by Jim the Realtor | Apr 22, 2024 | 2024, Commission Lawsuit, Realtor Training, Why You Should List With Jim |
On Friday, the Plaintiffs’ counsel filed a Motion for Preliminary Approval of the commission-lawsuit settlement agreement with the federal court, so the two new rules will go into effect in late July, apparently. The plaintiffs have requested a hearing on final approval of the settlement by the court to be held on November 22, 2024.
The second rule about buyers having to hire a buyer-agent before touring a home is a done deal, mostly because nobody is objecting. At least not yet. It will become a major headache for all.
The first rule about home sellers not being required to pay a buyer-agent commission will be affected by the overall market conditions. Red-hot markets like Silicon Valley will likely be seeing zero percent (or close) being offered as a reward to buyer-agents. The demand is so strong there, the inventory is so thin, and the buyer-agents are so desperate that the sellers will get away with it. How much will buyers be willing to pay to hire a buyer-agent there? Not much – 1% tops – but the entry level there is $3,000,000.
But other markets will have different challenges – especially those that are slowing (or buckling under) from a heavier load of unsold listings and stingier demand.
The conversations will go like this:
Seller: It’s been thirty days, how come my house isn’t sold?
Listing Agent: I feel good, and it should be selling any day now. People are looking.
Seller: What are you doing to sell my home?
Listing Agent: I’m showering every day now in case someone wants to show your home.
Seller: Are you advertising in SF, LA, and NYC where all the rich people live?
Listing Agent: We are advertising world-wide.
Seller: Then what do you suggest we do?
Listing Agent: You should lower the price and pay more commission to the buyer-agents.
Seller: The last thing I’m going to do is lower the price. Aren’t I paying 4% commission already?
Listing Agent: Yes, because you saw in the news that realtors imploded, so commissions are less now.
Seller: You’re saying 4% isn’t enough?
Listing Agent: Correct, because I work for 3% and that leaves only 1% for the buyer-agents. You should increase it to encourage more buyer-agents to show it.
Seller: It sounds like you’re backing into a 6% listing.
Listing Agent: I’m sorry you feel that way, but yes. But hey, you got to try out lower commissions!
Seller: Well, I guess you got me because I want to sell. Knock off $5,000 off my price too.
Listing Agent: Off your $3,000,000 listing?
Seller: Ok, ok, knock off $10,000, but that’s it. I’m Not Going To Give It Away!
Realtors will still be holding all the cards, and will game any system you throw at them. I said this will blow over quickly, and a softer market will help keep the status quo. Listing agents may appreciate buyer-agents (finally), though paying them more won’t be an obvious solution for many. Expect a slower market instead.
by Jim the Realtor | Mar 26, 2024 | Commission Lawsuit, Realtor, Realtor Training |
From the CEO of a large Sotheby’s brokerage based in Florida:
Last week the National Association of Realtors announced a settlement agreement in the Sitzer Burnett case that would take effect in July. For those who missed the declarations in the media that this outcome will render transacting real estate almost free, protect consumers, and make homeownership affordable once again, the settlement does none of that.
Here’s the truth.
1. The settlement forces brokers to reduce their compensation. False.
The settlement in no way establishes a standard or limitation on Realtors for what they may charge, nor services they elect to deliver. Those fees have always been negotiable and there has never been any collective bargaining. In every market, there is a wide variety of fees, just as there are levels of marketing, service and competence.
2. The settlement will, for the first time, allow sellers to no longer pay compensation for an agent bringing the buyer. False.
There has never been an obligation for a seller to pay buyer agent compensation, yet it is a practice that’s worked well. A past rule requiring an offer of some amount of compensation was a rule of display on a Realtor-owned MLS, yet it could have been as low as $1. That limitation was removed and today the MLS accepts all listings, regardless of buyer agent consideration.
3. The settlement prohibits sellers from paying a commission to a buyer’s agent and relieves sellers of the financial burden. False.
The mandate restricts properties with an offer of buyer agent compensation from displaying on association-owned MLS, yet the practice can’t be restricted in any other form of marketing. Sellers may still elect to pay buyer agent compensation to differentiate their properties. While sellers can elect not to pay buyer agent compensation, that doesn’t mean they will avoid the economics as buyers may write into any offer a contingency requiring the seller to cover the cost or request other concessions.
