Will Realtors’ price-fixing settlement affect Idaho home buyers? What Boise experts say

The National Association of Realtors announced a $418 million settlement to end several lawsuits accusing the influential organization of unfair practices in home buying.

Will that reduce the prices of Treasure Valley houses and the commissions that real estate agents receive? Maybe. But some Boise real estate agents say the dramatic changes some national experts foresee are likely to be smaller in Idaho.

The settlement, which would be paid out over about four years, still needs court approval. It would change the way many if not most real estate brokerages and agents conduct business across the nation.

Some rule changes include:

• Getting rid of an industry-standard commission for real estate agents.

• Prohibiting brokers from communicating compensation in the private databases of home listings known as multiple listing services.

• Requiring agents to sign buyer-broker agreements.

The association has faced several recent allegations of price-fixing and antitrust violations, according to prior Idaho Statesman reporting. In October, a federal jury in Kansas City ordered the association and multiple brokerages including Keller Williams Realty, RE/MAX and HomeServices of America to pay $1.8 billion after finding they had intentionally inflated real estate commissions.

The association has also seen a rotating cast at its highest leadership levels. Kenny Parcel stepped down as president of the association in August amid sexual-harassment allegations. Tracy Kasper, a real estate broker based in Caldwell who succeeded Parcel, stepped down less than five months later, saying that she had been blackmailed.

Rules could change home prices, agent commissions

A major issue in the lawsuits was how much real estate agents collected in their commissions.

The industry standard commission is 5% to 6% of the home’s sale price, according to real estate platform Redfin, with half generally going to the home buyer’s agent and the other half going to the seller’s agent.

That means if you sell a home for $484,200 — the median sale price in Idaho — the agents would keep nearly $30,000 with a 6% commission, not including closing costs or other fees.

While there are no laws keeping the normal commission that high, it is a standard that is commonly followed, said Vanessa Fry, director of the Idaho Policy Institute at Boise State University who studies housing.

“It’s like an unsaid rule, even if it’s not an actual rule,” Fry told the Statesman by phone.

Buyers and sellers can negotiate commissions, but she said that if the broker prints the rate in a contract, then many buyers and sellers not realize they can negotiate it.

The rule-changes outlined in NAR’s settlement would scrap the standard and create a new rule that would require agents to enter into written agreements with their buyers to represent them.

Fry said she was unsure how much these new rules would change anything. She said it would likely depend on how engaged buyers get and whether they know they’re able to negotiate rates.

“We’ll see if anything changes,” Fry said. “There’s definitely differing opinions on what people think will happen.”

Some people think the rules could lower home prices if the standard 6% commission is removed, since home sellers could sell their homes for less and still make the same amount of money, Fry said.

For instance, if you sold a home at the Idaho median of $484,200 then you’d receive about $454,200 after the 6% commission is taken out. If you negotiated a 1% commission, you could make the same amount of money by listing it at $458,788 — and likely have more people interested in buying your home.

“What (the association is) trying to do is make things a little more competitive,” Fry said. “It does seem to be that the consumer representatives feel that it will be better for consumers.”

Could the settlement affect Idaho?

But don’t expect massive savings in Idaho right away.

“I think (the settlement) is going to have an impact,” said Mike Moir, managing partner of Boise real estate brokerage The Agency. “I just don’t think it’s going to be as far-reaching as in other states.”

For one thing, Moir said many Idaho brokerages, including The Agency, make it clear that the commission is negotiable and have already been using the broker-buyer agreements that the settlement would now require.

“For the most part, we’ve been proactive with that,” Moir said by phone. “We’ve been using that practice for years.”

And while some speculate that the changes could lead to a decrease in the number of agents, Moir said any decrease in either agent employment or home prices would be more dependent on market conditions than on the new rules.

“I don’t think it’s going to fall off a cliff like you’re hearing in the headlines,” Moir said. “Where we’re at in terms of inventory, and how many buyers are out there, and how many sellers are out there, is going to dictate demand.

“I just don’t see where there’s going to be a massive change in average sales price of a home,” he said.

Mike Pennington, a longtime agent with John L. Scott Real Estate in Boise, said much the same.

“I think here, locally, it won’t affect us that much,” Pennington told the Statesman by phone.

Agents are supposed to sit down with a buyer and seller to explain how representation works, negotiate commissions and obtain a signed buyer-broker agreement, he said. He doesn’t see how the changes would affect the agents who are already doing what they are supposed to do.

“It really comes down to the integrity of the Realtors and the Realtors doing their job,” Pennington said.

Moir said no one has ever told him what to charge for commission.

“There is no average that we use,” Moir said. “It’s a market-forced number, and we just look at that from a competitive standpoint.”

Low-balling an agent on commission may not be in a buyer or seller’s best interest, Pennington said.

“If I want to sell my house for the best price and I want to sell it fairly quickly, I’m going to want a full-service agent,” Pennington said. “If I’m going to sell a home from anywhere from $300,000 to $1 million, I want to get the best agent I can.”

Agents, he said, can help buyers spot problems in a purchase that often is the most expensive of someone’s life.

“I don’t think many of us have a problem paying a fee … if they do a good job and do what they say they’re going to do,” Pennington said.

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