NAR Lawsuit

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    If you've been online at all this week, you probably heard about 'The Lawsuit' in the real estate industry.

    It's been comical to see some of the articles come our from 'reputable' news companies...

    I'm going to spend our time today going over these three questions:

    1. Why was there a lawsuit in the first place?

    2. What were they trying to change?

    3. What was the real outcome of the settlement?

    ... and as always, from me, you're going to get this straight to the point and explain in a way we can all understand. (as I jokingly say, "Explain it to me like I'm a 3rd grader”)

    --

    Side Note: I just read an article titled '14 most hated professions', which placed Real Estate Agents at #7, right between Politicians and Traffic Police Officers.

    This doesn't surprise me at all. As a real estate agent and owner of a company of agents, it's safe to say that I talk to a lot of real estate agents. It has always amazed me that you can get your real estate license for $350 and start doing deals.

    The thing that will never stop surprising me is that people still hire agents with no experience and no team. Fun Fact: 49% of licensed agents sold zero to one house in 2023. This means that if a consumer doesn't do their homework, they have a 50-50 chance of hiring someone who has sold one or fewer homes in the last year. Yikes.

    To be clear, we hire new agents to our company. However, we provide them with an incredible amount of training and a mentor who has a ton of experience. There is nothing wrong with new agents as long as they have the support behind them.

    --

    Back to the point!

    Let's first talk about why this lawsuit was started in the first place.

    Question 1: Why was there a lawsuit in the first place?

    The argument was that home sellers shouldn't HAVE to pay a buyer's agent. It should be an option. I agree 100% with this.

    Here is the problem: HAVING to pay a buyer's agent isn't the actual problem. The real problem was a massive lack of transparency. We know there is room for ‘shady players’ when there is a lack of transparency.

    Have you ever heard this from an agent in their marketing or conversations:

    "You don't have to pay me anything" or "I'm free for you, the seller pays me" or anything to make it sound like the buyer's agent is "free."

    Just because there is no money paid from the buyer to the buyer's agent doesn't mean the buyer isn't paying for the service. Too many agents for too long have avoided the conversation of how they get paid, which has led to this lawsuit.

    Our company has ALWAYS done a Buyer Strategy Session with all our clients. In this consultation, we ask, "Do you understand how real estate agents are paid?". If I had to guess, 90%+ of people answer NO. We answer that question UP FRONT every time.

    Answer 1: Lack of transparency and 'shady players'

    Now that we understand where this lawsuit came from in the first place, let's move on to question two.

    Question 2: What were they trying to change?

    They wanted to change the lack of transparency. Things should be more transparent.

    I think everyone agrees with this. There should be no misleading of any consumer on how people get paid. The mortgage business had a massive overhaul with this same idea not too long ago. It was for the better for everyone.

    This messaging got twisted in a ton of different directions. Some people were saying that it was inflating sales prices. As if sellers are going to lower their sales prices if commissions were lowered? I've sold my personal house, and I promise you I wouldn't have lowered my price just because commissions were lower.

    Others took this to mean that they were trying to get rid of buyers' agency. Which would mean that buyers are all buying unrepresented... OR WORSE, working with the listing agent. There is no way you could convince me that buyers are better off negotiating with an expert whose job is to protect the seller AND sell the home for as much money as possible. This would be terrible for 99.9% of home buyers.

    The easiest example of this would be the attorney example. If you were being sued for $1m by an attorney, would you want that same person to defend you? No, that would be insane. Yet people do it every day with their biggest asset. I hear horror story after horror story of buyers who went this route.

    In the end, the media is going to do what they do. But in the end, the real goal was transparency.

    Answer 2: Transparency.

    Now, probably most important, let's talk about what has actually happened.

    Question 3: What was the real outcome of the settlement?

    There have been two changes as a result of the settlement.

    1. Buyer Agent Commission will be removed from the MLS

    2. Agents have to enter into a signed agreement to work with buyers.

    These are the only two changes. Now, they will turn into a ton of changes on how many agents do business, but this is all that has technically changed.

    In my opinion, these two changes, one is good for buyers and sellers and the other is bad.

    Let's take the first point...

    Buyer Agent Commission will be removed from the MLS. This does not mean that sellers won't be allowed to pay a buyer's agent to bring a buyer to their property. This simply means that the Buyer Agent Commission will no longer be posted in the MLS and pushed to public websites like Zillow.

    So... they're going to decrease transparency? What is the solution to a lack of transparency?

    I think what they're trying to accomplish here is make it clear that a seller does not HAVE to pay a buyer's agent. However, this doesn't make any sense to me. There will be far less transparency when this change takes place.

    I believe that we will still see most sellers choose to compensate a buyer's agent to bring a buyer to their home.

    If you can't tell, I don't think this is a good change for anyone.

    Now, let's take the second point, which is the most important one.

    Agents have to enter into a signed agreement to work with buyers. This is a change that is long overdue. Agents have to enter into an agreement with sellers to sell a home (a listing agreement). Why wouldn't agents have to deal with buyers?

    They should.

    I mentioned this earlier, but with our company, this has been standard practice for a long time.

    This is going to lead to a TON of change in the industry. This will be bad for most real estate agents.

    It is going to get even more competitive for agents, mainly for the ones that don't already have a clear value proposition for why buyers should work with them. Remember the stat I shared earlier? 49% of licensed agents have sold zero to one home in 2023.

    Here is what I imagine happening: your top agents and teams will continue to do more business. I hope that buyers start making the decision to work with experts seriously. Too many times people use an agent out of obligation vs what is best for them.

    Answer 3: The two changes that will lead to a huge shift.

    I'd love to hear what you think about this lawsuit and how it might change how the real estate industry works.

    If you're a buyer and want to chat about how this affects you, feel free to reach out to your Onyx Agent or me directly.

     

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