4. The settlement will serve to meaningfully lower prices and make homeownership affordable again. False.
Values in real estate are determined by supply and demand. Fees in a real estate transaction represent additional expenses, yet these include not only commissions but many other related charges. Should real estate commissions be reduced by 1% because of compression, that $500,000 home will now cost $495,000. Not only is the potential impact marginal at best, but do you think the seller now believes the home is worth less and will happily give the difference to the buyer? The reason home ownership is increasingly less affordable is that homes in our market have significantly risen in value these last few years.
5. The settlement is a win for buyers who will now be able to negotiate the fee for representation. Questionable.
For readers who have purchased homes, it is more than likely you were happy to have the seller compensate your agent so you didn’t have to. For buyers who had to provide the down payment and closing expenses, having the commission paid by the seller and incorporated in the home price allowed them to finance the amount over time instead of coming up with additional cash at closing.
6. The settlement will result in significant restitution to consumers who were “harmed” over recent years in their transactions by Realtors. False.
The settlement is huge, yet when one divides the amount by the number of potentially qualifying consumers it works out to about $10 per person. Those benefiting are the attorneys who have submitted a request to the court for over $80 million in fees.
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As a real estate professional for over 40 years, I have had the privilege of working with Realtors who represent the public in what is likely their largest investment. What I have witnessed are the countless situations where an agent has gone above and beyond to help buyers realize their dreams and sellers maximize their returns, often serving in ways far beyond their job description.
Everyone would like to see costs lowered yet I do not see the Department of Justice going after attorneys or other professions we wish would charge less. I always believed in the concept of free enterprise. If one is willing to assume the risk of running a business, one may do so at rates that allow a reasonable return for the capital investment and time. As my dad would say during his 60-year career, you wake up every day unemployed and have to find a job. Then you spend out of pocket and don’t make a cent unless you achieve someone else’s goals.
The brokerage community has always adapted to best represent buyers and sellers whenever there is a shift in the environment. And we will again. Yet when an industry I love is singled out and the justification is for false reasons, I will not be quiet.
https://www.heraldtribune.com/story/opinion/columns/2024/03/22/budge-huskey-says-dont-believe-the-myths-about-the-realtor-settlement/73055934007/
by Jim the Realtor | Mar 22, 2024 | Commission Lawsuit, Commission War, Jim's Take on the Market, Realtor, Realtor Training
Oh, you’re going to get lower commissions alright – on the backs of the buyer-agents.
The last time I checked a couple of months ago, there were 30% of the monthly closed sales that offered a buyer-agent commisssion under 2.5 percent. Of the 92 closings so far this month, 25% of them were under 2.5% – and those were determined before the NAR debacle.
The listing agent determines how much the buyer-agent gets paid.
Not the seller, not NAR, not the attorneys – it is the listing agent who decides the commission rate to offer the buyer-agents. It makes for an easy solution. Want a lower overall commission rate? Just take it off the amount paid to the buyer-agent. What’s worse is the MLS rule that buyer-agents are not allowed to negotiate the rate – hopefully that will go away now.
Listing agents aren’t lowering their commission rate – they are taking the same or more than ever, and paying less to the buyer-agents. They are under-appreciating the amount of work it takes to conclude a successful buyer-side transaction (usually 3-6 months of frustration and losing).
If the listing agent has superior skills that result in a higher sales price and a smooth transaction, then no one will mind them getting paid accordingly, but their success is also at least partially due to the buyer-agent doing his job well. The good buyer-agents shouldn’t be penalized, and ideally, there would be a sliding scale based on performance.
But because everyone will be hearing that commissions are negotiable (for the first time, says Biden), the listing agents who feel the need to agree to a lower rate with their sellers will just subtract the same discount from the buyer-agent side. But is that in the best interest of the seller?
