Volume Down, Facts Up: What the Proposed NAR Settlement Really Means for Buyers, Sellers, and Agents

Episode Transcript
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Kevin Johnson (00:03):
That is recording and you can hear fine in your
your headphones.

Andrew Doyle (00:07):
Mic check, check one, two.

You can hear yourself fine. Yeah. All right.
I can turn your volume if I needto. All right, that's recording
so we should be freaking good.
Yes, yes. Okay. Hello andwelcome to the 121% podcast. My
name is Kevin Johnson here fromCentury 21 edge in Orlando.
Today we are welcoming back tothe show for I think it's the
third or the fourth time, thelegendary Andrew Doyle from sea

(00:31):
bass. That introduction rightlegendary legendary from C bein
Doyle right here in Orlando,Florida. They are a business
real estate law firm if itinvolves dirt, paper or money. I
love that. You've got a TM TM TMtrademark. Excellent. So
welcome, Andrew. How are thingsgoing for you today?

For me, it's a fantastic day for the rest of
the real estate industry. Idon't know I think everything is
kind of up in the air right nowa lot of people are confused.
They don't know what what'shappening next. But Mighty is
going great Friday. I'm psyched,you know, as I told

everyone, my my family to pick a headline for
our agents. And today we'regonna be talking about the NAR
settlement. The headline wouldbe, everything's gonna be okay.
Right? There's, I actuallythought the results of this and
of course DOJ is not done, but Ithought it was going to be far
more impact to our businessrather than how it should be

(01:27):
anyway. What

was that that show? Keep Calm and chive on are
on

and carry on?
Yeah, what

was that show?
Doctor?

I thought it was just there was a saying from the
British during World War Two.
Oh, maybe or one one of them.
Maybe

it was it was on a show. But I think that's the
mantra here is just keep calmand carry on. Because the
industry will survive. Thingswill continue. Commission's will
still be paid. But you know, Imaybe that's a spoiler alert.

You know, yeah, that's the thing is it drives me
crazy. So let's go ahead. And,you know, reason why I wanted to
do this show with Andrew andreached out to him was that I've
been looking over the media,looking on YouTube, you know,
watching Social Media, and wehave agents that are going,
they're losing their minds.
They're going crazy. We have themedia, the mainstream media, and

(02:13):
they're all guilty from bothsides of the spectrum, right of
just completely false headlines,headlines not based in any
element of fact, as it relatesto the settlement that we're
gonna talk about today. So Ithought it was important. We
came in addressed the factversus the fiction and, like,
take the sensationalism out ofit. It's just it's, it's, like I

(02:36):
said, I think it's much betterthan I was expecting it to be, I
think, okay, and it was my, myfirst reaction was, this is what
everybody's freaking out about,because I actually read the
settlement, which was, you know,

bless your heart.
It was 108 pages long. Yeah, Iskimmed. But, you know, it's
literally been fake news. Yep.
literally been fake news fromwhen the settlement was
announced. I think it was likeFriday morning, last Friday
morning, about a week ago. We gotoday, all throughout the
weekend. It was headline afterheadline, the Commission's are

(03:12):
going away. Nora walks back 6%Commission requirements. And I
mean, I'm sure we're going tocover that. Oh, yeah. But just
so everyone knows, there wasnever a 6% standard requirements
set by NAR or anyone else.
Right, right. That Commission'stotal Commission's on a
residential transaction acrossthe United States be 6%, not $1.

(03:32):
More, not dollar less. That wasnever a commission. In fact,
that would literally be pricefixing. And these Gnar suits
would have not taken 50 years tobe brought, they would have been
brought a long time ago.

That's my favorite most of the headlines
if true, Nora would be admittingin an agreement with a court to
do to break the law in thefuture. Right. Right. Right.
Yeah, nothing happening. So thesettlements, the basics of it
not agree to a financial sum of$418 million over four years,
over four years, right? Theygotta make sure they collect
those dues to get that. And thenthey also agreed to some other

(04:09):
items we're talking about today.
But the big thing is, the courthas not approved this yet.
Right? They're not expecting itto what may? I'm

not sure when they're expecting it, but it's
pending court approval. So whenyou have a case of this
magnitude, you can't just say,Okay, we reached an agreement
were settled. It requires thejudge's approval. And this kind
of goes back to the type ofthings that the plaintiffs the
sellers, in this case werelooking for. Not only were they
looking for monetary damages,but they were looking for
structural relief. And thesetype of antitrust cases when

(04:42):
they're brought, right, they'rebrought for two reasons one
money to structural changes. Sowe see these cases commonly with
banks, right, and it results inbanks reforming the way that
they do business. So here we'reseeing nor settling and agreeing
to reframe the way that they dobusiness.

