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!
But your attorneys failed miserably at presenting a case to counter this!
NAR Chief Legal Officer Katie Johnson discussed the lawsuit on their internal podcast.
“The outcome, no matter which way it goes, could have major consequences for the real estate industry and profession for years to come,“ Johnson said. “The plaintiffs are home sellers in Missouri represented by class action attorneys. These home sellers used an agent who listed their home on one of four MLSs in Missouri. And the class action attorneys representing the plaintiffs are alleging that the commissions paid by the sellers are too high as a result of the listing brokers offering compensation to buyer brokers. So what’s really at stake here is the way that compensation is made from listing broker to buyer broker.”
Johnson went on to explain: “These class action attorneys are mischaracterizing our rules and do not understand how the rules work themselves. And then the practice of cooperation between real estate professionals has contributed to this efficient pro-consumer model that we have and have had for a hundred years for transacting real estate in America.”
Ever since I bought my first house 40 years ago, 6% has been the “standard” seller-paid commission. There have been brief periods when we saw “discounting,” but eventually the 6% “standard” always returned. When a number like that remains that consistent across an entire industry, decade after decade, an assumption that “the fix is in” becomes very easy for people to make.
Explaining the value of services provided is probably less critical to a successful defense than an explanation of how that 6% has remained so set in stone for so long without some kind of collusion between agents who are supposed to be competing against one another.
an explanation of how that 6% has remained so set in stone for so long without some kind of collusion between agents who are supposed to be competing against one another.
We’re going to talk about the path to the future next.
The real estate industry is experiencing a period of major disruption, Redfin CEO Glenn Kelman said this week, and one of the results may well be the end of today’s commission landscape.
“I think there’s a world coming where cooperation may really crumble,” Kelman said. “And it’ll affect whether we have an open marketplace. It’ll affect whether there’s two agents instead of one.”
Wait until the market turns and there’s more sellers than buyers.
When this happens suddenly buyers agents will come back + sellers agents will wine and dine them.
However my preference is to do auctions which happen when there’s WAY more sellers than buyers.
Go auctions!
Check out the pre-foreclosure. They are delinquent on their 1st and 2nd loans and have been noticed by both lenders so a trustee sale could be imminent (first notice was in July).
The combined balances are only around $1,000,000, so don’t you price it at $1.7 or $1.9 to ensure a quick sale?
https://www.compass.com/app/listing/7116-sitio-caliente-carlsbad-ca-92009/1435509827081094921
Dear Members,
In June of this year, Bob Goldberg indicated his intention to retire. Last month, Bob shared with me privately his desire to make his retirement effective this fall. He planned to announce that decision on Tuesday but chose to hold off given the news around the outcome of the trial.
Today, the Leadership Team unanimously voted to appoint Nykia Wright as NAR’s interim CEO. She will start full time on November 20. Read the press release here:
https://www.nar.realtor/newsroom/nar-announces-leadership-transition.
Nykia is the former Chief Executive Officer of the Chicago Sun-Times, an entrepreneur, and a strategic advisor to leading companies and universities. She will bring to this role significant expertise and a valuable outside perspective. She has a deep understanding of the ways in which NAR empowers REALTORS® to help families across America realize the dream of homeownership. Nykia’s experience driving transformational change for mission-driven organizations positions her to help NAR embark on the next phase of leading our industry.
In the meantime, the LT is committed to continuing the search process for a permanent CEO in the most thoughtful and thorough way possible.
I am immensely grateful for Bob’s leadership and decades-long service to NAR. It has been a privilege to work with him in expanding and strengthening our association, and I hope you will join me in congratulating him on his well-deserved retirement. His contributions to our association and our industry have been tremendous.
We look forward to working with Nykia as a bridge to NAR’s future – one that will continue to have us be a force for good in the real estate industry.
Thank you!!
Tracy Kasper
NAR President
NAR has said it plans to appeal.
The verdict raises the possibility of the biggest changes in decades to how Americans buy and sell homes, and the costs associated with those transactions.
In a report released ahead of the verdict, Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, predicted that the lawsuits could lead to a 30% reduction in the $100 billion that Americans pay in real-estate commissions every year and push well over half of the almost 1.6 million agents out of the industry.
“I have a hard time believing that this could be the verdict and there’s no material changes,” said Anthony Lamacchia, whose brokerage Lamacchia Realty has more than 500 agents in six states. “It’s just what, and when, and what does it lead to?”
Nothing has changed yet for real-estate agents or for consumers in the middle of transactions. But new commission policies could come from a variety of directions. The federal trial judge might require changes to how the brokerages operate, or real-estate brokerages or multiple-listing services could institute new practices on their own due to concerns about potential liability.