This practice will expedite the demise of the buyer-agent.
by Jim the Realtor | Mar 19, 2024 | Commission Lawsuit, Realtor, Realtor Training
Everyone seems to have a take on the commission lawsuits. This is one of the best:
A way to implement an instant solution within the existing framework is to require that realtors possess a broker’s license, which takes a minimum of two years experience (or a four-year degree with a major/minor in real estate), plus passing EIGHT college-level courses.
Getting a salesperson license only requires a passing score of 70% on a 150-question multiple-choice test after talking a couple of classes. Once licensed, the office trainings are thin and too basic in nature, which unfortunately forces new agents to learn the trade on the backs of their first 100 clients or so.
The commission lawsuits may expedite the retirements of a million realtors, but they aren’t going to solve the problem – convincing the public that they should Get Good Help! Instead, the lawsuits will just keep everyone talking about the same old thing, with no advancement of what’s really best for the consumer.
Ryan tries to make the same point here, and look how fast it deteriorates:
by Jim the Realtor | Mar 15, 2024 | Commission Lawsuit, Commission War, Realtor, Realtor Training |
What a headline! Nowhere in this article does it say that NAR is slashing commissions or that any agents – the people who determine the commissions – have agreed to slash the commissions. The weak, spineless agents who have nothing else to offer will gladly agree to work for less because to them, it beats not working – but consumers suffer when they hire a weak agent.
Nothing will change until consumers realize that the key is to GET GOOD HELP!
There will be only one result from these commission lawsuits. The buyer-agent will be eliminated in the name of ‘saving money’, and home buyers will be forever harmed by not getting any, let alone adequate, representation.
The full NYT article without paywall is HERE.
Nobody from the industry is quoted in the article, and they published the most outrageous quotes they could find.
Excerpts:
Housing experts said the deal, and the expected savings for homeowners, could trigger one of the most significant jolts in the U.S. housing market in 100 years. “This will blow up the market and would force a new business model,” said Norm Miller, a professor emeritus of real estate at the University of San Diego.
The lawsuits argued that N.A.R., and brokerages who required their agents to be members of N.A.R., had violated antitrust laws by mandating that the seller’s agent make an offer of payment to the buyer’s agent, and setting rules that led to an industrywide standard commission. Without that rate essentially guaranteed, agents will now most likely have to lower their commissions as they compete for business.
Economists estimate that commissions could now be reduced by 30 percent, driving down home prices across the board. The opening of a free market for Realtor compensation could mirror the shake-up that occurred in the travel industry with the emergence of online broker sites such as Expedia and Kayak.
“The forces of competition will be let loose,” said Benjamin Brown, co-chairman of the antitrust practice at Cohen Milstein and one of the lawyers who hammered out the settlement. “You’ll see some new pricing models, and some new and creative ways to provide services to home buyers. It’ll be a really exciting time for the industry.”
Under the settlement, tens of millions of home sellers will likely be eligible to receive a small piece of a consolidated class-action payout.
The legal loss struck a blow to the power wielded by the organization, which has long been considered untouchable, insulated by its influence. Founded in 1908, N.A.R. has more than $1 billion in assets, 1.3 million members and a political action committee that pours millions into the coffers of candidates across the political spectrum.
The antitrust division of the Department of Justice is continuing its investigation of N.A.R.’s practices, including the organization’s oversight of databases for home listings, called multiple listing sites or the M.L.S. The sites are owned and operated by N.A.R.’s local affiliates. For decades, the Justice Department has questioned whether these databases stifle competition and whether some N.A.R. rules foster price-fixing on commissions.
Some experts said the shift on commission structure, and the billions of dollars that would flow into the housing market as a result, could spark a recovery in the housing market, going so far as to say that it could be as significant as the 1930s New Deal, a flurry of legislation and executive orders signed by President Franklin D. Roosevelt designed to stabilize and rebuild the nation’s economic recovery following the Great Depression.
“This will be a really fundamental shift in how Americans buy, search for, and purchase and sell their housing. It will absolutely transform the real estate industry,” said Max Besbris, an associate professor of sociology at the University of Wisconsin-Madison and the author of “Upsold,” a book exploring the link between housing prices and the real estate business. “It will prompt one of the biggest transformations to the housing market since New Deal-era regulations were put in place.”
