When news broke that the National Association of Realtors would pay a $418 million settlement to impacted home sellers, Utah real estate agent and broker Brad Goaslind said the anxiety began to set in. The organization was held liable for “fixing” the percentage agents get paid when they sell a home.
“Any change in the weather when it comes to my profession … I tend to have a little bit of a panic attack. Am I going to have to find a different career?”
On the surface, Goaslind said the settlement seemed like a massive industry overhaul. That’s when the questions started to swirl in his head. How would this change his commission-based living? How would he advertise his realtor fee? How was this going to alter a booming and competitive Utah housing market? What did this mean for consumers and real estate professionals alike?
“These are the kinds of things that keep me up at night.”
After mounds of research, Goaslind said his practices “aren’t going to change much” because of the settlement. And it’s likely not going to drive down the cost of a Utah home – at least not substantially. The biggest impact it’ll have on the Utah housing market is the amount of commission paid to realtors and who pays it, if anything.
Ordinarily, home sellers pay the commission cost of their agent and the buyer’s agent. In Utah, the average fees are just under 5%. The national average is 5-6%. For example, the median sale price in Salt Lake County as of January is roughly $498,000. With a 5% brokerage commission, the seller would pay approximately $24,900. That amount is then divided up between both agents – it’s how they make their money once they close on a home.
The settlement, however, left the percentage up in the air because sellers are no longer on the hook to cover commission costs for both agents. It also clarified that people looking to buy or sell a home don’t necessarily need an agent.
Andra Ghent, finance professor at the University of Utah and Ivory-Boyer chair in real estate, said the settlement is “great news for consumers,” especially those currently looking for a home. Instead of the commission fee “being baked into the home price,” it “allows buyers to make some different choices.”
“Hopefully it allows them to choose what level of service they want from a realtor. It could open up a flat rate service. It could open up buyers to say, ‘Hey, I want to pay 1% or I want to pay 2%,’” she said. “The goal is really to give consumers some choice here.”
Dave Robison, former president of the Utah Association of Realtors and a current broker, said there was never a “fixed price” on commissions. He’s seen sellers negotiate a commission for as little as $1. And sometimes, Robison said, agents aren’t the ones that set the fee, it’s the brokerage firm they work for. But he acknowledged the settlement will change how agents present their services.
“There's going to be more legwork for realtors, hands down,” he said.
Ghent added realtors may need to hustle a little harder to convince clients their services are worth the cost. And if the commission cost can be reduced, she said that may bring slight relief to the overall price of a home in Utah.
“It's a little bit of money that can go towards the buyer, a little bit of money the seller can save. It's not making a huge dent in our affordability in Utah. It'll help a little bit.”
The biggest change, Goaslind said, is realtors will now have to have their clients sign a buyer-broker agreement before showing any clients a home. One part of that agreement shows how much he expects to make in commission. Prior to the settlement, Goaslind said it was Utah’s “standard of practice” to “always have a buyer-broker agreement signed before you start helping a buyer as an agent.” But some agents, including Goaslind, wait to have clients sign on the dotted line until an offer is ready to be made on a home.
“The reason why is because I never wanted to put pressure on any prospective clients,” he said. “I didn't want them to feel like they were obligated to me until I actually helped them secure a home.”
The settlement also stated that brokerage firms can’t post their commission offers on a multiple listing service system. That’s where seller agents usually post their commission offer to buyer’s agents. Data from that system usually aggregates for popular real estate sites, like Redfin and Zillow. Robison said those offers can still be made over the phone or on the website. Not being able to use a large system does change how realtors conduct business.
“We're just going to be negotiating more, and we're going to definitely have more paperwork.”
Robison stressed the settlement doesn’t make it “illegal” for the seller to pay the commission costs of the buyer’s agent. He hypothesized that it would still be a common practice, especially since most buyers “barely have enough money for a down payment.”
