National Association of Realtors Settlement Won't Change the Colorado Mountain Home Market as Much as You'd Think

landmark settlement announced last weekthat could change how the National Association of Realtors handles real estate transactions has sparked headlines about potential price drops in the U.S. housing market. 

But in virtually all cases, the impacts on housing costs will be driven by market forces of supply and demand rather than transactions, experts say. In tighter markets like Colorado’s mountain resort areas, the changes will likely do little to chip away at multimillion-dollar home prices that sit well above the state and national average

“I don’t think it’s going to have an impact on the supply or cost of homes in places like Summit County or Eagle County or Pitkin County,” said Jeff Peshut, assistant professor of finance and director of the real estate program at Metropolitan State University of Denver. 

Still, the settlement could reduce the cost of selling a home after the realtors association agreed to changes that could allow more negotiation over commission rates. More negotiation could aid homebuyers as well, though the outcomes are again dependent on supply and demand in the housing market. 

“Transaction costs are going down,” said Stephen Billings, associate professor of finance at the University of Colorado Boulder. “In a really strict seller’s market, the seller’s going to make even more money than they would before.”

The settlement comes as a response to a litany of lawsuits brought against the realtors association by groups of home sellers who alleged the association’s practices were keeping the costs of selling a home artificially high. The settlement must still be approved by a judge but could go into effect this summer. 

In addition to paying $418 million in damages, the association agreed to changes to its multiple listing services, which are owned and used by realtor groups at the national, state and local level to advertise home listings. 

Realtors representing sellers will no longer be allowed to post their commission rates for homes on the listing service, a rate which is typically split between the seller’s agent and a buyer’s agent, also known as brokers. 

“At its heart, the multiple listing service is a cooperation and commission sharing agreement between listing brokers and other brokers — brokers representing buyers,” Peshut said. “If you help me sell my listing, I’ll agree to share my commission with you.”

The practice had been criticized by homeowners who, through their lawsuits, claimed the model forced them to pay higher fees to compensate their buyer’s agents. Criticisms have also been made that buyer’s agents steered their clients toward homes that would give them a better pay-out.

Realtors say they’ve always discussed commission rates with clients, a practice that won’t change. 

“There is no such thing as a standard commission,” said Dana Cottrell, president-elect for the Colorado Association of Realtors. “It is, and it always was, negotiable” 

Lower commissions would empower sellers 

While commission rates have always been negotiable between sellers, buyers and realtors, Peshut said the industry standard has hovered between 5% and 7%, nationally. On a $1-million home sale, that would equal a commission of between $50,000 and $70,000. 

Commissions aren’t always split evenly between the seller and buyer’s agent, but the practice has all but guaranteed a buyer will be compensated to some degree by the seller, Peshut said. 

By eliminating commissions from a realtor’s listing, agents who represent buyers will lose that certainty. They’ll instead need to negotiate with a seller’s agent over a rate or may turn to the buyer to be paid. For a seller, this could mean paying smaller commissions and ultimately keeping more money in their pocket during a sale. 

Peshut said this is already how it works in the commercial real estate world. 

But even if the cost of a home transaction becomes less expensive on the seller’s side, whether or not those savings get passed onto a buyer is unclear. 

Experts, including realtors, said it will come down to the market landscape. In markets like Colorado’s mountain resorts, wherein housing demand outweighs supply, sellers will likely see no incentive to lower the price of their home. 

“The actual price of a property is not dependent on the real estate commission. It is dependent on the market forces,” Cottrell said.

“And right now with having low inventory, that is the strongest element in our pricing. Until the supply and demand seesaw changes,” she continued. “It’s not a buyer’s market.”

Impact to buyers could be mixed

Robert Tann/Summit Daily News
Homes in Wildernest near Silverthorne are pictured on Jan. 25, 2024. A landmark decision by the National Association of Realtors is likely to result in a restructure of how brokers receive commissions. While experts say the changes may reduce the cost of selling a home, and potentially benefit buyers, it’s unlikely to affect sky-high home prices in mountain resort areas.
Robert Tann/Summit Daily News

For buyers, the impacts of commission changes could be a mixed bag. 

