Open Conversation About the NAR Settlement

The recent National Association of Realtors proposed lawsuit settlement has put a focus on various aspects of a real estate transaction including the representation of buyers and dialog about commissions.   We have an open and candid conversation explaining what has been occurring and what the future may look like and how it impacts sellers and buyers. 

Episode Transcript

(00:00):
You are listening to the Remax realEstate Insights show, where you get real
talk by real agents, brought toyou by Remacs of Southeastern Michigan. Hello,
and welcome back to the Remax realEstate Insights Podcast. We're happy that
you're joining us today. To saythat this year has been one of real
estate headlines is definitely an understatement.Capturing many headlines and video topics is the

(00:25):
recent proposed settlement of the National Associationof Realtors, and there's been a variety
of talking points cited in the mediaafter the settlement that we're extremely misleading.
We wanted to take some time todayto dig a little deeper into what's really
happening in the industry and more importantly, how may it impact buyers or sellers

(00:45):
now and in the future. Andwe want to give you the honest take
on what's going on, because Ithink there's a lot of misinformation out there
and it's our job to set therecord straight. I'm Janet Schneider, I'm
your host. I'm also the presidentof Remaxs of Southeastern Michigan, and through
this podcast, we hope to bringyou tips and trends that are happening in
the media and in your local market, and I think we can check both

(01:07):
off the list today with this topic. And joining me is very special guest
Rob SCALESI. Rob is an associatebroker with Remax First. He's been a
guest on the program before. Welcomeback, Rob, Thanks so much for
having me. And it's been aminute, hasn't it. It has been
a minute, as they say,And I guess a lot's probably transpired since
the last time you were in here. Yeah, we could make a whole
show of my whole change in realestate career here, right, Yeah,

(01:30):
well, go ahead, since youbrought it up. What has changed for
you since I saw you smile whenI said you were the associate broker?
Yeah? So you know, lasttime I was here, I was a
broker owner of Remax Metropolitan, andafter twenty seven years or so of that
title, we merged with Rob Schaefferand Remax First. And now I am

(01:51):
just just in or I'm an associatebroker for Remax First, no longer the
owner. Well, and I wouldn'tsay there's a just in that sense.
It's just it's a change of thetitle. But that doesn't make you any
less knowledgeable about the real estate.Well, thank you. I'd like to
think so that is for sure.So I'm going to tackle something right out
of the gate because it's been somethingthat it's like nails on a talkboard to

(02:13):
me. All the headlines that havecome out of the news. In early
spring, the National Association of Realtorshad, you know, proposed settlement.
It is not done. The courtstill has to rule on it. There
was a lot of money involved.Four hundred and eighty million is a lot
of money. So it got alot of headlines. But even more so,
it got a lot of interesting takesin the media, whether it was

(02:36):
print media, social media, TVmedia, you know, saying for the
first time ever, commissions were goingto be negotiable. Even President Biden said,
and I am taking some quotes fromwhat he said. The National Association
of Realtors agreed for the first timethat Americans can negotiate lower commissions when they
buy or sell their home. Andevery time I hear it, I live

(03:00):
literally cringe. What is your responsewhen you're hearing stuff like this, yelling
at the TV I'm not alone thereand oh man, my wife that would
come on and she goes, you'regoing to watch this again? And get
yourself all worked up, I said, but this is ridiculous. Commissions have
always been negotiable, and for themedia to put that information out there,

(03:21):
these little sound bites and the publichears it, and they'd never retract what
they said was wrong. No,it's crazy. In the National Association of
Realtors put out like that first weekendwhen this was announced, which goes back
at this point. You know,we're recording this in late April, I
mean, so it's about a monthold, I think at this point,
and they put out a statement saying, hey, you know, we want
to be clear what this meant,what it doesn't mean, and what we're

(03:44):
hearing in the press doesn't match reality. And you're right, there was no
Well let's clarify, you know,let's let let us clarify what we meant,
you know, or kind of stepit back. I certainly haven't seen
that. Yeah, and they usethose words that we're taught not to use,
write the standard commission, the typicalcommission, and you know, whatever
label they put on it. Andagain, commissions have and always will be

(04:05):
negotiable. So let me ask youthis, because I mean, we're in
the industry, so I think artears perk up when we hear all of
this right, And so then there'sa part of me that says, well,
maybe maybe it's bothering me more thanpeople are really hearing and absorbing this
information. And just about the timeI start to think that, I go
to the dentist last week and hesays, so, I guess that standards

(04:28):
like you said, that standard,that standard six percent, I don't have
to pay that anymore. And I'mlike, oh, the message did get
through, And so are you hearingit from clients I have? You know,
you hear it from even agents willsay, well, you know,
the typical commission is six percent orwhatever it is, right, And I
think that unless you get face toface with a client or a consumer out

(04:54):
there and explain to him how itworks, they're going to grab onto those
sound bites that they hear think thatthat's what they have to pay or had
to pay. So let's talk abouta little bit about what how does it
work? Because I mean, noteverybody buys a house every day. Decades
can go by in between the timeyou've bought one house and you buy another,
and you know, we're in itevery day. But a lot of

(05:15):
people aren't. Can you maybe walkthe listeners through kind of how is compensation
handled in a real estate transaction?Yes, this is actually a great topic,
and I'm going to talk post nineteenninety four because there were some things
that came into play in nineteen ninetyfour that also changed the landscape of everything
that we do today. But typically, when I meet with a seller,

(05:39):
or any agent meets with a seller, there's going to be a listing contract
or an agreement signed between a sellerand the listing brokerage agent office. That
agent's going to negotiate a commission withthat seller. Now I'm going to use
the word typically, whatever that agentcharges the seller. Typically the listing agent

(06:00):
then will offer half of what heor she is being paid by a seller
as compensation to another broker who wouldproduce the buyer, and that agent producing
the buyer, typically representing that buyer. So listing agent yep, getting paid
by seller yep. Listing agent payingbuyer's agent. Okay, not the seller

