Brokers resist bill to peel back curtain on real estate sales in Utah

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A proposed law that would require real estate brokers to share sales data with Utah officials has the state’s commercial real estate sector springing into action to keep lawmakers from changing the status quo of secrecy.

Utah is one of 12 states that don’t require brokers to share purchase prices with anyone, a status known as non-disclosure.

That status leaves buyers and sellers at the mercy of brokers for information about commercial real estate values in the Beehive State. It also leaves county assessors, who are required by the state constitution to assess all properties at fair market value for taxation, in the dark as well.

“It’s the only tax you pay where we ask the tax collector to guess the value of the asset,” said Lincoln Shurz, a partner with Lincoln Hill Partners and lobbyist for the Utah Association of Counties.

The nondisclosure system has the potential to lead to inaccurate property assessments, which can unfairly shift the overall property tax burden. Inaccurate property valuation models, like those due to a lack of accurate data, shifts the tax burden disproportionately due to a number of factors, according to research on the topic, including by an assistant professor in finance at the University of Utah who is an expert in property taxation.

After residential property taxes rose quickly after an unprecedented jump in home prices during the COVID housing market, counties began asking whether they should have more insight into the commercial side, as well.

Senate Bill 30 would require brokers to report the purchase price for any real estate sold in Utah to the county recorder in an attempt to ensure that the taxes charged on real estate are based on the fair market value of the property. The bill would end the long-standing practice of secrecy in Utah, but only for the officials tasked with setting a taxable value for real estate.

County recorders could share the information with assessors. The information would still be exempt from disclosure to the public through Utah’s public records law, which is known colloquially by its acronym of GRAMA.

The bill, which is awaiting a final vote in the Utah Senate, hasn’t caused any commotion with the residential sector. Home prices are already largely available through private data sharing agreements managed by multiple listing services.

The commercial sector doesn’t have a similar system, leaving valuable data in the hands of relatively few private companies that are responsible for pricing and selling buildings and land.

“We have the opposite of transparency at the moment, and we have extreme unpredictability,” Sen. Dan McCay, R-Riverton, a commercial real estate attorney who sponsored the bill, said during a committee hearing last week. “That is three broken pillars of a stool that’s laying on the floor.”

The lack of information has left some wondering whether homeowners are paying more than their fair share in property taxes, given county assessors have more access to that information than on the commercial side, leaving the system open to errors.

McCay proposed SB30 along with a bill that’s currently tied to it: Senate Joint Resolution 2. If passed by supermajorities in the Senate and House, the resolution would ask Utah voters whether they want to amend the state constitution to ban a tax on real estate sales known as a transfer tax.

Utah is one of few states that doesn’t tax buyers of real estate, but some brokers fear that any level of purchase price disclosure could lead to a transfer tax in the future.

The Republican-dominated Senate has so far signaled its overwhelming willingness to pass both of McCay’s bills. But rather than push the bills through, McCay has hit pause on the bills to open an opportunity for the brokers and the county assessors to compromise. McCay told us the bills were effectively tied together.

Midway through the 45-day legislative session, the relevant parties are assembling, with brokers looking to stave off a state mandate to share sales information and assessors willing to hear what they have in mind.

A POTENTIAL COMPROMISE

McCay’s pause has given the assessors and commercial brokerages time to come together to see if they can reach a compromise. Those meetings are ongoing while McCay’s bills sit on the 50-yard line on the Senate floor.

Building Salt Lake has learned that Utah’s six major commercial real estate brokerage firms in Utah have begun meeting with the county assessors along the Wasatch Front to see if they can create a kind of data-sharing system that gives the assessors information to help inform them about commercial real estate values. 

It’s too early to say what the system would look like, other than parties involved say it would be somewhat similar to the way assessors get access to data from the residential real estate market, which is driven by long-standing private information sharing agreements.

That may look like a kind of data-sharing agreement that occurs in the multiple listing service for residential brokerages. Sources said a similar system existed in Salt Lake County for over a decade before falling through for administrative reasons during COVID.

Representatives for the brokerage community say they’re willing to compromise, though they have made clear they will vigorously oppose any movement toward Utah joining the other 38 states allow the public — including buyers, sellers and tax assessors — to view accurate sales information.

“The commercial real estate brokerage community invests heavily in data collection and analysis and that includes sales and leasing data,” said Nate Worthen, president of the Utah chapter of the group called CCIM (Certified Commercial Investment Member). “It is that investment that helps the brokerages provide the most value they can to their respective clients and having that data remain proprietary is critical to their sustained success.”

The industry says there would be a cost to collect and maintain the data, and a cost to transmit it to the counties. They may be trying to create a kind of pilot data-sharing agreement where the brokerages maintain exclusivity over the purchase price while sharing information with the assessors to allow them to more accurately assess commercial properties.

McCay and the counties may be willing to see how it goes.

For his part, McCay said he preferred a compromise that didn’t involve passing a new law, suggesting he’s open to the brokers creating a new data-sharing system in which those parties — but not buyers, sellers or the public — get access to purchase data.

“I appreciate the effort from the market and the big brokerage houses,” McCay said during the hearing. “Looking forward to seeing if the assessors are on board. If they are then I think we can get a great compromise.”

If that happens, it’s not clear whether McCay would still move ahead with the proposed ban on a real estate transfer tax, or if he’d hold onto it should a deal with the brokers fall through.

Email Taylor Anderson

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Posted by Taylor Anderson

Taylor Anderson grew up near Chicago and made his way West to study journalism at the University of Montana. He's been a staff writer for the Chicago Tribune, Bend Bulletin and Salt Lake Tribune. A move from Portland, Oregon, to Salt Lake City opened his eyes to the importance of good urban design for building strong neighborhoods. He lives on the border of the Liberty Wells and Ballpark neighborhoods.