What’s Working: Real estate agent commissions aren’t going away, especially if you want to buy or sell a house fast

Tamara Chuang | Business/Technology Reporter

Now that a Missouri lawsuit got America’s attention that home sellers don’t really have to cover the 3% commission to both agents anymore, Kelly Moye, a Realtor at Compass, said that none of her homeowner clients have stiffed the buyer’s agent.

“And I’m a little surprised but I just have not had that experience,” said Moye, who works in the Boulder region. “I explained the scenario to my clients and every single one of them said, ‘Let’s pay more. If this amount is negotiable, I want more people to see my house because I need to sell.’ I said that’s absolutely up to you, you’re welcome to do that. He offered a higher compensation than what’s typical and the house sold within a weekend, by the way.”

It’s only been about two weeks since the landmark settlement was announced by the National Association of Realtors. But the industry knew something was coming after a jury had ruled in favor of the plaintiffs last October and awarded a $1.8 billion verdict.

The gist is that the 6% commission home sellers typically pay their agent and the buyer’s agent — who split it 50/50 — seemed non-negotiable. Buyers didn’t have to pay it so their agents could steer clients away from houses if the commission was too low. But the 6% was just a guideline, and always has been, the National Association of Realtors has stressed. NAR settled with the six Missouri plaintiffs who felt forced to pay the 6% fee.

Moye said Colorado house hunters and sellers may have been aware that commissions have been negotiable for years. That’s because there’s competition from discount brokers who don’t charge the full fee. Some don’t pay the buyer’s agent, so if the agents aren’t educating their client, they won’t get paid when a house sells.

“They need to explain to their buyers how they get paid and why they get paid and what they do, all the work they do and why they’re worth it,” Moye said. “And the buyers need to understand that if a house has a seller who is not willing to compensate their (buyer’s) agent, then they have to do so. And that is a difference that we haven’t had to do before.”

Well, Moye’s experienced it before. One buyer client paid her $11,000 commission because the discount brokerage did not. “And they were happy to do it. They were like, ‘We love the house and we want it and we want to work with you,’” she said. “So this is nothing new.”

For those house hunters and sellers still wondering what just happened, here’s our own FAQ:

The settlement:

NAR, which represents licensed real estate agents who are NAR members and thus called Realtors, settled with Missouri homeowners after a jury ruled against NAR last fall. By settling, NAR hopes to avoid future claims against its members. NAR denies any wrongdoing and will pay $418 million over four years to a fund to benefit people who’ve recently sold their house. NAR’s proprietary listing service, the Multiple Listing Service, can no longer advertise how much a seller will pay the buyer’s agent. Realtors working with buyers must have a written agreement about compensation. Terms are expected to take effect in mid-July. >> Read NAR’s statement

I sold my house and paid the 6% commission. Will I get it back? Maybe. Details are still being sorted out. But that NAR payment of $418 million is for legal fees and will compensate homeowners who’ve sold a house in recent years. You can submit a claim at realestatecommissionlitigation.com

Home sellers:

Do I have to pay my agent a commission? Yes. If you want someone to do the homework and provide expertise on the market, hold open houses and actively market and sell your home, that agent won’t work for free. But you can negotiate the fee. Sellers may have felt awkward in the past or may have been told it’s non-negotiable. Hence, the lawsuit. Agents should negotiate the terms before the work begins.

Do I have to pay the buyer’s agent a commission? No. But covering the buyer’s agent fee could entice more buyers to check out a home and make an offer. The lawsuit said NAR kept commissions artificially high, especially compared with markets in other countries that on average are much lower.

➔ Other countries: the U.K., average commissions are 1.3%, China’s are 2.5% and Germany’s is 4.5% but that’s also credited to fewer buyer’s agents, according to the Wall Street Journal.

➔ U.S. averages: The average real estate commission is 5.49%, with 2.83% going to the listing agent and 2.66% to the buyer’s agent, according to a survey by Clever, a real estate information service. The commission range was 4.78% to 6.67%. In Colorado, the average commission was 5.62%.

House hunters:

Do I have to pay my agent a commission? If you need help finding and buying a house, understanding the contract, or connecting to financing options, that’s what agents do. House hunters can hire an agent and negotiate the fee ahead of time. This is new, for the most part. Sellers typically covered the buyer’s agent fee. A licensed agent should be able to answer all real estate questions and help you find and bid on a house. If that expertise is worthwhile, you will have to pay for it. Starting this summer, buyers and their agents will have to sign a payment agreement if it’s not covered by the seller. But instead of a percentage of the home’s price, the fee could be an hourly sum or flat rate.

Do I have to pay the seller’s agent a fee? No.

The change in costs

Will houses cost less? If the housing market remains the same, sellers stand to make a little more dough if they negotiate lower commissions and/or don’t pay buyer’s agents. Buyers will have to cover a fee that they didn’t have to before. Realtors, especially those who specialize in representing buyers, stand to make a lot less.

