Buying a Home in the Denver Metro Area : Buyer Broker Agreements; Buyer Agent Compensation & Disclosure; Real Estate Agent Commissions - RE/MAX Colorado Agent & Realtor Anthony Rael

Contrary to what you're hearing in the news or on social media, there has never, ever been a "standard commission". Listing commissions remain negotiable today, just as they've for many decades. Any articles or click-bait links suggesting buyers and sellers are going to save thousands of dollars on the sale and purchase of a property are misleading and require additional context so you can educate yourself on what's actually happening in the Sitzer-Burnett lawsuit. In a nutshell, effective August 17, 2024, every MLS in the United States will be prohibited from advertising offers of buyer broker compensation. Also known as a Buyer Broker "co-op" or "co-broke", it represented the amount a buyer's agent would be paid (usually a % of the sales price) by the listing agent, seller or home builder if they successfully represented a buyer who closed on the property. Moving forward, any real estate agent working with a buyer will be required to enter into a written agreement with the buyer BEFORE showing them a property. In other words, before an agent can show a home, they MUST have a written contract with a buyer that clearly discloses to a buyer that they will be responsible for compensating their agent (*Colorado rules are different - see below). Buyers can continue to ask the listing agent, seller or home builder to compensate their agent (just as its been done for decades), the only difference now is the broker offers of compensation must be negotiated directly into the purchase offer because there's no guarantee the seller will accept it. In other words, everything is negotiable. Link to a comprehensive NAR settlement FAQs - .

A Guide To Real Estate Agents and Commissions


 

I am attending an open house without an agent. Do I need a written buyer agreement in order to tour the home?
NO. If you are simply visiting an open house on your own or asking a real estate professional about their services, you do not need
to sign a written buyer agreement.

Is an agent who is hosting an open house required to enter into written agreements with the potential buyers who attend the open house?
NO. In this case, since the agent is only there at the direction of the listing broker or seller, the agent is not required to have a written agreement with the buyers touring the home.
Learn more about Open Houses & Buyer Broker Agreements

History and Background of the Multiple Listing Service
If you're interested in taking a deep dive into understanding the History and Background of the Multiple Listing Service, please read this informative article. It will literally walk you through how real estate has evolved since the 1880's! In a nutshell, what started out as town auctions in the 1880's reaching a few dozen people changed to agents having to go to each other's offices and changed to driving around town looking for "for sale signs" and changed to the process of printing property listing books in the 1960's once or twice a month so agents and prospective buyers who stop by an office and thumb through a catalog. Then in the mid-1990's, the internet was born and changed the entire landscape forever by making it possible to input a property listing 1x in the local MLS database which would propagate to thousands of websites and reach millions of potential buyers around the globe! As exposure for Seller listings grew, brokerage firms  agreed to share the listing commission paid by their Sellers, thus allowing agents who weren't representing the Seller to sell the property. These agents were known as sub-agents as they were sub-contracted by the listing brokerage to work with prospective buyers to sell the home. This meant that the sub-agents legally represented the Seller and owed the seller fiduciary duty even though they might not have ever met the seller. Agents showing a Buyer properties had a legal obligation to protect the Seller's best interests rather than the Buyer. This led to a lot of confusion and disenfranchised a lot of Buyers! It proved to be a bad system because nearly 75% of Buyers believed the agent showing them homes represented their best interests. Fortunately, the 1990's ushered in Buyer Agency - which for the first time meant Agents could actually represent a Buyers' best interests. Finally, each side had legal representation in a real estate transaction! That system has worked flawlessly for decades.

Fast-forwarding to 2019, when the Sitzer-Burnett lawsuit was (as mentioned above). The United States Justice Department got involved to have real estate compensation (formerly known as commissions) "decoupled" between the listing broker and buyer broker - thereby ending broker-to-broker "co-op".  The DOJ wanted Sellers to know that they could continue offering compensation to the Buyer's Broker, but just not make it publicly known in the MLS because they feared agents might steer buyers away from listings that offered less compensation. I personally don't agree with this because in Colorado at least, our Buyer contracts specifically stated who paid the commission and buyers were allowed to determine if they wanted to see a property even if it didn't pay what they had agreed to with their agent. On the flip side, I wholehearted like the idea that compensation is hidden from websites for the very fact that each Buyer Broker is now forced to demonstrate their professional value because they were no longer guaranteed a specific % of the sale. In other words, the most seasoned veteran in the market with decades of experience was previously being compensated the same % as an agent who literally just passed the state licensing exam a week ago! Nonetheless, I find it a bit hypocritical that almost every Seller in the United States seems to have forgotten that when they purchased a home, the Seller of the property they purchased, paid their Buyer's agent a commission (not them). During the last few years (2019-2024), Buyers have been faced with a market that is heavily weighted against them with historically high home prices, high mortgage rates, low inventory and in order to compete, were asked to make regrettable decisions like waiving inspections and other contract contingencies (a very bad idea). That being said, real estate markets have always been cyclical and we will soon return to a Buyer's market.