(06:25):
paying buyer's agent. Seller is notyou know, coming to the closing with
cash and you know, writing acheck, you know, going to you
know, going to the other andand like you said, and this has
always been negotiable. Now that doesn'tmean that there is a parameter under which
a lot of deals seem to fallwithin, but it was always a negotiable
item, absolutely in historically, andwe're kind of looking ahead a little bit

(06:48):
about how some things may change andit's not, you know, done yet.
But one of the things was inthe Multiple List Service the MLS in
our in our vernacular was we're kindof agent's community that there were properties for
sale. I mean, you goback in the day it used to be
the big phone books and the MLSbecame online and if Robier took a listing,
it would get put in the MLSso that other agents could could see

(07:12):
that this house was for sale.Then once the internet became a thing,
became a thing, any buyer couldsee that a house was for sale,
and the offer of commission was kindof articulated through the multiplist service. And
now if anybody's been looking for ahome, if you scroll down deep enough
on you know, a listing portal, you can usually see the terms of
that online. So it wasn't likeit was aid a hidden item, right,

(07:34):
So that is going to be changingbecause they're basically saying you're not going
to be able to offer that throughthe MLS moving forward. If I'm understanding
the settlement correctly, this is whatwe've heard, and it's not because I've
already heard agents saying a seller canno longer pay you and I'm going to
use this percentage, not that thisis fixed amount, but they can't pay
you six percent anymore because you can'tbe offering money to a buyer's agent.

(07:59):
I've already heard agents saying this.That's absolutely false, absolutely false. The
offering of money from agent to agentthrough the multiple Listening service, just like
you said, will no longer besomething that's viewed by the agent or the
public. Right that field's going todisappear what we anticipate. Yeah, so
that part of it is gone nowwhere. And I don't know that this

(08:22):
is as clear I mean, anda lot of this is clear as mud,
you know, I mean right now, because there's a lot of you
know, different voices and different opinions, and the court hasn't settled it.
So I mean, but it's nota fast track. I mean, based
on everything that I think, youknow, you and I have read or
seen, it's mid July is kindof the target date for these changes,
and when you're talking changing a wholeindustry and kind of how some things are

(08:43):
done, that's a pretty quick,pretty quick turnaround. So one of the
things that is starting to come outof this is will the compensation for the
for the buyer's agent become something that'sincluded in the purchase agreement, in the
terms of sale, or or theword concession, which has some different connotations
and rules attached to it that noteverybody's familiar with. You know, I

(09:05):
just read something and I didn't diginto it too deep from Fanny and Freddy,
or at least I think it waspublished by Fanny or Freddy saying,
now, beyond the typical seller paidconcession for a buyer's mortgage, prepaid items,
closing costs, they're going to allowadditional percentage amounts. And this gets

(09:28):
pretty deep, but I'm just goingto give an example. So on an
FHA loan, they would allow fora seller to contribute up to six percent
of the purchase price towards the buyer'sprepaid items, mortgage, closing costs,
et cetera. However, that sixpercent could never exceed what the actual costs
were, so just for easy math, I'm gonna SA one hundred thousand dollars

(09:52):
sales price six percent is six grand. If the buyer's prepaid items and closing
costs came to fifty three hundred dollars, the seller could only contribute fifty three
hundred dollars, even though the guidelinesays up to six percent, so that
additional seven hundred dollars would have stayedwith the seller. So they have these
percentage amounts already in place depending onthe type of loan you're getting in the

(10:16):
amount of downpayment you have, Sothere's different criterias for an FHA loan three
percent conventional, fifteen twenty percent conventionalin which Fanny and Freddy allow these concessions
back to a seller. This headlinethat I started to read was that that
is now going to be increased tooffset or contribute money to the buyer's agent

(10:39):
commission. And the thing that's justmind boggling about this to me is if
it comes from the seller's proceeds,the accounting of all of this stuff ends
up being the exact same of whatwe've already been doing for years, which
is kind of the irony is likewe've we've spent a lot of money.

(11:00):
I mean, the collective we youknow, different industry brands in the National
Association of Realtors to fight a lawsuit, you know, the people on the
the side, paid attorneys, youknow, and all of that to in
essence kind of get us, ina complicated way back to the way things
were or are. It's just youkind of have to scratch your head a

(11:20):
little bit, you know. AndI could talk about flaws maybe within the
industry, and I might get alot of haters out there for saying that.
So if there are flaws in howthings were done, I would go
on record as saying a lot ofagents don't properly explain things to both their
buyer clients and or properly explain thingsto their seller clients as to how this

(11:45):
works. And I made an exampleof the commission that's paid to me as
a listing agent from a seller.And when I explain the three percent of
a six percent commission that I mightoffer to a buyer's agent, I explain
to a seller that, listen,you're hiring me to market your property,
and I'm going to market it twice. I'm going to market it with everything.

(12:09):
Rob SCALSI can do my website,you know, Remax International website.
You know it's going to end upon Zillo, it's going to end up
on rob Scalisi dot com, it'sgoing to end up on the Remax First
Personal website, and it's going toend up on Yahoo real Estate, and
it's going to go all these otherplaces. Right And I'm going to do
some print advertising, and I'm goingto do some flyers in the in the

(12:30):
box on the yard sign out front, and I'm going to do open houses.
So I'm marketing your property. That'swhat you're paying me for. However,
I'm one person the power of themultiple listing service where you've got ten
to fifteen thousand agents with all oftheir buyers that can now view your home.
I'm marketing it to them, tothe agents that might have the right
buyer for your house. Part ofthat marketing is me telling that agent,

(12:54):
you bring me the right offer withthe right buyer, I'm going to pay
you, and I I made thecomparison. Let's pretend the Multiple Listing service
does not exist, and the onlytool out there, or the biggest tool
to get homes sold for sellers isa magazine let's just call it whatever.

