Almost No Buyers Are Having to Compensate Their Agents as Result of NAR Settlement
Leading up to the changes on August 17th which prohibited MLSs from displaying compensation for buyer brokers, I said that I would be surprised if any buyers ended up compensating their own agents. So, last week I did some research of my own and solicited input from others to see if my prediction had come true. It has. I sent emails to listing agents who had closings in September, and every one who replied said that their seller had compensated the broker representing the buyer of their listing.
My friends at First Integrity Title did a few “spot checks” on transactions which closed post-NAR settlement to verify what they were hearing based on actual data. The challenge was that they would have to open every file individually, but the consensus was that, as I expected, the seller has continued to compensate the buyer’s agent.
“It really has not changed from the past,” I was told by Pam Giarratano, our sales rep at First Integrity Title.
Here is the response Pam got from her VP of Operations:
“I can tell you that I’ve asked the same question multiple times; I’m just trying to understand how much has changed since the NAR settlement. I can tell you that I am repeatedly told that people have not seen any buyers paying their own agents.”
From Pam’s VP of Sales: “I looked at settlement statements for a dozen closed files, and the seller paid the buyer’s agent’s commission on all of them.”
Pam asked closers and lenders, and the
consensus was that the seller still pays. A lender who conducted a CE class in Westminster told Pam that they are still seeing the seller pay, but that sometimes if the seller is offering a buy-side compensation of 2.5% and the buyer’s agent has an agreement of 2.8%, the buyer is making up the .3% difference, or it is included in the contract as a seller credit.
That was exactly the case with one of my own listings in September. I told the buyer’s broker that the seller was offering 2.5%, and he submitted a contract with the seller paying 2.5% and the buyer paying an additional 0.3%.
Pam told me, “It looks like nothing has changed as far as the seller paying commissions. I think homeowners still want their houses looked at.”
Here’s the bottom line: Real estate is a free market. Just like builders who feel they must offer commissions to buyers’ agents because other builders are doing so, individual sellers are being counseled to offer the buyer broker commission because they realize that most buyers are represented by agents and they’re not going to buy a home if the seller requires them to compensate their own broker.
I chatted with my broker associates about this, and they are comfortable with the new rules which essentially bring more transparency to the process.
At the closing table, it has always been that the commissions paid to listing agent and buyer’s agent were listed separately on the settlement statement as being paid by the buyer. Naturally, some sellers objected to paying the buyer’s agent’s com-
Understanding Different 55+ Communities
Last week I was in a Zoom conversation with 14 of my high school classmates. We have been meeting like this every week since our 2020 reunion was canceled due to Covid. Three of us had moved into senior communities and we were answering questions about the options which we Baby Boomers face.
We are all healthy 77-year-olds (or thereabouts), but we all realize that the clock is ticking and that it’s not a matter of if but when we will need some sort of assisted living. Should we “age in place,” enter an “independent living” facility now, or wait until we need “assisted living”?
If you have 90 minutes of free time, I could share with you the URL of the recorded Zoom meeting, but for now, let me share some of the insights.
Laird lives at Windcrest, where he paid a 6-figure “entrance fee” and pays about $4,000 per month rent for a 1bedroom plus den apartment. He gets 30 meals per month in a dining room, but also has a kitchen for other meals. 90%
of his entrance fee is returnable if he leaves or dies. One thing I learned was that if by chance he runs out of money and can’t afford the rent, it is taken out of his entrance fee instead of having to leave. If assisted living is needed later, he stays in the same apartment, but the services and rent increase dramatically.
“They promise this can be my home for life,” Laird said.
Rita and I had moved into a pure rental 55+ community with no entrance fee. In fact, we paid no security deposit, and we got the first month free. We since moved to a regular apartment building.
I shared what I had learned about Vi at Highlands Ranch, where you must be healthy with no degenerative disorders, but you are promised no increase in rent when/if you need to enter assisted living, nursing care or even memory care.
The entrance fees at both facilities are reduced if you agree to only 50% or none of it being returnable when you leave.
Call me if you’d like to get more info or chat, or if you’d like that Zoom URL.
mission, forgetting that they had listed their home for x% and agreed that part of their listing agent’s commission would be offered to any agent who produced the buyer.
In other words, the commission to the buyer’s agent was coming out of the listing agent’s pocket, but it sure looked like the seller, not his agent, was compensating the buyer’s broker.
As I predicted, nothing has changed except the wording. The revised “Exclusive Right to Sell” contract still states the total commission to be paid at closing, but it lists a smaller amount that the seller will pay to the buyer’s agent, and states that the listing commission will be reduced by that amount.
Of course, in a real estate transaction, what rules are the provisions in the “Contract to Buy & Sell” between the buyer and seller. Section 29 of that document has lines to enter the compensation paid to the buyer’s broker by (1) the seller, (2) the buyer, and (3) the listing agent.
In some cases, the buyer’s agent will find out what the seller is offering, since it is no longer specified on the MLS listing. (Our listings specify that amount on the listing’s website and on a sign rider.) Regardless, the buyer’s agent will submit a contract which specifies how much the seller will pay the buyer’s agent, and the seller can counter that provision. It’s simply another element of the offer to be negotiated between buyer and seller through their agents.
Just last month, to win a bidding war, one of our broker associates submitted a contract asking the seller to pay only 1.5%, which tells you not only that buyer broker compensation is negotiable but that the amount of buyer broker compensation is going down. That was predicted, and is coming true. Listing agent was paid 3%.
In the past that listing probably would have displayed at least 2.5% buyer agent compensation in the MLS, and that amount would have been paid without negotiation or discussion.
So what did the plaintiffs in the NAR settlement expect to achieve, and what did they get?