Selling Real Estate is Easy

If you've ever had a real estate transaction that seemed "easy" - thank your REALTOR! That means they did everything possible to ensure a smooth transaction and insulated you from 100 things that may have been going sideways behind the scenes. You see, we protect you from the drama and nonsense that sometimes takes place between parties (including agents) because let's face it, buyers, sellers & agents can sometimes allow their egos and emotions to interfere with things. They dig their heels in on the dumbest things that would otherwise completely blow up a real estate transaction and it's completely avoidable. That's why I often refer to myself as a firefighter because just like our local heroes, we're busy using our respective expertise mitigating life-changing disasters and we don't get caught up in the nonsensical things that would otherwise interfere with us doing our jobs. Surely everyone knows there’s A LOT more than just dousing a structure with water to extinguish the flames, but regardless of whether the buyer or homeowner understands "how the sausage is made" or not - we take pride knowing what it took to ensure the best possible outcome.

In the age of Google and recent emergence of artificial intelligence (AI), many would-be buyers and sellers question how complicated real estate really is. Truth is, I can train any monkey to set up client searches in the MLS or drive around town opening doors (which is what many people thing that's all we do), but do you really know "how the sausage is made"? If you believe you can successfully navigate Title companies, Home Inspection companies, Lenders, Appraisers, HOAs/CC&Rs, Non-warrantable units, Metro Districts, Local municipality rules & regulations, Solar Leases, Water & Mineral Rights, Insurance companies, Structural Engineers plus dealing with inspection-related issues? Do you have expertise in assessing property values and negotiating the right price and terms? Do you have knowledge to effectively execute a Listing Contract or Contract to Buy & Sell? By simply checking the wrong box (or failing to) and/or using legal clauses in the additional provisions section that can mitigate any potential ambiguities which may otherwise cost you tens of thousands of dollars (or more) in a future lawsuit? If the answer is yes, then by all means you are probably skilled enough to pursue this journey unrepresented. But if you're not 100% certain about what it takes to avoid future litigation, then you might want to consider hiring a trusted (full-time) real estate professional. If not me, chose someone who comes highly recommended by family or friends and/or has a stellar reputation on realtor.com.

I realize this is a massive amount of info to digest, so please bookmark this page and refer to it to remind yourself that real estate agents are not paid a penny until they can successfully demonstrate their value and get you to the closing table. We are self-employed small business owners who don't earn a salary; receive no benefits; no 401k plan; no medical, dental or vision insurance; no vacation days or PTO; no reimbursement for vehicles, mileage, repairs or insurance. Nada.  Additionally, we pay our respective brokerage firms 10-40% of everything we make (it comes right off the top). Real estate is a performance-based career, so if we cannot get you to the finish line, we do not get paid - even after months of work in many cases.

Having said all of that, you (as buyer or seller) are empowered to determine if the person you are considering hiring to represent your interests brings value to this massive financial and sometimes life-changing decision. I encourage you to talk about everything from your service expectations to compensation and remember, no question should be off-limits! If your agent cannot expertly and effectively communicate their value and they quickly pivot the conversation to discounting their commission, respectfully walk away. After all, if the agent doesn't have confidence in their own expertise and the backbone to fight for their livelihood, why on earth would you trust them to fight for yours?

If honesty, integrity and an agent's reputation are important factors to you when deciding to purchase a home - Anthony Rael is the real estate agent for you.  As a professional buyer's agent, I am knowledgeable about local market conditions and will help you find the right house, negotiate sales terms and price and more importantly, look out for your best interests every step of the way.  I have extensive knowledge of the purchase process and my responsiveness to your needs will be first-class.  My real estate services are backed by a 100% satisfaction guarantee!