Real estate commissions in Colorado change after NAR settlement

This summer’s National Association of Realtors legal settlement could change who pays real estate commissions. Colorado realtors say this could create unnecessary confusion, cause buyers to spend less money on down payments, and lead sellers to limit their buyer pool unintentionally.

Previously, the seller paid commissions for both the buyer’s and seller’s agents, and property listings included the commission rates. Now, the listings don’t include commission rates, and agents must sign written agreements that detail their compensation to potential buyers before offering their services.

Kerron Stokes, owner of RE/MAX Leaders, said that Colorado served as a national model before the change and offered real estate contracts that empowered buyers and sellers to negotiate in clear terms and eliminated unnecessary confusion. That transparency gave buyers and sellers more control over the costs of buying or selling a home.

“Buyers and sellers could publicly see what compensation was being offered to help them,” Stokes said. “This was a great solution for all parties involved because it removed the possibility of unethically steering a uniformed buyer towards a property for personal benefit.”

Stewart Seeligson, managing partner and lead broker at The Agency Telluride, said by abandoning a model that worked for more than 50 years where the seller paid both commissions, the change may inadvertently cost buyers more money.

“In practicality, buyers want to invest all their available cash toward their down payment to purchase the most valuable home possible,” Seeligson said. “The NAR settlement attempts to force the buyer to take some of their available cash to pay their broker, so the buyer has less cash to put toward their down payment.”

He said that may mean the buyer purchases a less desirable home.

Buyers may now take risks by hiring a discount or inexperienced agent to save money, which exposes them when making the biggest purchase of their lives.

“Prior to the NAR settlement the buyer could afford to hire the most experienced broker to represent them because the seller paid for that service,” he said.

Ryan Carter, with 8z, said he believes paying the buyer’s agent commission remains in the seller’s best interest and notes that the commission is negotiable.

“When you’re selling a home, it’s worth making sure the buyer is represented by a professional who can help close the sale,” Carter said.

Paying the buyer’s agent commission is a strategy that makes more sense when homes are on the market longer.