(13:15):
We want to write real Estate Buyersmagazine, and that's where every real estate
buyer shops. But to advertise inthat magazine was very, very expensive.
Jeanette, you're my seller. I'mgoing to charge you when I'm going to
charge you five six percent, doesn'tmatter. It's negotiable, right, we
negotiated a fee, and I'm goingto plan on spending half of what you're

(13:35):
paying me to advertise in that magazineto capture a buyer. Would you want
me to advertise in that magazine?Would you want me to spend half of
the money you're paying me to dothat? And if you're telling me that
that's where everybody goes to look forhomes, I'm going to likely say yes,
there you go. Yeah. SoI don't see what the big shake
about this is. I really don't, No, don't, And I think
you hit on something though. Imean our industry, like any industry you

(13:58):
can point to, any industry,medical, legal, you name it.
There's always bad actors, bad apples, whatever you want to call them,
people that don't maybe represent the industryin the best possible light. And not
to say that we don't have someof that within the real estate industry,
and I think that you know,where there are there ways to better communicate.
Like you just said, you haveto sit down. If somebody doesn't

(14:20):
understand, if a seller or abuyer doesn't really understand how the process works,
how people in the process are gettingcompensated, it's on the licensed professionals
to explain that. And so Ithink what a lot of people are starting
to hear is, you know,you know, what's this going to do
to buyers if their agent isn't goingto be compensated, does the buyer now
have to come with an additional youknow, checkbook or a additional bag of

(14:43):
money, you know, to paytheir agent? Or they are they going
to be left unrepresented? Because that'ssome of the dialogue I'm starting to hear,
and I don't think that's accurate,but that's some of the concern that's
out there. Well in prior tonineteen ninety four, they were unrepresented.
Right here comes buyer agency in theagency disclo. Right, right, So
we move forward, what now we'regoing to go backwards? See that was
my point exactly. I'm like,I remember sitting at conventions where this was

(15:07):
a big thing and oh, thename's escaping me. Now. He was
a big consumer advocate, and hewas actually a speaker at one of the
conventions years ago about how buyers wereunrepresented. It's the biggest purchase of their
life. You wouldn't typically, youknow, go into something else like this
without representation. How important it wasthat they had somebody solely representing their interest,
not who had a fiduciary responsibility tothe seller and the seller alone.

(15:28):
And you know, now here wecome in the perception. And in some
cases, I mean, it couldbe that somebody decides they want to go
going on their own, or don'tfeel like they can, or they run
up against an agent or a sellerwho's going to say I'm not paying you
know, I'm paying someone else,And here we go. We can have
parties unrepresented again. Yeah, andthat discussion, you know, if you
are a buyer who wants representation,that discussion should and always should have been

(15:54):
discussed. Meaning you know, I'veheard agents make the mistake. Janette,
you're my buyer, and it's notgoing to call lost you anything. In
other words, I work for free. I'm working for you for free.
That's not a true statement, Jeannettethe proper way to say it would be
that you know what, here's howI get paid. By the way,
do you know how I get paid? And you know, open up that

(16:14):
dialogue for that buyer client to understandhow the process works. And I've heard
also that people say, you know, part of this lawsuit is because that
commission that was published in the MLSby the listing agent is compensation to a
buyer's agent. That two things,it's price fixed, and it didn't allow

(16:36):
the buyer to negotiate what their agentis getting paid. And my argument to
that is that buyer is not payingtheir agent. If there's compensation offered by
the listing agent, the listing agent'spaying the buyer's agent. If the buyer
agent is actually going to pay thefee, then of course they should negotiate
that with their agent. And theconversation between buyer and agent about how we

(17:03):
get paid what we may typically seeas compensation, what happens if it's not
offered. Who's gonna pay me?How much are you willing to pay?
Et cetera. The other thing thatI've heard that really is kind of disturbing
is that from agents as well asconsumers is saying well, if the buyer's

(17:25):
agent didn't collect the fee, whateverit is, that negotiable two three,
four, five, ten, doesn'tmatter. Whatever they're being offered by a
listing agent on a particular property,the buyer wouldn't have to pay as much
for the house. Okay, sidywhen I haven't heard that, well,
because they're saying, since the buyerbrings the money to the table, it's
really the buyer's money that's paying everybody. So again, I'm gonna go on

(17:52):
record, I'm probably gonna get somehaters and saying you're If you're thinking that
way, you're wrong. Okay,the seller owns the house. Buyer bringing
money to the table is to buythe house or buy a product, right
right. If the seller engaged arealtor or a brokerage to sell their house,
what commissions they pay is for servicesrendered. And it's also saying that

(18:14):
a house sold on its own ora buy owner identical house sold with a
broker that they should have two differentvalues. If that really is the case,
right, right, one engaged abroker, one didn't. Are identical
houses they have a value. SoI've used that example over and over and
people go, well, that's differentbecause you know, the market has now

(18:36):
mostly been houses sold with brokers,so you set a precedence for what the
value of that product is. Like, oh my god, Herery Kelly,
you can't win, right, Okay, let's take new construction. Then they
get built. There's a cost tobuild, so we know what that cost
to build is. Right, Twoidentical houses and the builder decides I'm going
to hire a broker on one andI'm going to keep one as a model,

(18:56):
so I don't need to sell thatone as fast worth two differents.
No, now paid a broker forservices rendered? No, And it's it's
just interesting, Yeah, how allof this is skewed? And I get
that when you're talking about a lotof money, which for most people buying
a home is it's a big investment, often the biggest investment that someone,
you know, sole investment that someoneis going to make. I get that.