How can I pay lower fees? Negotiate, of course. But buyers have other options, too. In the past, buyers relied on agents to find out what houses were for sale. Anyone can go online to sites like Zillow to research homes for sale and then contact the seller. Some of those sites also offer agent services to help sell a house at a discount. A few examples:

• Trelora, part of Newfound Company, charges sellers 1% of the home’s sale price, instead of the traditional 3%. Buyers pay nothing and can get $2,500 in cash if they bundle a mortgage and title. >> Trelora FAQ
• Redfin charges a 1.5% listing fee to home sellers who use a Redfin agent but that drops to 1% if the seller buys their next home through Redfin. On its site, it also has a suggested 3% fee to pay the buyer’s agent, but paying that amount “is up to our seller and always has been,” said a Redfin spokeswoman. >> Redfin details

• Clever provides an agent-matching service and has already negotiated a 1.5% listing fee with brokerages like Berkshire Hathaway and Keller Williams. The company shares how its rates compare to four other discount brokers here.
• FSBO, or the for sale by owner market, essentially means no agent is involved and it’s a sale between individuals. According to NAR, the FSBO sales represented 7% of all home sales in 2023 and sold for nearly $100,000 less than sales involving agents.

➔ Got a question about this? Ask us and we’ll try to track down answers. Please send your questions to tamara@coloradosun.com and if we receive it by Monday morning, we’ll share what we know on Tuesday’s Daily Sun-Up podcast, which is typically business focused.

Sun economy stories you may have missed

➔ This Colorado rancher sees a world where conservation can turn a profit. Dave Gottenborg and his wife, Jean, own the 3,000-acre Eagle Rock Ranch in Park County, where they work the land led by the ethos of the conservationist Aldo Leopold. >> Read story

➔ Pharmaceutical company Amgen sues Colorado over price-setting prescription drug board. The state’s Prescription Drug Affordability Board is moving forward with possibly setting price limits on Amgen’s blockbuster drug Enbrel. >> Read story

➔ Data centers are proliferating. So are concerns about their effects on Colorado’s environment. AI and other growing tech sectors are driving demand for bigger, more powerful data centers, and Colorado is obliging. How does their demand for all that power coexist with climate goals? >> Read story

➔ Steamboat Springs voters reject plan to build affordable housing community for more than 6,000 residents. The Brown Ranch plan began with a donation of $24 million and proposed more than 2,200 affordable units in Steamboat Springs by 2040. >> Read story

➔ Can accessory dwelling units in Denver help keep families and communities intact? Still in the pilot phase, Denver leaders think this ADU program has potential to expand and help keep low-income residents in their neighborhoods. >> Read story

➔ Asphalt, gravel demand is rising as residents near Colorado mines push back against expansion. Colorado has $4 billion to spend on roads and the governor is calling for new housing. But people who live near where materials are mined and made say water and air should be prioritized. >> Read story

Other working bits

➔ EV technician training program expands. A Drive Clean Colorado experiment to teach auto technicians electric vehicle maintenance just graduated 20 technicians with new EV skills. Fifteen work at Pro Auto Care, an auto repair shop with locations in Denver and Littleton.

“EVs are here. People want them. People love them. And we’re going to be a solution to their service needs,” Al Oramas, Pro Auto Care’s CEO said in a statement. Pro Auto Care plans to expand training to more of its staff. The shop also installed four EV chargers on site and added a Tesla Model 3 for customers whose cars are getting repaired.

Drive Clean Colorado, the nonprofit behind the pilot program, received $150,000 in grants from the city of Denver and state transportation department for the training sessions. It plans two more training programs that’ll focus on medium and heavy-duty vehicles with 12 technicians participating. For businesses interested in participating in EV training, contact Drive Clean’s Hunter Woodruff for details.

➔ Fort Lupton aluminum plant awarded $22.3 million. The U.S. Department of Energy awarded Golden Aluminum Inc. a $22 million grant as part of its Industrial Demonstrations Program. The Fort Lupton firm, which was founded in 1982 by Bill Coors Sr. to produce 100% recyclable aluminum cans, plans to use the funds to upgrade its next-generation mini mill called the Nexcast.

Upgrades will help the mill use 86% less water, reduce its natural gas consumption and recycle 15% more mixed-grade aluminum scrap, according to the Energy Department. Aluminum could be used for electric vehicles and other clean-energy applications.

The company plans to replicate the mill and create a workforce training program. It was one of 33 projects nationwide representing difficult-to-decarbonize industries. The $6 billion in funding came from the Inflation Reduction Act and the Bipartisan Infrastructure Law supported by both of Colorado’s U.S. senators.

➔ 12 Colorado Springs businesses get stabilization grants. A dozen Colorado Springs businesses are splitting $372,000 from a state grant to help support culture and creative entrepreneurs who are trying to stabilize their business and bolster operations.

The funding comes from the state’s economic development office’s Community Business Preservation Program, which awarded the grants to Thrive Networks and Downtown Ventures. The two nonprofits are splitting the money among 12 companies, including taco burger joint Felipe’s 109, stationary store Ladyfingers Letterpress and the Luxe Daiquiri Lounge. The Office of Economic Development and International Trade awarded about $1.64 million to 11 applicants. The funds will benefit 58 small businesses, according to the state.

Thanks for sticking with me for this week’s report. Remember to check out The Sun’s daily coverage online. As always, share your 2 cents on how the economy is keeping you down or helping you up at cosun.co/heyww. ~ tamara

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• Colorado ranked as one of the top states for protecting consumer data, but it still gets a C+

What’s Working is a Colorado Sun column about surviving in today’s economy. Email tamara@coloradosun.com with stories, tips or questions. Read the archive, ask a question at cosun.co/heyww and don’t miss the next one by signing up at coloradosun.com/getww.

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