Yeah. And, and again, it was, I don't think
it's that earth shattering. It'sit's really, it's, if I'm being
honest, it's how it should havebeen, it's actually how it was
done in the past. And then wegot away from it in the digital
age, right, we used to do as anindustry, formal buyer consults
have them signed by our brokeragreements, right. That's how we

(05:22):
did it back in the day, we justgot lazy as an industry, right.
But as an industry, we got lazy,and that laziness and that
lowering of standards ofmembership, in my opinion has
led to where we are today.

So, I mean, I don't want to speak for all
agents. But I do think, as oflate, and by as of late, maybe
the last 1015 years, it's alittle uncomfortable for them to
have conversations with buyersabout signing buyer broker
agreements. But if I recallcorrectly, in NARS settlement
statement, they're kind of pressrelease, so to speak, they even

(05:57):
said, we've always kind ofencouraged this. Yeah. And I
know that in my practice, Igenerally recommend to the
brokerages that I represent, youshould have your agents train
them on the forms here inFlorida, they're called the
EBAs. And then they havedifferent forms, depending on
the single single agent ortransaction broker relationship.
But there's a form for that,there. And it's not that hard,

(06:19):
it's not that complicated. Itshould just be kind of part of
the overall agent training,because at the core, that's the
agents job is to closetransactions, and you need to
know how you're gonna get paid.

As a brokerage, we've always strongly like in
the most strongest of terms, youknow, encourage them, starting
last year, we required them, itwas no, you're gonna work with a
buyer, you have to have itbefore showing the property full
stop. Otherwise, you're notworking with a buyer. So for our
agents, that one that onechange, or the two big ones, if
you will, that's an that's anothing burger for our agents,

(06:53):
because we've been doing that.
Right. So that's what so let'stalk about the first one like
you kind of have already broughtit up that kind of the fact
versus fiction one of the bigheadlines we keep seeing over
and over again in various formsis NAR agrees to cut commissions
now agrees that 6% Commissionmodels gone. Let's talk about
some of the misconceptions like,to my knowledge, and you know,
there's never been a fixed rateInaros formula in 1913. And

(07:15):
since its inception, there hasnever been a fixed rate. In
fact, if you look at thestatistics, the average if you
just take the average of thetotal commission charged by both
sides, right now, obviously, itaverages the average hasn't been
above or at or above 6% for 27years, according to Nar really

(07:35):
27 years. So if so it's actuallycome down. Yeah, the average is
closer to 5%. Okay, if you addboth sides together, but that
headline is also misleading,because it makes it feel like
every agent was making anaverage of 6%. And then let's
just say if you're using anaverage, and we were going to
use the fake headlines, that'snot the case. It's both agents
involved in the transaction.

(07:58):
That's half of that. So theactual average agent commission
is below two and a half percent.
Did

you see the video I posted on our Instagram page
about this? Yep. So if youhaven't already, please give us
a follow at Orlando lawyers.
Know I did a video on this onMonday. And the and I
specifically addressed thesethings. But the point, I think
the most salient point in thatvideo was these are headlines in
the middle of an election year.

(08:26):
And we're seeing regardless ofwhat aisle the source is on CNN,
Fox, they're all saying the samething. Right? And that's because
they need to have the attention.
So the call to action, so tospeak from that video was
sellers, buyers, agents,brokers, whoever you are, take
this information with a grain ofsalt because it is verifiably

(08:50):
false. But beyond that, considerthe source. And I really can
honestly say that since thesettlement terms were announced,
I've spoken to a lot of myclients about this. And everyone
is coming to me and sayingbasically exactly that is it
fact or fiction. And I'm likethis is a complete fiction.

(09:11):
There was one instance. And infact, I think Housing Wire had
posted a story on this. Therewas one instance and I want to
say in the 1980s or so where NARwas involved with an FTC issue
that resulted in some form offixed compensation, but it had
absolutely nothing to do withthe issue that we're dealing

(09:36):
with. Now there was a SupremeCourt decision. It's a nonfactor
now, right. So at the very leastis verifiably false that that
it's verifiably false to saythat in the past 25 years, they
have not required any any sortof fixed percentage commission
at all

right. And the other thing is commissions have
always been negotiable, that'sthe key, right? And I can tell
you, you know, out of thehundreds and hundreds of deals
that we have been a part of as abrokerage, there has never been
a seller who didn't negotiate.
And there's a huge difference,though I tolerate is between
it's, it is negotiable. But foreach of us as a professional

(10:18):
based on our skill set in ourhistory, we're going to have a
minimum we're going to charge todo our services like anybody
would any profession, anattorney, a surgeon, whatever,
you have your minimum, what isit gonna take for you to go to
bed and go to work that day?
Sure. Right. But commissionshave always been negotiable, and
that nothing is changing beforeor after. And I hear that

(10:41):
sellers and buyers look at nowand get to negotiate their
Commission's Yeah, you sure can,as you always have.