(19:18):
You know, everybody gets a littleanxious about it. And now if
I'm a consumer who doesn't buy orsell a house, you know all that
often and maybe I don't know anybodyin the industry and you're just hearing headlines.
Boy, it kind of puts realestate as boy, you know,
either greedy sharks. You know,all these different analogies that you can make
to it. In the reality ofthere's a lot of expenses that go in

(19:40):
to this profession. And like yousaid, when if it's on the listing
side and you've got a seller that'spaying you to market the home and the
skills that you have to negotiate ontheir behalf. I mean, although it's
been a seller's market and pretty muchit's kind of skewed in the seller's favor,
there's still typically negotiation that's going Ijust bought a house earlier this year.
There was negotiation. Even though it'sa seller's market. You know,

(20:02):
there was still negotiation that happened.And that's part of it too. I
also think that people think that thisalways just goes smooth, and it's really
contrarily, it's the opposite, andthere's never a transaction that is just so
smooth that you feel like, man, I just had a windfall of money
because I did nothing to do,you know, get this property sold.
I mean recently, I had abuyer side transaction. The appraisal came in

(20:23):
fifteen grand light. I've got aseller side transaction. The appraisal came in
sixty thousand dollars light really, soeven though both sales happened relatively quick,
neither one of them are worked out. Yet we're still going through the pieces
and getting all of this information backto lenders and providing comparable properties and you

(20:45):
know, dealing with the shortfall onthe appraisals and it may never ever happen
and these deals may fall apart.So the amount of time, effort work
that goes into these things, really, if you'd base it on hourly I
think realtors are underpaid. Well that'sthe funny thing is somebody's you know what
if this went to an hourly thing, which kind of seems to wed the
DOJ wants it to become a salaryposition. And I know there's a lot
of you know, kind of eyerolling with that because it's like, really,

(21:07):
you want me to submit an invoicefor the amount of time that I've
spent to do all this. Goodluck getting paid on that because my hourly
rate, you know, times howmany hours I put into it, most
people would say they couldn't afford.I'm glad you said that, because I
do have a true story here.I have a client that and then it
was last year, maybe a yearand a half ago they ended up buying.
You know, the house was sixhundred and twenty thousand dollars, you

(21:30):
know, and the commission on thatwas a two and a half percent commission
my way, right, we wereat closing in two and a half percent
of six twenties. A lot ofmoney, no doubt it is. But
the buyer themselves offered this statement upat closing saying, you know, you
didn't make a nickel from us,because to find that house that I earned
two and a half percent of sixhundred and twenty four took six years.

(21:53):
Oh wow, six years of showingthem houses. Now not every single day,
right, you know, every week, but I mean we looked at
houses. I bet we looked atseventy eighty ninety houses before they bought that
house. Nice that they did acknowledgethat, you know that they did,
And it reminds me of a socialpost I saw recently. I'm paraphrasing because

(22:15):
I wasn't planning them talking about it, but it says, if I make
something look easy, you're paying mefor the years it spent for me to
make it look easy. Yeah,I mean, because because there are you
know, there are deals that someI mean many, don't many the vast
majority don't. You have a fewthat are you know, like everything just
falls into place. Both parties aregrant everything. There's no appraisal issue.
Inspection goes well. But that isso the exception exception, not the rule,

(22:38):
for sure. Yeah, not notthe rule. I mean even in
the transaction that that we had,and I would say the inspection on the
house that we owned actually went relativelysmooth. The esquestionally on the other you
know, came up with a fewa few items, and so now we
were negotiating and say, hey,you know we offered this, but now
we've got to take a ten footyou know, piece of the trunk line

(22:59):
in the crawl space out because it'srusted through the size of a basketball,
so that needs to be dealt with, you know, and stuff like that.
Now you're dealing with you know,those things and the negotiations that happens.
There's a lot and like you said, the appraisal, there's just more
that goes on. I think theother thing that I think maybe doesn't really
help our industry is the prevalence andthe shows are entertaining, whether it's HGTV,

(23:22):
DIY. Everything's always done in ahalf hour hour at most. Right,
they look at three homes, theypick one life as easy boy,
this is smooth. But like youjust said, an appraisal coming in short
doesn't usually show up on those shows, right, because it's all aesthetics.
It's all what house that I like? The color is better or the layout
better, And it has nothing todo with the non sexy behind the scenes
stuff that goes on. And realize, folks out there listening, it is

(23:45):
a show, okay, and Iwill not mention names. But I did
one of those shows, as youknow right that aired, and it was
seven days, eight to nine hoursa day recording the show. Different takes
on every scene for twenty minutes ofair time. It's a show, no,
I mean, and it happens.And I've mentioned that to a couple

(24:07):
of people in the pastor are likeoh and then they were really surprised or
like really like how do you howdo you not know that this is all
scripted and you know and whatnot?Now one of the things, and we
kind of alluded to it with youknow, buyer representation, ye back pre
nineteen ninety four, buyers really kindof were on their own, so to
speak. Ninety four comms and othersbuy a representation. One of the things

(24:27):
that you know, alleged to becoming out of these settlements is that buyers
will need to be under contract withsomebody representing them that articulates how they're going
to get paid, how much they'regoing to get paid, before they even
see a home. Eighteen states hadrules in place that basically already required this.
The rest of the country maybe notso much. This doesn't really change

(24:48):
how you've been doing business, butit is going to probably change how some
agents have been doing business. Right. Yeah, And I've said this to
my especially when I was an ownerof the office. It was a requirement.
Listen, if you're going to representa buyer, you need to sign
and we use the word contract,which people don't like to hear, but
an agreement, which is a contractas to what you're required to do for
this buyer, how you're going toget paid and explaining to them the nuances

(25:14):
of this process. And there's alot of agents that don't do it.
And you know, my response tothat was always would you go take and
can you take and put a houseon the market? Without assigned listing agreement.
And the answer is no, youwould never do it. So why
would you sit down and try torepresent a buyer without assigned agreement. That's
just crazy. So I hope thisdoesn't come across as arrogant. But again,

(25:37):
I've had many, many conversations withpeople in my office is that I
don't understand why we're at where we'reat. I just don't get it,
because in my years of doing this, I've never had a seller say,
well, geez, I really didn'tunderstand that I paid you and you paid
them right as I explain that tothem, and it is clearly indicated on

(26:00):
my listing agreement which they sign,and they have had an opportunity to ask
questions and negotiate, among other things. But I do go through that agreement
with the line item by line itemand of course do you have any questions?
And the same thing is true withmy buyer agreement, and one of
my questions religiously at every buyer interviewis do you understand how I get paid?

