor with Compass Real Estate in Broomfield.

Moye said she had two buyers who had to cover a small difference beyond what two sellers, including a homebuilder, were willing to pay, but they did so without pushback.

"The consensus is that there hasn't been any change," said Amanda Snitcker, chairwoman of the Market Trends Committee at the Denver Metro Association of Realtors and a local Realtor. "I haven't heard or experienced a change in the amount of commission being paid or who is being paid."

Buyer agents must now reach out to listing agents on the properties their clients are interested in to obtain commission terms. But if a client was truly interested in a home, agents were going to be reaching out anyway, Moye said.

As the weeks passed, a more common approach was to include the compensation the buyer and agent had already agreed on into an offer, making it another term that was negotiated with the seller, Moye said.

In rare cases where a seller was asking the buyer to cover costs, and a buyer wasn't in a position to do so, Moye said a listing would be treated not unlike one that was outside the buyer's budget on what they could afford. When commissions the sellers are willing to pay fall short by a small amount, some agents said they have stepped in to cover the gap, while others said their buyers came forward.

"We really have not seen an increase in complaints related to compensation issues. The industry still seems to be really confused about the terms of the settlement and what is required if they are Realtors or MLS participants," said Marcia Waters, director of the Colorado Division of Real Estate, in an email.

When commission-sharing arrangements were posted on multiple listing services, they were easier to track. If the settlement intended to boost transparency, it may have had the opposite effect, agents said.

"If you are a seller and you want to offer compensation to a buyer's agent, it is difficult to make that decision. What are people offering right now? There is a lack of data transparency," Thayer said.

So far the surveys are conflicting. Boulder-based real estate tech strategist Mike DelPrete found no change in the average buyer agent commission rate since Aug. 17 based on an analysis of 55,000 closed transactions per month at the nation's largest brokerage firms. Buyside commissions have held steady at 2.59% nationally, but are down from a 2.65% rate before the National Association of Realtor's settlement was announced.

A survey of 734 agents from discount real estate firm Clever found the total U.S. real estate commission averages 5.34%, while Colorado at 5.29%. The split on the Colorado commission was 2.62% to the buyer agent and 2.67% to the seller agent.

Average commissions have fallen from 5.64% before the settlement agreement to 4.96% in the two months following implementation, said real estate blogger Rob Hahn, citing a third study from RISMedia. The compression came mostly on the buy side, where commissions fell from 2.65% to 2.28% in that same period.

"…I think we will see commissions drop for real in 2025 — probably towards the latter part of the year. It won't be because of some new lawsuit or the DOJ or whatever, but because competition in real estate is actually quite fierce," Hahn noted. The shift hasn't been more dramatic given the inertia tied to a century-old system.

Sellers are still covering both sides, which agents attributed to a more competitive market with rising inventories and more days on the market. The outcome might have been different in the super-tight market coming out of the pandemic when sellers were receiving multiple offers and could call the shots.

"Three years ago, homes often went under contract in a matter of days, resulting in a very sparse inventory," said Bret Weinstein, CEO of Guide Real Estate and a member of the Market Trends Committee with the Denver Metro Association of Realtors. "When sellers are so in control, they don't feel obligated to offer any compensation to a buyer agent."

Right now, if they want to find a buyer, sellers need to offer to cover the buyer agent commissions, he said. But that attitude could change in the future.

Another survey from Clever found that eight in 10 homeowners looking to sell in 2025 planned to turn to an agent. But only four in 10 buyers said the same thing, which Clever chalked off to a lack of awareness of the work and risks involved with purchasing a home.

Two in three buyers said they plan to negotiate their agent's commissions. Half of the agents surveyed expected buy-side commissions to fall in the months ahead, while only a third expected them to fall on the sell side.

If compensation does get squeezed, one long-term fallout could be fewer people seeking a real estate broker's license and of those who do get their license, fewer seeking a Realtor's designation or participating in a local Realtor's association.

"We are currently in our renewal season for the real estate brokers and are waiting to see if the changes over the past year will affect the number of brokers that renew their licenses," Waters said.

Tyrone Adams, CEO of the Colorado Association of Realtors, said the group's membership continually experiences churn and counts are down by 1,600 out of 25,758 members. He acknowledges some CAR members were confused and angry about the settlement, and he expects a clearer picture will emerge when renewals come around on March 31.

"Our job is to go out and talk about the value of their membership and what it looks like and what it means to their business. We are getting a lot of great questions," he said.

Weinstein said the focus on who pays what and how much is paid represents a missed opportunity. One reason the lawsuits even came about was that there were a lot of agents who didn't know what they were doing, he said.

"The focus shouldn't be on buyers and sellers making more money, but on real estate agents being worth the money they are being paid," he said. "There's been zero conversation on that."

Search This Blog

Glass House