The last time we talked about this issue was I
think November, right, rightafter the announcement of the
Burnett Setzer verdict, theblockbuster $1.7 billion. Right.
Where does it where's the worldgoing? The sky is falling. In
that, in that recording, weaddress that specific issue as
well. Right. And, again, publicservice announcement. I believe

(11:11):
I have to repeat this. Yes,commissions have always been
negotiable. listing agentssitting there across the dinner
table with sellers, thosesellers have always had that
right. To say, Look, I get youwant 5% Total commission, I'm
committed to not giving you adime more than three. And if you
want to take that three anddivide that equally with the buy

(11:33):
side, that's up to you. But Iout of my pocket, I'm not losing
more than 3% of this purchaseprice to total commission. That
has always been something Theproblem is that sellers. I
think, partly because of thelack of transparency in the
industry, I think sellers havenever really felt comfortable
exercising that right tonegotiate. And I really think

(11:54):
that lack of transparency iswhat brought about all of the
all of this litigation. So

what do you talk to me about because I couldn't
disagree more, I think there hasbeen at least the interact in
the transactions we've beeninvolved in, there's always been
the transparency like they knewthey can negotiate, we'll

talk about it's a corporate decision from the top
down, that has to trickle downthrough the training to the
agents. But I don't believe thatthe average real estate agent
sits in front of a seller andsays, Look, this is 6%. And this
is why it's 6%. And moreimportantly, the 6% doesn't go
to mean just me that 6% Thatyou're paying the list side

(12:33):
brokerage. In turn, when weadvertise your property on the
MLS, there's a field there, andwe're going to offer to take
that 6%. And we're going todivide that with whoever brings
a buyer, that conversationdoesn't generally happen. And
because it doesn't generallyhappen, we end up with
Switzerland, Burnett, moralBatten, Gibson, all of these

(12:56):
massive cases that have beenfiled across the country that
really say, well, sellers didn'tknow that, or they felt
compelled to have just agreed tothat they weren't given any
meaningful choice for lack of abetter term. So I do think it's
it's a training issue. That'skind of endemic to the industry.
That hopefully, we'll see changenow. And

that's one of the big things I've said that, you
know, with respect, this is mypersonal opinion, that NAR has
contributed greatly to our issuein that the standards are light.
And then you know, NARS goal ismembership, no, membership
brings money membership bringspower in Washington. But also if
you increase standards, if youincrease to dues to level it up,

(13:40):
you decrease membership, whichmeans you lose power, you lose
money. And so there's thatbattle that is going on within
Nara and has been for years ofyou know, what's the balance of
standards versus membership. Andit as long as that's the battle,
I think we're going to struggle,you're going to have people like
this and that are going to filesuits and try to level force the
industry to level up. And, youknow, for us, I mean, we've

(14:03):
always done that at ourbrokerage and our brand, I
applaud our brand training I'vereceived from them, since
joining them in 2014 has alwaysbeen the same right there.
They're big on the law of file,not just a letter, but the
spirit of the law. And if youdon't, they will kick a broker
owner out faster than your headwill spend. They they would
rather have integrity over themoney. And that's what I love

(14:24):
about our brand. The next onethe next factor fiction offers
of compensation are going away.
So it reiterate, as Andrew said,If a seller was property for X
percent, we would then as alisting broker offer a portion
of that to a another agent thatwould bring a buyer that was
called the offer compensationthat money came from the listing

(14:45):
brokers commission not directlyfrom the seller. So if I brought
the buyer as well, I got to keepthe entire length of the
commission right. So seeing alot of news stories that are
saying that it's going away andit's just not the case the
little field and the MLS isgoing away.

That's it right?
Yeah, it's just being moved offof the MLS and my kind of legal
instincts lead me to see that asthe structural change that the
sellers in the plaintiffs in SRwere looking for because of the
NAR requirement that the fieldbe there and offers of

(15:28):
compensation be placed on theMLS. Remember up until I think
it was like November 14 herelocally, the local MLS had had a
rule that said that you had tooffer at least $1 A whole dollar
a whole dollar a whole dollar.
But that was walked back. And Ithink cool. Don't quote me on
actually not quote me, often andit's November 14 2023. I

(15:50):
remember the exact date that Ithink the new the new MLS rule
change went in. And now all of asudden it was it was 00. Right?
So now we're saying okay, well,now we're going to delete the
whole fields. Nobody got all upin arms with the change from $1
to 00. They did it just not asloud. So but yeah, I mean, the
fact remains that commissionscan still be paid, they can

(16:13):
still be negotiated. It's justnot going to be on the field.
And I think the reason for thatis that was one of the prior
requirements, and now to makethe sellers happy nor sad, okay.