(26:26):
And I've had people say, well, we pay you. I said,
well, no, not exactly.I said, you can pay me,
and we're going to talk about thatand explain to them, you know,
the compensation typically offered by the listingagent and how that flow of money
works within the listing agreement or thebuyer agency agreement. I use. It

(26:47):
does stipulate what do I expect tobe paid and what happens if it's a
shortfall based of that offering of moneyfrom the listing side. It gives me
the ability to collect that shortfall.Here's another thing. If I put a
fee in there and that compensation ismore than what I'm asking for in my
buyer agency agreement, I cannot takethat extra money. I could take it

(27:08):
from the listing agent, but thenwould have to discount it back to the
buyer or negotiate it into a lowerprice because yeah, and a lot of
people don't realize that. And I'vehad buyer conversations asking them. By the
way, if you think I'm beingpaid too much, whether you end up

(27:29):
paying me or this listing broker paysme this fee, you have the ability
to say will you do it forless? Go ahead and ask me,
and they'll say, okay, willyou do it for less? Or will
you give some of that money backto us? I say no, but
thanks for asking so you know,I put it out there in a way
that they understand, and they acknowledgethat agreement. And I will go on

(27:51):
record as saying, if the commissionoffered by a listing broker was less than
I indicated, I wanted to bepaid as a fee within my buyer agency
agreement. I have never held thatbuyer accountable for the difference. And here's
a thing again that one of mypet peeves being a broker owner. I've
had agents come up to me andsay, can you believe this? That

(28:11):
agent's only offering two and a halfpercent compensation. I'm not showing that house.
I'm goly, well, does yourbuyer want to see that house?
And guess what you're showing that house? You work for somebody. You have
a duty to this person. Ifit's the right house for them, you
have to show them that house.And here's another comparison that I've heard agents

(28:33):
say, and I've asked them,Okay, you'll go run out and show
a house that's listed because it's offeringa three three percent buyer agency fee and
it's one hundred grand sales price,So that's three grand, right, five
hundred thousand dollars house offering two percentbuyer agency compensation. What's two percent of
five hundred grand, Genet, whichone's more money? Jeanette, Yeah,

(28:56):
I was gonna say the two percentof the five hundred grand is more?
Which house is probably more fun toshow? I'm going to guess the five
hundred. Yeah, So agents,this is where I say, you know,
if there's any merit to this lawsuit, there's a lot of agents that
think that way, and it justboggles my mind. I don't understand it.
They get so caught up in thepercentage percentage that they're not really thinking

(29:18):
clearly. It's Yeah, it's kindof the again, cutting off the nose
despite the face, you know,type of a thing, because I mean,
and it's not back in the daywhen we as an industry were the
gatekeepers of information, because that horsewent out of the barn a long time
ago. And in buyers buy andlarge can find any house that you know,
if it's been listed in the multiplelists, like you said, it's
on pretty much any real estate relatedwebsite. And you know, buyers are

(29:42):
out there, they're seeing what theywant to see. And yon agent,
if you're working for somebody and you'rerepresenting them, as buyers, you definitely
should be showing them any home thatthey feel is something that they want to
see. You know. Here's somethinginteresting too that was brought up in this
lawsuit, which okay, thirty fouryears in this business, and I think,
yeah, I know almost everything,right. I I had no idea
that you were able to search homesthrough the multiple listing services based on the

(30:04):
commission being offered. Oh interesting,I had no idea. So there are
agents out there doing that, sayingbasically, when I set up a file
for my buyer client, if it'snot offering me the commission I want to
see as a minimum, I'm justthey're never going to see that house.
How absurd. So again I'm beingfair merit to this lawsuit. If this

(30:26):
kind of stuff is going on,it's ridiculous, absolutely absurd. And so
I mean, if if that's somethinglike that had been happening, then okay,
then then this is a good potentialoutcome is going to stop that practice,
because, like I said, nobodyis inherently you know, good or
evil. There's always shades of gray. And the lawsuit overall has me very
confused because I don't think it's donea lot to protect consumers. I don't

(30:48):
think it's done a lot to makethe consumer buying and selling experience better easier,
you know, anything like that.I think we're going to be okay.
I don't know for sure what we'regoing to look like when we can
out the other end, but I'mquite this industry. And like you said,
I read the same thing Freddy andFanny and I think Faha were all
included on this where they're saying okaywhen it comes to concessions were I think

(31:10):
the wording that they use is ifit's commonplace in your market for sellers to
offer this type of concession i e. Paying the buyer's agent, then they're
not going to count that against thepercentage for concessions overall. I'm thinking,
well, you can see where thisis going to go. And if I
read if the numbers that I readwere accurate, that roughly seventy percent of

(31:30):
home loans go through Fanny and Freddy, in another about ten or eleven go
through Faha, Well now you're upto, in essence, eighty percent of
the business being out there is probablygoing to fall in a bucket where they're
figuring out a way to make thiswork. And once Fanny and Freddy do
it, I have to believe thebig banks, the big mortgage companies,
they're going to follow suit. SoI mean this industry there's because it's not

(31:52):
just real estate. While real estateis the one getting all the headlines,
in our industry has the appearance ofthe one that had their hand slapped to
some degree. Is you've got themortgage industry, you've got the title industry,
you've got home inspectors, you've gotappraisers, You've got a lot of
other businesses that feed off of areal estate transaction that could potentially be impacted

(32:13):
by this as well, not maybedirectly, but indirectly if it scares consumers
from buying and selling. And soI'm thinking they'll figure it out. There's
just too many industries involved in this, you know, with that increase in
concessions, if that ends up beingthe way things are done. To me,
my immediate response is now a buyer'syou know, financing a fee and

(32:35):
it's increasing, and it really Icould almost say, okay, now the
buyer is paying it, you know, and it's just a different way to
get to it. It Really,this system to me, was not broke.
It wasn't why and how these lawsuitsstarted. Again, I will say
a good majority of agents property probablydon't properly explane documents to buyer clients or

(33:01):
seller clients. I'll give them that. The other thing that I do find,
and I think, okay, youcould have some merit to this is
at the actual closing with the settlementstatement. So earlier you heard me say
that the seller is not paying thebuyer agent, sellers paying listing agent.
Listing agent is paying buyer's agent.That's the flow of money. On the