Despite N.A.R.’s turbulence over the last several months, however, there was one constant: their insistence that the lawsuits were flawed and they intended to appeal. With Friday’s settlement agreement, N.A.R. gave up the fight.
The settlement includes many significant rule changes. It bans N.A.R. from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent, a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check.
And on the online databases used to buy and sell homes, the M.L.S., the settlement requires that any fields displaying broker compensation be eliminated entirely. It also places a blanket ban on the longtime requirement that agents subscribe to multiple listing services in the first place in order to offer or accept compensation for their work.
“The reset button on the sale of homes was hit today,” said Michael Ketchmark, the Kansas City lawyer who represented the home sellers in the main lawsuit. “Anyone who owns a home or dreams of owning one will benefit tremendously from this settlement.”
From the NAR President:
NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs). This change will go into effect in mid-July 2024.
by Jim the Realtor | Feb 29, 2024 | Realtor Training, Tips, Advice & Links, Why You Should List With Jim
Once a home is for sale but not selling, how do you know what to do?
Both buyers and sellers can apply my List-Price Accuracy Gauge:
Once the home is on the open market, if it is……
- Getting visitors and offers, you are within 5% of being right on price.
- Getting visitors but no offers, you are 5% to 10% wrong on price.
- Not getting visitors, then you are more than 10% wrong on price.
It’s nothing personal, it’s just a simple guide to know how close the price is to being right.
The serious buyers rush out the first week to take a look, but after that it’s crickets, with only an occasional visitor. It is tough for sellers to cope, or make adjustments. But once the initial urgency has expired, you have to do something – don’t just sit there.
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How quickly should sellers make adjustments? The DOM clock is ticking!
0-14 days on market – Hot property, and when the sellers have their maximum negotiating power.
15-30 days on market – Buyers get suspicious, want to pay under list.
30+ days on market – Buyers will be expecting deep discounts, or ignore it altogether.
After being unsold for two weeks, sellers will suspect that something is wrong. But it is natural to resist changing the price and instead blame everything else – especially the listing agent.
Sellers, and agents, need to shake that off and act quickly to keep the urgency higher. The first price reduction should be for at least 5% and happen in the first 15-30 days for maximum effectiveness. If the home doesn’t sell in the next two weeks, then another 5% is in order, and by then the fluff is eliminated.
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Where do sellers go wrong? They don’t properly price in the negatives.
Typically sellers just pick apart the comps to convince themselves why their home is the best around, and then settle on a list price that will show everyone who’s the boss. If you don’t have any negatives, then you probably will get your price! But typically sellers are forced to come to grips with the negatives of their house, and adjust accordingly.
Do sellers have to lower their price? No, not neccesarily.
There are other alternatives:
1. Make your house easier to show. Listing agents who insist on buyers jumping several hurdles just to see the home aren’t realistic about today’s market conditions. Make the home easy to see!
2. Fix the problems. New carpet and paint is the best thing you can do: 1) it looks clean, 2) it smells new, 3) you have to clean out your house to install it, and 4) you are managing a business transaction now – it is the logical solution. Utilize staging too.
3. Improve the Internet presence. Have at least a 12-25 hi-res photos and a simple youtube tour.
4. Wait for the market to catch up. If unsold for 60+ days, cancel and try again later – probably next year.
5. Reset the Days-on-Market stat. As long as the MLS allows agents to refresh their listings, then it’s in the best interest of the seller to reset the DOM. It is a gimmick, and instead sellers should concentrate on creating real value for buyers – that’s what will cause them to pay more.
The longer it takes to sell, the more discount the buyers will be expecting – usually about a 1% off for each week on the market. When other homes are flying off the market, the buyers’ obvious conclusion is that your price is wrong, and they load up the lowball offers.
Even if you complete one or all of the five ideas above, don’t be surprised if you need to lower the price too. Keep it attractive!
by Jim the Realtor | Feb 23, 2024 | Realtor, Realtor Post-Frenzy Playbook, Realtor Training, Realtors Talking Shop, Why You Should Hire Jim as your Buyer's Agent
The commission lawsuits and action by the DOJ will cause buyers to wonder if they need to pay for representation, and what do they get if they do.