The funny thing I found in the settlement is that
it's the specs are explicitlycalled out that sellers can
still offer credits orconcessions to buyers. You just
can't call it for you know, it'sfor the commission and you can
call whatever you want to so wecan still offer there it can be
negotiated off MLS. And by theway, the negotiating deal by

(16:50):
deal off MLS is how commercialhas been done for years. And
it's working just fine. Now.

I don't see how I mean, NAR can't tell a seller
what concessions the seller ischoosing to give or not give to
a buyer anyway, you want to givea $10,000 roof credit without
going through the hassle ofreroofing the house, go for it
right now. It's just the samething. Now my question is really

(17:19):
questioned for the state ofFlorida and the Joint Commission
between the Florida Associationof Realtors in the Florida Bar
is what changes, if any will wesee to the far bar contract in
the crisper contracts thataccommodate that in Section nine
closing costs?

Well, there was an email that came out about an
hour and a half to two hoursago. I'm missing from Florida
realtors, that they are workingdiligently on new listing
agreements. There you go, a newcompensation agreement and new
purchase contract. That's

fantastic. That's great news. I've actually put
the feelers out there too. I'mtrying to get in contact with
some attorneys that sit on thejoint committee. So that maybe
just maybe fingers crossed, Ican be a part of that decision.
That'd

be awesome. Have some sanity, they're just
saying. So the ruling says andI'm quoting, specific buyer's
agents must find alternativeways to be compensated
potentially directing directlywith by their client or their
customer through sellerconcessions or negotiations off
MLS. So again, the only changeto the offer of comp, the only

(18:19):
change is the little bitty fieldat which most agents in Florida
don't know how to fill outproperly anyway. is going away
now, which I'm more than happyabout. So no big change there.
The so we can't make those youcan also want to make it clear
in the settlement. We can't makethose offers and realtor marks

(18:41):
or anywhere else. They can onlybe made off MLS, right.

I've heard recently. Some people thinking a
little bit outside the box andsaying okay, well, what is it
off? MLS mean? Does it literallymean not in the MLS sheet? What
if there was for example, maybean AI assistant that was keyed

(19:09):
into showingtime and the AIassistant was auto generating
details about the property andincluded in that message to the
buyer's agent who had justscheduled something seller is
committed to X percentage on thebuy side does that constitute an
an offer of compensation on theMLS which come mid July would be

(19:33):
basically a violation of localMLS rules?

My my my creative solving is right now we include
attachments with the listing.
What if we have a Dropbox file?
You know, and we put thewatermarks, here's your dropbox
link for this listing withdisclosures and all that and in
there is a commission agreement.
I think

we need to wait until July and see what the rule
change is as a result of thissettlement. And I, you know, I
should I'm gonna call a proposedsettlement because it hasn't
been confirmed yet as proposedsettlement. I think we need to
wait to see what the court makesure that the court approves the
108 page verbatim settlementagreement, and then see what

(20:15):
that rule changes and then seehow the local MLS has adopted
incorporate that rule change.
Before we can say this is good,this is not. But between now and
then there shouldn't be anysignificant change. It should be
business as usual. That's

why I keep telling people I've had
questions from agents alreadylike, well, what if there's like
right now don't worry aboutanything. A the court has to
approve it. I've heard May iswhen the judge is supposed to
review it. If he if if heapproves it as this as you said,
it's not going to go into effectuntil mid July earliest. So
there's time and everybody'sworking behind the scenes to
make sure that we're ready.
That's it like for ourbrokerage, we're ready already.

(20:53):
I mean, we've already been doingBVA is done right we that's
standard practice for us. Andthey've already been so it
shouldn't be an issue. I do

think brokers brokerages that have not yet
incorporated the ABA practice orthe BBA practice into their
training programs. They're goingto be at a disadvantage. Yep.
And it's really incumbent uponthe brokers the supervising the
managing brokers to say, okay,look, I avoided this issue for
long enough, but this is athreat to my financial existence

(21:25):
now. So I need to startincorporating this into the
training programs we

are I'm in the process of writing a class for
the school that wonderfully youknow, not just how to fill it
out, but also how to pitch itand know if some scripts with
that. Our next one, I love thisone. And I've seen a lot of this
reading the comments in thesevideos and new stories out
there. Well, NAR settled,clearly that means they were
guilty as charged. Right? Theyknew what they were doing wrong.