(33:25):
settlement statement, they show the sellertaking that same amount that he's paying the
listing broker, but they split itand then it shows X going on to
this broker, X going to thatbroker. So now the settlement statement shows
as if the seller's actually and yes, it's coming from the seller's proceeds.
So you could make that argument,but the accounting of that could very easily

(33:46):
be switched, which would change notthe bottom line numbers, but change the
dynamics on hall of this would work. So again, if that's a debit
as a expense to the seller atclosing, all coming, let's just hypothetically
say remax verst rob SCALESI then RobScalici is post closing writing a separate check

(34:09):
to ABC Realty for the buyer theyproduced. You know, it could be
done that way. And here's anotherthing that I thought of with this whole
accounting, right, Typically the buyer'sagent office is the one that holds the
deposit for the buyer. Ye,so they typically say, okay, that
stays in your account, and we'regoing to on the other side just give

(34:30):
you the difference as opposed to youbringing this money here and then we turn
around and give it right back toyou. And it's just it was done
out of convenience. I don't thinkit was ill will. I don't think
it was to deceive anybody. AndI again don't think that it was to
show that see the seller really ispaying the buyer's agent their fee. And

(34:50):
what else have I heard on thattopic too, that between buyer and seller
this is just adversarial anyway. Soit's just odd that a seller's money would
be going to come and in citesomebody that's an adversary. And I said,
really, in all my years ofselling real estate, and I haven't
been at too many closing where fistswere being thrown you know, so I
think of adversarial you know, Idon't like you, I don't trust you.

(35:14):
Yeah, it's just it's not likethat, right, because not that
it couldn't be, But if there'sany sort of adversity going on, it's
typically between maybe a husband and wifegetting a divorce or something on, people
on the same side of the transactionof fighting versus you know. Yeah,
because I mean, because yeah,I put a house on the market and
somebody had enough interest and liked itenough that they want to buy it.

(35:35):
Now, we may have had somecontankerous negotiations, maybe we didn't agree on
the cost of a repair that neededto be done, you know, based
on an inspection. But if yougot to the closing table at some point
you all kind of came to ameeting of the mouth, yeah, end
of the mind. Very rarely,you know, rough at closing, you
know, I mean, that's thehappy day, right, well, compared
to what it was like in twothousand and seven eight nine, when they

(35:55):
were off for closures and short sales, those were not necessarily be closing.
Yeah, and not for sellers,that's for sure. Yeah, not for
sellers on that one. Well,if nothing else. It makes life interesting,
and this has given us something newto talk about, because let's kind
of go a little bit to marketconditions overall, because while all of this
has been going on, and admittedlythis is probably something that within the industry,

(36:19):
you know, we're paying close attentionto, but it has gotten a
lot of reporting, and I'd liketo, I think, just set the
record straight or provided another avenue oflooking at something that got a thirty second
sound bite and a catchy headline thatI thought was extremely misleading. So thank
you for kind of taking the timeto walk through all of this. But
let's talk up a little bit aboutwe're in the spring market. I think
there was some hope in expectation thatmaybe this year, this market, the

(36:43):
market would be a little bit different, a little more so, maybe some
more homes coming to market than we'vehad in the last year. Some optimism
going into the year that rates mightcome down. It's not exactly so far
how things have played out, giventhat inflation is still running hotter than want,
interest rates have crept up over sevenpercent. Kind of what are you

(37:04):
seeing in the market for this heand has your opinion of what's going to
happen change. It is more ofthe same, you know. And rates
are up, they really are,but it really hasn't slowed down buyer interest
at all. I have seen afew more houses coming into market, which
is nice, but it's more ofthe same, people fighting, multiple offers
again, appraisal guarantees, twenty thousand, thirty thousand, forty thousand over asking

(37:27):
price, no inspections, free occupancy. It's it's a fight to get a
house. And I don't see thatchanging because I don't see the inventory coming
on the market. And I havesaid repeatedly when I've talked to some other
folks, I'd love to be ableto have a different story to tell you.
I feel like, you know,I am kind of singing off of
the same song sheet. And wehave been now for well over, you
know, losing track. Is itgoing into year two of this, you

(37:51):
know? I mean it's like it'sbeen a while since we've been saying that,
but it's true. I mean,you drive around many neighborhoods, You're
not seeing a lot of yard signsout there. No, And like I
said, we're getting busier. I'mstarting to get more buyer activity. You
know, they're getting emails from medaily, more and more inventory coming up.
But I'll tell you that the niceones, they're going fast still,

(38:13):
and it's multiple offers. There havebeen a few of those, and I'll
say, you know, the onesthat weren't in the pristine condition, kind
of trying to write on the coattailsof the other higher values in the neighborhood.
Those are starting to linger a bit. Okay. So that's good news
though, because if you're a buyerout there in the field and maybe tired
of getting beat out on every offerbecause the Pristine House has got twenty people

(38:37):
wanting it, maybe you adjust yourexpectations a little bit and go back and
revisit some of the ones that areabou out there. And I'll say a
long time fourteen days, you know, and that and no joking, I
mean, if you see something that'sfourteen days, you're like, okay,
let's yeah, there's got to besomething going on here, let's go back
and check this one out, youknow. And it's but not seeing a
whole lot past that thirty five daymark out there at all. Everything is

(39:00):
selling, no, I mean,and I do the housing report every month,
and yeah, we're I think rightat thirty days for March. I
mean, I mean I expect Apriland May for that number to come down
honestly a little bit because we're hittingthe time of the year where more buyers
do tend to come out of thewoodwork. We've already got a lot of
buyers, but even more come out. I know, this morning on one
of the like national shows that comeon at seven o'clock, I forget if

(39:22):
it was Good Morning America today,I just kind of had it on in
the background and they were talking aboutinterest rates rising, and you know,
you know, with and with homevalues rising, it continues to put pressure
on buyers. Yet worse, continueto see buyers that are out there,
and they were talking about, youknow, credit score being one thing that
buyers could control to try to putthem in the best possible position, you

