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IS THIS THE END OF 6% COMMISSIONS

Dear Dave,

Wow, holy headlines!  Can you please give your insight into this new real estate lawsuit and if it’s really “The biggest shake up in real estate in the last 100 years.”  I’d love to get your thoughts on it!

Thanks!
Bob – Mack, CO

Bob,
Let me start by saying that it is unlikely that the impact of this settlement will be as “significant” as you might be reading in the headlines or seeing on the television.  There is little doubt that the settlement proposed by NAR (National Association of Realtors), which still needs to gain court approval, will bring about some level of change to the real estate industry.

 I am not as convinced that the changes will be as “widespread” as predicted, as most things are never quite as dynamic as the media makes them out to be.  The primary lawsuit originated in Missouri and was brought against NAR to help establish a more transparent and competitive environment for negotiating buyer and seller agent commissions.  It can get a bit complicated and I will try not to get lost in the weeds here, but let me start by saying that EVERY listing contract in the state of Colorado lists the total amount of the agent commissions and also how those commissions will be split up between the buyers and sellers agent.  EVERY seller (at least the ones I have worked with) knows exactly how much the commission is and EXACTLY how much is being paid to each of the buyer’s and seller’s agents.

 Let me also note that commissions have always been negotiable and no “set” or “standard” commission fee exists, at least not that I am aware of.  Every agent sets their own commission structure. If a seller desires to find an agent who will work for less, it is not hard to do.  As with virtually everything, pay less and you likely get less, but the bottom line is that the ability to find an agent who will work for less is quite easy to do.  Not all agents are created equal, and cost becomes an issue when there is an absence of value.  As with every job, some are just better at it than others and should be paid accordingly.  I believe that most would agree, if you are better at your job you should expect to be paid more than those who are average or below average.   This expectation would apply not only to sales but also to doctors, lawyers, dentists, financial planners, and the list goes on and on.  Again, there will be changes to the real estate industry, but the strong will survive and flourish.  

Currently, the home seller determines how much commission they will agree to pay and what commission structure would be paid out to both agents. One of the main points of this lawsuit is that the seller should not be “establishing” the commission for the buyer’s agent, but that the buyer should be the one to negotiate their agent’s commission structure AND pay their agent either out of their own pocket or agree to ask the seller to contribute an agreed upon fee towards their agent’s commission….sounds somewhat similar to what is being done already.  The theory is that this will encourage more free negotiation of fees on the buyer’s side of the transaction and theoretically lessen the costs for buyers when purchasing a home, thus making it more affordable.  I have my doubts that this will lead to making homes more affordable for prospective buyers…potentially quite the opposite.  We will cover this angle next week and go over who this settlement will likely impact the most. 2 hints, agent commissions don’t establish the market price of a home and who it will hurt the most is exactly who they are “promising” to better serve.  Continued next week and maybe the week after that!

Dave Kimbrough
The Kimbrough Team RE/MAX 4000

HAVE A QUESTION? ASK DAVE!

dave@thekimbroughteam.com

   
           
   

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