(21:52):
And of course, to be clear, as apart of the settlement agreement
NAR has said that they'readmitting no wrongdoing. But
talk to me about that. I mean,from from not maybe specifically
this case, but you've beeninvolved in cases where there
has been settlements and whywould NAR settle a
1.7 $8,000,000,000.25 on

the dollar that had treble damages? 700 plus
million reasons.

treble damages, right? That because we took it
with the 5.5 point 8 billionpoints

seven. Yeah, it would have been way up there.
Right. I believe that verdictalone would have been sufficient
to bankrupt nor as an industryand probably a couple more of
the CO defendants. Well,

keep in mind, too. There's there's 87. Now,
additional brokerages out therethat are not included as part of
the settlement because onlybrokerages that had less than $2
billion in revenue last yearwere included. So there's a lot
of big independents out therelike exp Fathom some big ones,
right that are not included somelocal companies as well, that

(22:59):
they still have to figure outtheir settlement today, compass
did announce that they havesettled. So they were the
largest of the not includedvoice.

You know, I spend an afternoon working and I miss
everything. Well, that's why I'mhere. I'm here to help you.
Thank you. Thank you for keepingme on track. That's why I'm here
for you make a note of that.
Yeah. So

and then of course, the big ones, the big
big ones anywhere, whichincludes century 21 Coldwell
Banker, Better Homes and severalothers, and REMAX Keller
Williams all settled prior towell, at various points during
this right before the verdictwas anywhere in REMAX Keller
settled after verdict, leavingjust not home services. And now

(23:38):
it's just Home Services left ofthe original plaintiff. So
yesterday, the plaintiffs alsodemanded the sum of the money or
the final judgment and to getthe money from home services for
the entire thing. Yeah,

probably because it's considered joint and
several Yes, it's rough. Yep.
Okay, so to your point, yourquestion about nor must have
been guilty as a headline,right? So one, I take issue
nitpicky, legal, geeky reasonhere, but I take issue with the
use of the word guilt. This isnot a criminal case. There's no
right criminal element here. Soin civil, there is no guilt.

(24:13):
It's liable or not liable.
You're paying or you're notpaid. Right. So strictly
speaking, Nora has not beenguilty of anything. I don't
think that they ever were in aposition to possibly be found
guilty of doing anything. Now.
To my knowledge, there are someDOJ investigations going on,
which may result in criminalliability, but strictly speaking

(24:35):
in terms of Switzer Burnett, andthe North's settlement here,
there's no guilt. Beyond that,right. There are a number of
compelling reasons why acorporate defendant or an
individual defendant wouldsettle a lawsuit. And we could
talk about settlements for casesthat are $5,000 all the way up

(24:56):
to 5.7. billion dollars. Thereare a number of compelling
reasons why someone or somethingor one party would enter into a
settlement agreement usually hassomething to do with what I call
in practice the law ofdiminishing returns, you may
fight for so long to win orshifts, I should say your

(25:17):
lawyers will fight for so longto win. And victory may be on
the horizon. But because of theprocedural rules and the nature
of litigation, it may take solong to get there, that the cost
of achieving that victory isless than or is greater than it
would be if you had just cutyour losses and agreed to settle
right now. Put another way,where was never ever going to go

(25:40):
with this. Right? There was ajury verdict, finding liability
to the tune of $1.7 billion ifthere was no settlement
agreement. And NAR just said,Okay, we're gonna let it we're
gonna we're gonna see how thisplays out. They have I think
they had a pending appeal.

(26:01):
Right? So

they did announce yesterday, they do not have the
ability to put the bond. Okay,so that was one of the factors
that went into settlement.

So that's what's called a financial constraint on
litigation. Right, they didn'thave the money to fund the
litigation to fight to fund tofund the fight any longer. So it
made sense, then, for them tosettle at 25 cents on the
dollar, which $480 million is alot of money. But it's a drop in
the bucket compared to 5.7billion, which is what may have

(26:30):
happened had the judge exercisedhis potential discretion here,
and trebled or tripled thedamages, which is a possibility,
it was a possibility under theAntitrust Act that they were
sued on. So there was a juryverdict, that was it, right?
Liability was found. The probthe, the, I guess the question

(26:52):
posed, then XR was okay, wheredo we go from here? Do we appeal
at X dollars? Or do we justreach an agreement here and make
some changes and pay 25 cents onthe dollar? I don't disagree
with that decision for years toYeah, yeah. I don't disagree
with that decision. In a vacuum.
Obviously, I don't represent norI don't know what the inner
workings of their legal strategywas. But from the 10,000 foot

(27:15):
view, sounds like a deal of thecentury to me.