(39:44):
know, as far as what they'regoing to pay, you know, for
an interest rate. Any other advicefor buyers, because it's been tough for
buyers for five years now, Imean or four years now. It's been
a tough market for buyers. Yeah, absolutely, And the best advice again
is keep your credit and check staythe course because I've had buyers go I'm
gonna wait till values come down.And I'm gonna wait till interest rates come

(40:06):
down. And you know, you'reif I had that crystal ball, you
know, i'd be a millionaire,right right. So I would just say,
if you need or want to buya house now, just again,
find somebody with the experience, keepyour credit and check and stay the course
and maybe hone in on some ofthose houses that are you know, lingering
at fourteen to thirty days on themarket, you know, and maybe you

(40:28):
know, maybe you have to paintand you know, put some new flooring
in. But I mean it mightbe it may be a good trade offer
at least getting a house if especiallyif it's in an area that you're that
you're interested in. Absolutely and asalways, find somebody with the experience that
knows how to do this the rightway. And I don't do we have
any more time? Are we runningout of time? The one thing that
I if I could talk about myprediction on how this whole lawsuit thing is

(40:52):
going to wash out. I'll tryto make this brief, but you know,
every year we go to continuing educationfor our license, and every year,
as many years as I can remember, one of my best friends who's
a real estate broker. He's acommercial real estate broker, you know,
and we go to KANED and he'shanging out with a bunch of residential guys,
and the instructors are usually gearing Kanedmore towards residential stuff. But you

(41:16):
know, the talk about commissions notbelonging on a purchase agreement, and this
has gone on for years. Sowhen I first got in the business,
and we're talking back in nineteen ninetyeighty nine, the commission was placed on
the purchase agreement even though we didn'trepresent buyers whatever. It was a co
op between you know, ABC andRemax and ABC's going to pay Remax three

(41:38):
percent or whatever it was. Andthen at some point, and I don't
know if this was NAR or whoever, commissions disappeared from the purchase agreement and
saying it made the brokers a partyto an agreement that they're not a party
too. Well, my buddy Larry, because this topic just comes up at
KANED and he would get pretty animatedand yelp, yes, that's crap.

(42:00):
We put it on our agreements allthe time and it's part of the deal,
and we negotiate what we get paidfor years and years and years.
Well you're being party to the contractnow, and the instructors are telling them
you're wrong, you're wrong, you'rewrong, you're wrong. Well, in
this lawsuit we found out that no, that's the right way to do it.
So when I think about how thisis going to wash in the end,

(42:23):
I think sellers are still going topay listing agents, and there's going
to be money allocated to pay abuyer's agent for producing the buyer. And
I think that commissions are going toend up back on the purchase agreement.
And here's the nuance that's going tochange. So let's go back to my
little story earlier. I got toget three percent of that one hundred grand,

(42:44):
but I won't take two percent ofhalf a million. Well, if
you don't know is the buyer's agent, how much money is being allocated to
pay you? If any right,because it's not going to be published anywhere.
And this is a multiple offer situation, and you've got a buyer wanting
to buy a house and whatever.We can use the half a million dollars

(43:04):
as an example, and you knowthere's multiple offers, and somebody comes in,
I want three percent or I wantthree and a half percent and I
want two percent. Now, thoseequal offers to the seller. Because of
that commission being part of the deal, you know, that's going to affect
things. And I think that's whatwe're going to start to see when this
all washes it out. So it'llbe interesting because you're right, like like

(43:28):
it is right now, where it'sa competitive market, you know, on
the buyer side, where the marketfavors the sellers a little bit, that
scenario certainly makes sense. And I'mlike, I don't know for sure what
it'll look like down the road.At some point we'll have a neutral market,
right at some point it'll go tothe buyer side. Is just in
the market that we currently have,I can absolutely see that scenario being something

(43:49):
that happens. Matter of fact,yesterday, I have a listing out there
that's pretty nice and I'm getting alot of activity and multiple offers, and
I had an agent call and Irealized that my commission is still being published
as of today yesterday right this agentsaid that I'm going to write an offer
and I'm going to take two percentis my commission as opposed to the three

(44:10):
that you're offering to make that money, you know, more favorable to the
seller, you know. And Isaid, well, you know, we're
not even there yet or whatever.But that was what she wanted to do.
And here's the thing that I'm surea lot of agents wouldn't do in
that scenario. I would, butthere's nothing that would prevent me from taking

(44:32):
the other four as the listing agent. And you know, so she would
have to put some dynamic in writingto say how that yeah, how that
was going to work? Yeah.Otherwise it's like, okay, you don't
want it, I'll take it,yeah, yeah, And that wasn't the
intent. The intent tent would beto increase the net effect of her buyers
off right, you know. Sojust interesting. And again, if agents

(44:54):
would do things and be more iguess transparent in their conversations with buyers and
sellers, maybe this lawsuit and wherewe're at would have never came to be.
Well, it's interesting because you know, if you listen within our industry
there you know, of course there'scoaches and people that have been in the
industry a long time, and Ihappened one of them is Brian Beffini,

(45:14):
and I was listening to him.It goes back maybe the early part of
this month. He how did weget here? Yeah, because not that
this is the first lawsuit ever broughtagainst you. How did this one,
you know, get the legs underit and get to the point that he
was, He was, I havefelt that there have been other losses that
were probably more on target to thingsthat probably can be addressed. It was
this one, he was that thisis the one that rose to the top.
Just you know, kind of haseverybody and scratching their head a little

(45:37):
bit. It is very strange tome. And like I said, I
can pick on explanations, you know, and buyer brokerage contracts and listings agreement,
you know. And then if Iwant to defend realtors, even if
a seller didn't understand, or let'sjust say that the agent didn't properly explain
things to him, then why areyou signing the document Because it is clearly

(45:58):
explained on the document. Right,you're an adult, assuming you're about the
age of eighteen, You're signing thisdocument saying you understood. You can't cry
wolf after and say I didn't understand. I mean that just not rubs me
the wrong way. Well, Imean, well, what gets me in
all of this is I just findit interesting that the legal industry, which
correct me if I'm wrong, youhave discount attorneys, just like there's discount