It will also be a function of how much it costs. If the service was free, everyone would do it.
It’s been like that in the past, but it also caused buyers to be a little too casual about who they selected, and they tended to just grab someone – which doesn’t always bode well.
- If the fee was 1% at closing, you’d probably do it – if you liked them.
- If the fee was 1.5% to 2.0% and the terms were clean and non-exclusive plus the agent made a really good case why he’s worth it, then yeah, maybe.
- If the fee was 2.5% to 3%, there would need to be some guarantees or real promise that you would get exactly what you wanted, and be very impressed with the service too.
Buyers will be able to include in their purchase offer that the seller pays all or part of the buyer-agent commission. But there won’t be any promises about what a seller might pay – if anything. So buyers should be prepared to pay the entire amount to their agent, as agreed up front.
What should buyers expect? What are the skills that good buyer-agents possess and implement on behalf of their buyers? Here is my quick list:
Overall analysis of general market conditions
Video /audio tours of prospective homes for sale
Pinpoint Home-Value Analyses
Measure up the sellers and listing agents
Winning-price predictions
Offer Strategies
Bidding-War Management
Contingent offers that win
Tough and detailed inspections with free quotes on repairs/improvements
Expert deal management
Foreclosure hunting
Bridge-loan financing
Off-market homes for sale
Sniff out any shenanigans
See the new listings in person every week.
There are also the 132 things agents do for buyers linked here, but the real problem is demonstrating the skills. How will buyers know what they need? How will agents show them what they have to offer?
When you go to the car dealer, they let you take the car for a drive around the block. How can you do that with a buyer-agent?
It would be fruitful for agents to have a blog where they demonstrate how they work, and provide evidence of their results. But that may be asking too much of agents.
We do free consultations for sellers. Let’s do them for buyers too.
Buyer-agents should offer their list of services AND be willing to meet any prospective clients-to-be at a home for sale so agents can show them what they do. A tour of a house to point out the positives and negatives will give the potential buyers a great sense of the agent’s expertise.
Agents – let’s make the free consultation at a home for sale part of the effort to assist buyers. Besides, you want to get a sense of whether you want to work with these buyers too.
Before you get married, you should have at least one date!
What do you look for when you meet your potential realtor at a home for sale to see what they have to offer? If they add to the experience something you didn’t know, then you’re on the right track – ask questions! If they say, “Here’s the kitchen”, it is an automatic disqualification – just run to your car!
by Jim the Realtor | Jan 22, 2024 | Realtor, Realtor Training
I try not to double up the content here, and this was only linked in a previous blog post so I’m not sure how many readers saw this previously. But it is noteworthy!
https://consumerfed.org/reports/a-surfeit-of-real-estate-agents-3-abundant-jobs-inadequate-mentorship-and-few-sales/
This third report on a surfeit of agents focuses on the role of real estate companies in the creation of the glut and related incompetence of many agents.
Our analysis of the sales experience of 2000 representative agents from large companies in five different areas revealed that there is an even greater surfeit than we and many others had imagined. Nearly one-half (49%) of these agents had none or only one sale in the previous year while nearly three-quarters (70%) had five sales or fewer. Almost all of these agents hold another steadier job or are retired. For most agents, the residential real estate industry is truly a part-time business. Yet despite this agent glut, many large companies keep recruiting new agents, often regardless of agent qualifications. They do so largely because of four factors – high agent turnover rate, new agent sales to friends and family members, fees paid by these agents, and limited liability for these agents since they are independent contractors. For these same reasons, many companies continue an association with agents even when the agents routinely sell only one or no properties a year.
The surfeit of agents ensures that many will not be able to receive adequate personal training and mentorship. One agent reported that a managing agent had been assigned responsibility for more than 100 agents. Large companies do make available on-line training but many agents report that what new agents really need is experience working with a veteran agent and close supervision by a broker while they are selling properties. That close supervision is not required by most states. Of the 50 states (and DC) we examined, only seven require closer supervision of new agents than more experienced ones. Furthermore, that close supervision is often not clearly defined, and we have seen little evidence that state regulators have focused on the issue.