The one thing that Kevin Sears the head of nor
released yesterday's video wasthat one of the reasons they
chose to settle was the the onlyother path really was going to
be bankruptcy. And had they donethat it would have left all the
brokerages under 2 billion andexpose, so this solves it
protects them. We were you know,century 21 was our protected by

(27:41):
the anywhere settlements, wewere gonna go there. But you
know, unfortunately, couldn'tget those above 2 billion
included, but there is a myunderstanding a formula involved
and they want to pay they canpay to get out of this church.
So we I mean, it's, you know,it's a business decision, not so
much any other

type of decision.
I mean, I represent businesses,and I represent parties and
litigation all the time, and allof these conversations that
attorneys have. And, you know,don't let, don't ever let anyone
fool you, right, you file alawsuit, your goal is never to
take that thing to trial. Yourgoal is to is to extract as much
as you possibly can, whether itbe this sort of structural
relief in a non antitrust case,usually called equitable relief,

(28:23):
you're looking for conduct oryou're looking for money. But
the law of diminishing returnsto an experienced lawyer, to an
honest lawyer that's not lookingjust to build a file and is
looking to get the job done inthe clients best interest is
always cognizant of the cost tothe client, juxtaposed against
the most likely settlementterms, and how quickly we can

(28:44):
get to the point where we cansettle that I in my practice, I
call that balancing practicalversus principle, in principle,
sure, this guy may have wrongedyou sue them, but keep the
practical in mind, how much isit going to cost for you to get
that day in court? And is itreally worth it when you win?
Right, because who knows what'sgoing to happen? And settlement

(29:06):
you have control in trial? Lookwhat happened in Missouri?

And how long would it have taken say they
could appeal? How long wouldthat have taken two, probably
years and left the uncertaintyin the industry. And then also,
this stops some of the othercases from moving forward. My
understanding is it absolves allthe seller focus cases, but
there's still a buyer focus sidethat's still out there. So

(29:33):
that's not included in any ofthis. And that's still ongoing.
So who knows where that's goingto be? Yeah, I don't understand
the buyers claim at to this atall. You know, it's from the buy
side.

Was it baton one, I think was baton one that was
initially filed and the was metwith a pretty stiff motion to
dismiss at the early pleadingstage. And if I recall
correctly, the judge said had,what are you complaining about
the sellers paid yourCommission's which I took issue

(30:05):
with, right? Because they're notbecause they're not technically
but that was the the analysiswas while the sellers are paying
the commission, where's yourclaim here? And now that I'm
reaching back to it, I think itwas the way that the plaintiffs
the buyers analyzed, it waswell, indirectly, it was an
indirect loss. So they had toamend their complaint, their

their argument, my understanding was also the
elevated home prices, which,again, that's my read X Factor
fiction is, you know, homeprices will fall as a result of
this.

I have some opinions on why they're not
going to fall.

I would love to hear them. That's why it's on
the list here.

So let's imagine, right, let's imagine a scenario
where you're a listing agent,and you take a listing, and you
take it for 3%, because that'shalf of the fictitious standard,
right? Like, that's where youstart. Anyway. So you take 3%,

(31:02):
right? And the buyer comes toyou unrepresented. That buyer
doesn't have the Bluetooth appon the MO on the phone to open
up the super lockbox right,doesn't have MLS access to get
the key code, you need to do theshowing. Right? So I truly

(31:25):
believe that unrepresentedbuyers will actually secure the
6% total commission more quicklythan any direct rule would
because I think it's going tocause listing agents to work
more.

Yep, it oh, it definitely will, like one of our
agents asked yesterday, we did ainternal Townhall. It's like, so
does this mean, when this goesinto place? If I list a
property, I'm going to have abunch of phone calls from agents
who are just asking how muchmoney we're offering, like?

Yep. Yeah. But I mean, in my example, right? We
have an unrepresented buyer.
Yeah. And because they can'tafford to pay out of pocket,
their buyer's agent, and in ourhypothetical, we have a seller
that's not offering any sort ofcompensation, okay?

Who's gonna write the contract? Who's exactly
listing

agent has to open the door listening agent has to
do the showing, listing agenthas to prepare the contract or
run the risk of the buyersubmitting a form from New
Hampshire on a Florida property,right, and then get what the
seller sign that so it has to beredone, you know, the
communication, all of the thingsthat keep residential and
commercial, but we'll talk aboutresidential, primarily
residential transactions goingforward this professionalism,

(32:40):
that may end up actuallysecuring that 6%. Why? Because
where, what is the listing agentgoing to do? After they get
burned a couple times ontransactions, they're going to
say, I can no longer take alisting at 3%, because the
amount of work is so much morethan it used to be. But the
difference is, at that time,that's the market. That's the

(33:03):
market dictating prices.

Well, my thought was, you know, you have your
right now we have a here's thetotal commission, I'm charging
you, Mr. Seller, and of that,we're agreeing that I'm
disclosing to you, I'm going tooffer this percentage, you know,
half of x or 40% of x orwhatever to a buyer's agent, I
see a point where you get tothis is what I charge you if
there is a represented buyer,and if there's an unrepresented
buyer, here's what I charge youbecause now I'm going to have to

(33:29):
do.