(46:22):
agents in the real estate industry.You can have people that can represent themselves
in courts. You people are advisedagainst doing so, but they can,
just like we have for sale byowners, you know, And then you
have the professionals. I mean,if I got brought up in some criminal
charge, I'd want the best attorneypossible, you know that I could afford,

(46:42):
you know, representing me. Well, same if I'm buying a house,
it's a big investment. I wantthe best people possible representing me.
So I look at our industry tosay, but there's a lot of comparisons.
You can do it yourself, probablynot the best ideal. You can
find somebody that's kind of, youknow, willing to do it on the
cheap. You can find that inboth industries, or you can you can
pay a top notch person to helpyou with whatever, whether it's a legal

(47:04):
need or a real estate need.And somehow we're wrong for having that in
our industry. That's where I'm havinga hard time. Yeah, it really
is. I felt like and Idon't know. Maybe it's just you know,
tunnel vision for me or both ofus, right, I just feel
like, why are we being pickedon? I mean, like you said
that the legal field is kind ofvery very similar, right, and I

(47:24):
believe thirty three percent is their perconYeah, it seems pretty consistent, right,
It's pretty consistent. I guess.I mean, I'll gonna say I
don't know that field. I don'twork in it, but I mean,
as an outsider looking at that,I'm just kind of left. But I
guess any if nothing else, Imean, we're gonna take We're gonna make
lemonade out of lemons. Right ifthis lawsuit was lemons, and I don't

(47:45):
know that it was to a hugedegree. Will it change how things are
done? Yes? Is there goingto be a few months of people getting
used to whatever the new normal is? And will that kind of change between
now in July? Certainly? Willit change a little after July when that's
kind of the ear mark time thatthings are going to change and we kind
of, you know, settle intowhatever is new. Yes, But I'm

(48:06):
going to say, if there's somethinggood to come from it, it's the
conversations not so much that we're having. Although I hope this was enlightening to
folks, it's the conversations hopefully thatagents as a whole will be having with
their clients, with their sellers,in with their buyers, And if there
were agents out there not doing whatRob does you know, not having the
conversation asking do you have any questions? Do you understand how on paid?

(48:28):
Do you understand how this works?Maybe if there's something to good come from
that, it's going to be transparency. Yeah, I sure hope so,
because obviously I love this industry.This industry has been great to me,
you know, and just like anyindustry, you get, you know,
you get the good with the bad. And I do feel bad when the
consumer has a bad experience in realestate because there's a good majority of people

(48:51):
that really don't know what they're doingout there, you know, and brokerage
houses are struggling to make money sothey fill bodies and seats and you know,
don't have a lot of oversight onthese people on what they're out there
in the field doing and saying,and it just you know, we we
need more of that, more discussions, more education and what you should be
saying and you know again, Isaw a Facebook post today and an agent,

(49:16):
you know, puking her story outthere about how she's kind of got
screwed on a deal. And I'mreading this going you weren't even involved in
this transaction. What made you thinkyou were getting paid on it? You
know? But yet her perception ofwhat she did, she's entitled to be
paid and it, you know,just I scratched my head. Well,

(49:36):
I mean, and like I said, maybe another another good thing to come
out of it is you know,I mean, I think one of the
last numbers I heard was like onepoint six million members of the National Association
of Riilters. That's a lot ofrilters, I mean. And I know
at one point when we came outof COVID and inventory was way down,
there were more licensed rilters and therewere homes for sale in the country.
And that's a problem because you've gotway too many people then in that profession.

(49:57):
You know, they can't afford Wecan't afford that many people, and
you can't people can't live off ofthe salary they're going to make. The
average realtor from a national Association realtor'sperspective, makes forty grand a year.
That's not a ton of money.And so I mean, we have probably
too many people in the industry.So again, maybe another unintended consequences.
Maybe some people doing this part time, kind of doing it as a hobby.

(50:22):
Maybe they think, now this isjust getting to be more than I
want to deal with. I'm goingto find something else to do, and
that would be I think welcome news. To leave it to the professionals that
have dedicated this is how I'm feedingmy family. I'm not doing this on
the side. I'm not doing itbecause you know, I you know,
it's kind of fun for me todabble in. This is what I do
to fund my life and feed myfamily. We had more of those people

(50:44):
doing every transaction, I think thingswould go really quite well. Wholeheartedly agree.
So any last things, Rob,any last things we didn't cover that
you wanted to talk about today,We jeez, I don't know. I'm's
open ended. Yes, that's okay. I feel like there was something else
that came to mind about this thingthat I wanted to talk about, and

(51:04):
now it escapes me. So ohthat he's just setting himself up to come
back to see how he did that. See how he's laying the groundwork for
that. Well again, Rob Scalici, Remax First and associate broker there.
It's been great having you as ourguest today. If we had anybody listening
that maybe wants to reach out andtalk more to you, become a client
of yours, how can they contactyou? As I always say, shameless
plug. Rob Scalici, Remax Firstphone number five eight six nine nine nine

(51:31):
zero zero at the office mobile phonefive eight six two zero six two nine
nine nine or email me at ourScalici at Remax dot net and Scaleci is
spelled SCA l i Ci. ThanksRobin, It's been truly always a pleasure
to have you have you in hereinty our listeners. I hope maybe if

(51:52):
you've caught some of those headlines andyou weren't quite sure what all of this
meant, you know, hopefully we'vewe've been able to answer some questions that
you had, maybe you were ponderingand didn't take the time to reach out
and ask a realtor about and hopefullywe've been able to answer some of those
for you. Our next topic whenwe come back in a couple of weeks,
is going to be surprising things thatyou learn after you buy a house.

(52:15):
Everybody thinks maybe they know what they'regetting into, but there's always some
surprises. Most good a couple,you know, maybe if the neighbors aren't
so great, that could be anegative surprise, but most of the surprises
are good. Those are things thatwe're going to talk about in our next
episode, and we look forward tochatting with you. Then take care.
We hope you enjoy today's episode.Don't forget to subscribe, write a review,

(52:36):
or rate the show, as ithelps us reach more people. You
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