Spring is a busy time for buying and selling homes in Utah and sales were up by 9% in April and with the recent National Association of Realtors (NAR) lawsuit settlement, Utah realtors do not expect to see many changes in the way homes are bought and sold.

In March, a $418-million settlement was reached with the National Association of Realtors. The deal came after a jury ruled against the NAR in a class-action antitrust lawsuit. The suit was filed alleging that the association had colluded with some large real estate brokerages to keep real estate commissions inflated, benefiting real estate agents and costing sellers more in the commissions they pay to those agents.

Those rates nationally are about 6%. Approval of the settlement by a federal court would do away with set rates and let buyers and sellers negotiate those commissions with real estate brokers and agents.

The Utah Association of Realtors say the ruling won’t have much impact on buyers and sellers in Utah due to decades of proactive, consumer-friendly efforts by Utah realtors.

“We don’t feel that the lawsuit is going to have a big impact here in Utah,” said Adam Kirkham, president of the Utah Association of Realtors (UAR). “Anyone that sold a home could expect to receive a postcard about the class action suit. The lawsuit did not originate here because in Utah we have been using buyer-agent agreements for 20 years. Consumers in Utah have been more informed about what the commissions were.” 

The lawsuit’s resulting rules aren’t expected to impact the inventory of available homes or values, which are based more on the supply and demand in the market, according to Kirkham.

“Millcreek has an affordability issue and between 2012-22 the average homes listed were 500 and post COVID the inventory dropped and we have been hovering around 160 to 177 available homes for the last two years. Prices went up and the median price of a home in Millcreek is around $688,000 and in Salt Lake City the median price is $535,000,” Kirkham said.

Utah realtors have been using written, transparent agency forms with their buyer clients for decades and providing seller disclosures. This will be new for the rest of the country due to the settlement but was already being covered in Utah.

One of the new rules that came out of the lawsuit is that the buyer’s agent commission can no longer be listed on the multiple listing service (MLS) and this will create a lack of knowledge of what will be paid to the buyer’s realtor.

“Buyers will have to determine for each house what the sellers offering for the buyer’s agent’s commission,” Kirkham said. “This is a conversation you want to have before looking at the house and before you make an offer. The seller’s agent can still advertise the commission on social media or on the realtor’s website but not on the MLS.”

“Commissions can fluctuate due to inventory and competitiveness of the market,” he continued. “It is worth it for the seller to offer a buyer’s agent commission due to it will bring a better educated consumer who still wants to hire a realtor.”

There will be additional training for realtors who are now required to enter into an agreement with a homebuyer before they look at homes. “So that they can agree upon a commission rate which has always been negotiable,” Kirkham said.

He warned buyers who forego representation to save the commission might regret it. 

“Not having an agent can come back to hurt you in negotiation or hiring the wrong inspectors plus you want to be informed of the other offers or you could lose the bid,” Kirkham said. “Agents want to bring value to the process of buying and selling a home.”

Jason Eldredge, local realtor of The Eldredge Group with Equity Real Estate - Solid said they always had a buyer-broker agreement and have their customers sign one.

“The commissions have always been negotiable, and the standard was 6% but now we are seeing commission compression that is nationwide. With all of the iBuyers coming in, it compressed commissions and the new standard is about 5%, but it has always been negotiable,” Eldredge said.

“We meet with our clients and find out what is their situation, why you are selling. A good agent will have some flexibility,” Eldredge said. 

The national settlement requires listing agents to disclose to sellers any portion of their compensation that will be shared with a cooperating broker. Sellers must also approve in writing the sharing of the listing agent's compensation. Which Eldredge said is the “bummer” part of the lawsuit.

“You cannot post the commission on the MLS anymore,” he said. “It is an additional negotiating step and could make it really tough for a new buyer. The buyer might have to come up with the commission.” 

Deanna Devey, director of operations and communications at UAR, said the changes will be more procedural in Utah.

“The buyer has three options to pay the agent,” Devey explained. “The listing agent will offer to share compensation with the buyer’s agent or the buyer might negotiate directly with the seller to have the seller pay the compensation. The third option is the buyer might pay their agent outright.”

Eldredge added, “I think for the next few years sadly we might have more lawsuits due to buyers not having representation when purchasing a home.” 

The new rules go into effect after Aug. 17. More information about the NAR lawsuit can be found at realestatecommissionlitigation.com and Utah FAQs can be found on the website Utahrealtors.com.

Additional
reporting
by
Darrell
Kirby.