So attorneys, some attorneys in certain specific
practice areas, they have acertain fee that they charge
based on filing a lawsuit, ifthere is a response from the
defendant. In other words,they'll file a lawsuit. And if
the defendant does not respond,and they get a default judgment,

(33:51):
that's it, you don't respondwithin 20 days, you get a
default judgment case closed,there's a few additional pieces
of paper you have to submit butby and large when no opposition,
so that fee is necessarily lessin the practice of law than it
would be if it's an opposed formof litigation. There's an
there's the analog right therein the practice of law, I see no

(34:11):
reason why wouldn't also show upin residential real estate.

So they were gonna start seeing all the
carts. You know, here's my feefor my services, Mr. Seller, but
if an unrepresented buyer comesin, there's additional this, I
have dealt them, here's theseadditional fees that I will be
charging you. And then alsomaking sure for all these poor
buyers that they're gonna besigning no broker agreements,
right that says, I don't have aduty of confidentiality. You
tell me anything. I'm goingstraight to the other side.

(34:37):
Right? There's no loyaltythere's no obedience. Right? I
keep using the analogy. If youwere charged with murder, and
you didn't do it, you arecompletely innocent. You show up
for court judge in front of yourprosecutor to your side. Judge
says where's your attorney? Youknow what, I don't have one but
I've been talking with Mr.
Prosecutor, he or she seems likea really good person. I'm just
going to have them represent me.

(34:57):
That's not a good solution.
Right? Right and buyers going toa builder or going to a listing
agent directly. Those peoplerepresent the best interest of
their either the seller or thebuilder. They don't represent
the best interests of thatbuyer.

I take issue only with the use of the word best
interest because that implies afiduciary duty. So if a listing
agents working as a transactionbroker, then they're not
necessarily they don't have thatfiduciary duty.

I think I see a lot more single agency to prove
value now.

Now then, which was where I was going with that,
which is another thing that Ithink is a pivot point for
brokerages. Right? brokerage,plenty of brokers out there. And
I don't even really fault themfor this because it's so
archaic. But I think a lot ofbrokers out there don't even
recognize that there are twodistinct right three, it's
arguably three distinct duties.
And then there's the opportunityto jump from one and change the

(35:51):
hat. Right? What do I do? Yeah.
And I think everyone is just socomfortable working as this kind
of transaction broker, but underthe mistaken mindset, that for
whatever side you represent, youhave to act in their best
interests, per se. And youdon't, at least not strictly

(36:12):
speaking best interest, becausethat implies the fiduciary duty
that only exists in at least inFlorida, right? As a single
agent. Yep. But I do think thatwe're probably going to see more
single agents, because nowsomeone is paying conceivably
paying someone directly forthose services the same way they
hire a lawyer. So in your murderexample, right? If the criminal
defendant is paying the defenseattorney, then the criminal

(36:36):
defendant would expect that thedefense attorney is acting as
the person who's paying themtheir best interest. All right,

so we got two more I think we can talk more
about Commission's on this one,I don't think commissions are
going to fall either. Jump backto home prices just a second.
Because, you know, at the end ofthe day, you know, if the seller
is not offering, buyers agentsare going to charge maybe on the
buy side, we might see a littledrop because a brand new agent
going out might not feel ascomfortable if you don't have

(37:02):
great training and greatsupport, you know, to negotiate
that commission to make surethey get it if there's nothing
being offered by the other side.
But I think on the listing side,you know, if we split it, I
think you're talking about we'reactually going to see an
increase in the cost on the listside commission. When it comes
to home prices. That's the othercracks me up is like these
pundits and these experts sayinghome prices will fall because of

(37:27):
this, that this is artificiallyhelp home prices up. If I'm a
seller, and I'm a I'm gonna sayI'm being cheap and I don't want
to offer any comp to buy side.
I'm not doing that to thendiscount the home price. I'm
doing it to put the extra moneyin my pocket so I can pay my my
agent on the next purchase thatthey're helping me with. I look

(37:50):
back up just to make sure I waswrong. The definition of market
value yesterday, like I lookedover it from you from USPAP.
Right. Like I don't see anywherethat this is a national
standard, where market value isdetermined based on Commission's
being paid or not being paid.
Yeah, I

mean, it's it's just a bastardization of the
term. That's what it is. I don'tsee a direct correlation there.
I think maybe what they'regetting at is the cost of buying
or selling a home. Right. Soclosing costs may go down. And

(38:26):
again, that's only if the marketreacts exactly the way that I
think the sellers in the in thesellers in the Switzer Burnett
case are hoping it would, whichis each side pays their own
commission. But the last time wetalked about this, I made some

(38:47):
predictions that really, I thinkgo right to the heart of this
issue of whether the home pricesare going to fall or grow. And I
think buyers, first timehomebuyers may be priced out of
the market. Yeah. And if youjust think back to FHA buyers
that are getting approved by theskin of their teeth, they don't

(39:10):
have an extra 3%, they alreadyhave to put what three to 5%
down percent.