Peshut said the balance of supply and demand will dictate whether or not a seller’s agent feels they need to split their commission with a buyer’s agent. For example, in a soft market, wherein buyers have more options, a seller’s agent may need to offer a commission split to bring enough buyers to the table. 

However, “In a tight market, like we’ve had over the last sort of years … the seller’s broker may say, ‘No, we’re not going to cooperate. We’re not offering a commission to the buyer’s broker. You need to get paid by the buyer,” Peshut said. 

For a buyer, that can be a double-edged sword. It may lower the commissions they have to pay since buyers’ agents will need to set competitive rates to be paid by their client. But it also means buyers may have to foot the bill for their agents’ commission rather than relying on the seller. 

Billings argued that buyers have always been on the hook for their agent’s commission in one way or another, with those costs potentially being baked into the home price by the seller. But that too could be contingent on supply and demand, with Billings adding that a seller may only be willing to pass cost savings along to a buyer in a softer market. 

Still, if buyers are competing for business, Billings believes the changes will benefit both parties and could lead to commission decreases between 1% and 2%.

“Right now, people will take the 3% sale commission (for both brokers) and not negotiate it,” Billings said. “But once they see more people negotiating on the buyer’s side, they should also do that on the seller’s side.”

For realtors, it could provide more security when they represent a buyer. As part of the settlement, brokers will now need to sign off on written agreements with their prospective buyers, a practice that was already in place on the seller's side.

“There was this issue on the buyer’s side where lots of people like to shop around,” Billings said, adding that if a buyer doesn’t pursue a deal the broker doesn’t get paid. “Now, that behavior will completely go away.”

As Peshut put it, “I think buyers’ brokers are going to have to compete much more aggressively to get buyers business … and as a result you’ll likely see a shakeout, that the best brokers are going to win the business.”

Changes stand to make the industry ‘more transparent’ 

Snow blankets homes in Breckenridge on April 25, 2022. Around 50% of all real estate transactions were made in cash in Summit County in 2023. Experts say that even if buyers have to cover their broker’s commission, it likely won’t be a burden for high-income buyers who can offer cash transactions. For middle-income earners, it may present more of a barrier, though a competitive brokerage market could help drive down the commission rates they pay.
Andrew Maciejewski/Summit Daily News

Realtors say it’s too early to tell what the longterm effects of the settlement could be on their industry. But some say they’ll forge ahead the same way they always have. 

With seller and buyer agents forced to discuss commissions outside of the listing service, it “helps our industry be more transparent — communicate more,” said Dishon Lutz, a Summit County-based realtor and the former president of the Summit Association of Realtors.

“Do I think it will be a change? Yes, but I think it will help us get better, honestly,” he said. 

Realtors will also continue to advocate for rates they feel are reasonable, with Lutz adding, “Just like calling a plumber to your home, there’s a minimum they’d like to be paid per hour. I think that same situation applies.”

While homeowners and buyers can buy and sell on their own, the vast majority choose to do so through an agent. According to a study done by the National Association of Realtors, 89% of sellers and buyers in the U.S. worked with a real estate agent in 2023.  

Cottrell, president-elect for the statewide group, said she doesn’t believe the changes in commission practices will impact a realtor’s ability to find work. 

“Real estate’s about relationships, and that’s what’s going to drive it,” Cottrell said. “Buyers and sellers are going to want help to get to the closing table.”

With over 1 million members nationwide, the association is the largest trade group in the country. Its membership boasts additional credentials on top of the standard licenses needed to be an agent. 

For this reason, Cottrell said realtors — agents who are members of the association — continue to offer value to their clients. But post-settlement, those members will need to prove their value even more. 

“I’m a big believer in using a realtor,” Cottrell said. “I think this is going to force a lot of realtors into articulating their value — ‘What am I bringing to the table?'”

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