Now what?

The National Association of Realtors clearly underestimated the chances of losing this case – and the others to come. They must have thought that touting their 100-year old Code of Ethics was all that was needed to impress people, and instead they found out that it doesn’t.

What doesn’t get addressed is the common belief that realtors are overpaid.

It is a wide-spread belief. Even Joe Kernen, a guy who works 15 hours per week and gets paid between $3,000,000 and $22,000,000 per year (depending on the website), has to open his CNBC show today with the declaration that 6% commissions are too much, and 1% would be more like it.

This is what needs to be addressed. Can agents explain their value?

Listing agents are used to making a presentation to homeowners, but 80% of the time, the sellers have already decided on who they will hire so the presentation doesn’t have to be great. Buyer-agents rarely discuss what they do – they just have people jump in their car and go look at houses.

The judge and/or the Department of Justice will rule on future sellers paying the buyer-agent commission. If sellers are allowed to pay a commission to the buyer-agents, then their listing agent can counsel them properly on what rate to offer, and the status quo will endure. But it will be a game-changer if the sellers are no longer able to offer ANY commission to buyer-agents.

With the former, the listing agents will have to discuss the pros and cons in detail to the sellers, and agree to a comfortable amount. With the latter, the buyer-agents will have to create a presentation to convince their buyers to pay them directly. This will be a new practice, and they won’t be very good at it.

By the end of the day yesterday, I had already been notified of three different seminars being offered about using the Buyer-Broker Agreement. It sounds simple enough to the ivory-tower types – just get your buyers to pay you the commission! But they underestimate both sides.

Agents aren’t jumping at the chance to work with buyers in the current market.

It takes months or years for buyers to finally win the right home at the right price, and the abuse from the listing agents is mean and nasty along the way. Nobody plays by the same rules, and multiple offers are mishandled regularly, which delays the buyer finally getting a house.

The 2024 Selling Season will begin with buyer-agents pleading with their prospects to sign a contract to pay them a commission. It will only take a few months for this practice to get exposed. The buyers will be reluctant to sign, and those that do sign a contract will find out that it won’t change the outcome. It is still going to take months to find the right house, at the right price. There will still be the typical aggravations and shenanigans with the listing agents – most of whom now insist on buyers providing a bank statement and lender pre-approval letter just to see a house.

Because the local inventory is will be ultra-low, the desperation will cause buyers to blame their agent. It is a fact of life with both sellers and buyers – if they don’t get the outcome they want, it’s too easy to blame their agent (especially when it is true most of the time).

Will sellers and buyers be more diligent about who they hire?

They never have been – they just grab an agent and hope for the best. They don’t know the right questions to ask; they don’t want to waste time investigating thoroughly; and besides, the buyers just want a house, and the sellers just want their money.

This is where each agent and the industry at large could go a long way towards providing a solution.

If there was an outpouring of explanations on how the business works, what to expect, and why a consumer should pay the fee, it would help. Maybe write a blog or something!

Without a delberate attempt to educate everyone, the business will gravitate to the lowest common denominator – single agency, where buyers go direct to the listing agent, and the benefits of buyer-agency are slowly forgotten. Next year will be the phase-out stage.

It will be the next step towards auctions becoming the way to sell houses!

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