At least in Colorado, they did not relieve sellers from compensating buyer agents. Listing agents are probably get-
ting the same compensation as before, but some sellers (like in the transaction mentioned above) are saving on the compensation paid to buyers’ brokers.
In some cases, listing agents may actually be earning more. I know of one multimillion-dollar listing which had a 4% commission specified in the listing agreement. The listing agent negotiated a 1% commission paid to the buyer’s agent, leaving 3% for the listing agent. Under pre -settlement rules, that listing would likely have offered 2% co-op commission on the MLS, netting the listing agent only 2%. Thus, the listing broker earned 50% more, thanks to the new rules.
As Realtors, my broker associates and I are okay with this new arrangement. It clarifies that the seller is paying both agents, but makes the amount more transparent and thus more negotiable. With sign riders and listing brochures, it’s not hard to inform buyer brokers of the compensation which the seller (not the listing agent) is offering, and the buyer can submit whatever compensation amount he or she wants in the contract to buy and sell.
Given the minimal end result of the NAR settlement, it will be interesting to see if there is further litigation on this matter. I don’t see any legal basis for denying a seller the right to offer compensation to the broker who produces the buyer for his home.
The Habitat for Humanity Pumpkin Patches Are Open
Every October, Jeffco Interfaith Partners sells pumpkins to raise money to sponsor a Habitat for Humanity home. In the past 20 years, they have funded over a dozen metro area Habitat homes.
The pumpkin patches are on the corner of Garrison & Alameda in Lakewood, and at 78th & Wadsworth in Arvada. The pumpkins are more expensive than elsewhere, but 40% of the purchase price is tax deductible, and it’s an easy way to donate to a worthy charity.
And the selection of pumpkins is great! They also sell carving kits and other Halloween paraphernalia.
Jim Smith
Broker/Owner, 303-525
Sunday, October 27th,
Get out your zombie rags, witch’s hat, Dracula’s cape, ghostly sheets, and clown makeup! Do you like flesh-eating, skin-crawling bugs, bats, spiders, and cats, OH MY! They will all be there, so BEWARE! Join us IF YOU DARE... run or walk your decayed feet, and trick-or-treat along the way.
per individual $15 children 12 & under $100 4-pack $40 per individual on race day
Phone and Internet Discounts Available to CenturyLink Customers
The Colorado Public Utilities Commission designated CenturyLink as an Eligible Telecommunications Carrier within its service area for universal service purposes. CenturyLink’s basic local service rates for residential voice lines are $34.00 per month and business services are $53.50 per month. Specific rates will be provided upon request.
CenturyLink participates in the Lifeline program, which makes residential telephone or qualifying broadband service more affordable to eligible low-income individuals and families. Eligible customers may qualify for Lifeline discounts of $5.25/ month for voice or bundled voice service or $9.25/month for qualifying broadband or broadband bundles. Residents who live on federally recognized Tribal Lands may qualify for additional Tribal benefits if they participate in certain additional federal eligibility programs. The Lifeline discount is available for only one telephone or qualifying broadband service per household, which can be either a wireline or wireless service. Broadband speeds must be at least 25 Mbps download and 3 Mbps upload to qualify.
A household is defined as any individual or group of individuals who live together at the same address and share income and expenses. Services are not transferable, and only eligible consumers may enroll in these programs. Consumers who willfully make false statements to obtain these discounts can be punished by fine or imprisonment and can be barred from these programs.
If you live in a CenturyLink service area, visit https:// .centurylink.com/aboutus/ community/community-development/ lifeline.html for additional information about applying for these programs or call 1-800-201-4099 with questions.
TRIVIA
1. ANIMAL KINGDOM: What is a group of walking penguins called?
2. MOVIES: What was the rst movie to be adapted from one of Stephen King’s novels?
3. GEOGRAPHY: How many time zones does Australia have?
4. LITERATURE: Which country is featured in Sir Walter Scott’s historical novels?
5. HISTORY: How many essays are in e Federalist Papers?
6. SCIENCE: Who created the Periodic Table?
7. TELEVISION: What is the reality series “ e Deadliest Catch” about?
8. PSYCHOLOGY: What irrational fear is represented in the condition called pogonophobia?
9. U.S. STATES: What is the only state with a one-syllable name?
10. MUSIC: Which branch of the U.S. military did Elvis Presley serve in?
Answers
1. A waddle.
2. “Carrie.”
3. ree main time zones.
4. Scotland.
5. 85.
6. Dmitri Mendeleev.
7. Crab shermen in the Bering Sea.
8. Fear of beards.
9. Maine.
10. Army, 1958-60.
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FLASHBACK
1. Name the original artist to release “You Light Up My Life.”
2. Who wrote and released “Like a Prayer”?
3. Which artist penned and released “Two Hearts”?
4. Name the artist who released “Straight Up.”
5. Name the song that contains this lyric: “One night in a disco on the outskirts of Frisco, I was cruisin’ with my favorite gang.”
Answers
1. Kacey Cisyk, a classically trained opera singer of Ukrainian heritage, for the soundtrack of the lm of the same name in 1977. is was followed by a cover by Debby Boone that stayed at No. 1 on the charts for 10 weeks. e song went on to win several awards, including a Grammy for Song of the Year.
2. Madonna, in 1989. Pepsi cut a $5 million deal with Madonna and used the song in one of their commercials.
3. Phil Collins, in 1989. e song was used in the soundtrack
for the 1988 lm “Buster.” Collins also played the lead in the heist comedy lm.
4. Paula Abdul, in 1988.
5. “He’s the Greatest Dancer,” by Sister Sledge in 1979. e song, originally intended for Chic to record, topped the Billboard Dance Club Songs chart, as well as others.
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