Consequently, some companies and agencies feel permitted to adopt a “sink or swim” approach to their new agents that certainly is not to the benefit of their consumer clients. There are roles for states, the National Association of Realtors, and individual companies and agencies in addressing this issue. State legislatures should require close broker supervision of inexperienced agents beyond checking paperwork. Colorado, Illinois, and Montana not only require closer supervision but define what this supervision entails. States should also follow the lead of those states, a small minority, that require agents to receive post-licensing education on the practicalities of selling property. Moreover, regulators should intervene when the complaints they receive show evidence of inadequate training and supervision.
The National Association of Realtors (NAR) could play a role differentiating inexperienced sales agents from full-time professionals by raising the standards of earning Realtor status. Today, few consumers understand or are influenced by this status. If NAR were, for example, to require more experience and competence from Realtors then publicize this difference, consumers would more likely hire these agents. These requirements could include, for instance, selling more than five properties in the previous year and initially passing a new exam on the practicalities of selling property.
Many companies and agencies take seriously the training of new agents, yet many do not. The latter should recognize that heightened consumer awareness of industry practices resulting from class action litigation is likely to encourage more informed selection of agents. The industry should also recognize that increasing the number of agents does not appreciably affect home sales but does reduce the average income of individual agents and brokers. Companies and agencies should value full-time professional agents and brokers more highly than part-time sales agents who are engaged in other occupations.
The glut of agents and the inadequate training and experience of many has an important implication for consumers. Both home sellers and buyers should choose their agents carefully. These consumers should pay particular attention to the number of recent sales and client evaluations of the agents considered. Both Zillow and Realtor.com list this information about many agents, and this information tends to be more objective than that offered by referral agencies. Consumers should be wary of agents without an informative listing on either website. Friends and family members who have recently sold or purchased a home can also be consulted, yet consumers should also use Zillow and Realtor.com to supplement the information these individuals provide.
Click here for the full report:
https://consumerfed.org/reports/a-surfeit-of-real-estate-agents-3-abundant-jobs-inadequate-mentorship-and-few-sales/
by Jim the Realtor | Jan 12, 2024 | 2024, Realtor Post-Frenzy Playbook, Realtor Training, Realtors Talking Shop
Yesterday, we attended Gov’s annual update on new laws and forms for 2024.
He touched on many topics – including that landlords in California might be agreeing to tenants for life because it’s so hard legally to get rid of them – but the most interesting was his comments on the realtor lawsuits and commissions for the buyer-agents.
To demonstrate the difficulty of coming up with a viable solution, the best the California Association of Realtors can do is to add paragraph G3 into the purchase contract (above) and hope the buyer’s agent already has a written agreement for the buyer to pay the commission. At least paragraph G3 will pass the responsibility of paying the buyer-agent commission along to the seller so the buyer doesn’t have to pay it, but in a multiple-offer situation, all it will do is send your offer to the back of the line.
When in a bidding war, buyer-agents will be forced to omit paragraph G3 and saddle the buyer with the commission payment instead.
What’s worse is that the federal judge presiding over the successful realtor lawsuit will be deciding in May whether or not to make it a national law that PREVENTS the seller from paying the buyer-agent’s commission altogether, or let the current commission structure ride until the appeals process is complete.
It appears that the buyers will be paying their agent’s commission, sooner or later.
In an interesting twist, Gov was describing how the best solution for evicting a tenant is to bribe them with cash-for-keys and we even have a form for it now. But bribing a buyer-agent is completely out of line? A home seller should have the ability to pay the buyer-agent commission if they see fit.
by Jim the Realtor | Nov 27, 2023 | Realtor, Realtor Training |
If your listing doesn’t sell, or your listing agent withdraws it and then ‘refreshes’ it by inputting it a second time into the MLS, don’t be surprised if your phone starts ringing around 7am the next morning – and ring non-stop for hours, days, and weeks.
Did you know that those solicitations are prohibited?
While the listing agents might get a little frosty, they probably won’t do anything about it. Of course, there isn’t any MLS police either, so these solicitations run unabated – you will literally get dozens of calls and mailers, plus agents knocking on your door.
If lawyers want to chase around realtors for all the scummy things that happen, they will be busy!