They gifted, if they have some close relatives,
they can do that. But thenthey're struggling with the
closing costs, or three to threeand a half percent.

There's always a struggle there. So finding the
extra 30 504,000 $5,000 to pay abroker, a buyer broker out of
pocket, that's going to be aproblem. And when you
extrapolate that out over theentire real estate industry, you
have inventory, but no buyers,so maybe, maybe maybe they're

(39:43):
right. That's what will help outa total cause the home prices to
fall is a crash.

Right? The other thing too, nobody wants that as
a as a buyer, right? If I onlyhave the money I need for my
down payment and closing costs.
What I want that representationof Agent, I may have to instruct
my my agent to, don't show mehouses where the seller is not
willing to, you know, cover yourcommission. And now we have a

(40:09):
direct a direct from ourcustomers telling this or client
of being in a relationship thatsays no, don't show me these
houses. So from a seller'sperspective, you know, something
they need to consider as well,because that that homeless on
the market longer and then pricewill fall price will fall price
reduction, but it's going tofall because of not because of
this decision is going to befall because and if enough

(40:30):
people don't offer that cop

Yeah, and you know what comes to mind, the saying
that my grandmother always tellsme Pennywise pound foolish,
right? You don't want to paythat commission, that's fine.
You want to put some additionaldollars in your pocket fine. But
if you're trying to save 6000And you end up losing time off
market, the market shift occurscomps, you get a bad comp in the

(40:56):
neighborhood that could cost youmore than just $6,000 interest
rates right? Or just simply lossof love, right? Loss of love on
the MLS loss of attention.

Become a stigmatized property because
you've been there too long.
Exactly. You know. So where doyou think big picture if we had
to look at the future of realestate? You know, I kind of
opened up with my headline whereit's going to be okay, everybody
deep breath like, you know,enjoy whatever libation you
enjoy to calm your calm yournerves, but it's going to be
okay. What's, what do you thinkthe future I mean, short term

(41:29):
long term.

So I definitely think things are going to be
okay. I firmly believe that inone way or another, particularly
here in Florida, we have theFlorida realtors, they're going
to spit out these forms, andthey're largely going to address
this issue. So agents here inthe state of Florida brokers in
the state of Florida, there'sjust like, there always has been
there's gonna be a forum forthat. So that's the first thing,

(41:53):
right. Secondly, I do thinkwe're going to see some changes,
primarily on the buy side, Ithink that we're going to see a
lot of confusion. I've alreadybegun to hear murmurs and echoes
from people, about sellersalready saying, Well, I don't

(42:14):
have to pay a commissionanymore, right. We've had one
already. So you know, the realworld, the market participants,
the buyers and sellers, they'reseeing these CNN headlines, but
they don't have the benefit ofhopping on an industry podcast
and getting the truth. Right. Sothis is what it is. So I do
think in the short to mid term,we're probably going to see a
lot of difficult conversationsthat buyers, buyer agents,

(42:37):
selling agents and listingagents have to have with their
prospective customers aboutthis. And I think that brokers
are well informed to have goodtraining sessions about how to
address that in compliance withthe particular brokerages
policies and procedures, likehow do we respond to this?
Right?

I think we're gonna see a ramp up to on the
brokerage side of more mergersand acquisitions happening, I
think you're gonna see some moretenured brokers that have been
in this for a while, they werealready getting closer to the
end, I don't want to deal withit, you know, yeah, I don't
wanna deal with it. I was gonnasay, and we, you know, within
the century, 21 brand, I know,they had a record banner year of
mergers and acquisitions lastyear. And so I think we're gonna

(43:16):
see a lot of those smallercompanies fold into bigger
companies, or even to mediumsize, fold into a bigger company
to have those resources, I thinkwe're going to see, I think
there's gonna be just a nativedrop in agent count, I think
you're gonna have a lot of themore tenured agents, they're
like, Yeah, I'm out, I'mretiring. This is a good, this
is the perfect curtain call. Andthey have some of the newer

(43:37):
agents that joined the industry,you know, during the, we won't
say the word so we don't get youknow, demonetised. But like, the
big 2020 Fun health issues wehad, yeah. You know, that joined
because it was much like ordertaking at McDonald's, right? You
know, you want a home, you wantto pull with that. Okay, great,
here it is. Let's go. You know,and now, you see agents

(43:59):
gravitate more towards the buyerside, because it's been easier.
You know, on the sell side, Ihave to prove my worth, I have
to go in and have a conversationand, you know, try to defend my
value and prove my value anddefended. I haven't had to do
that on a buy side because thebuyer wasn't directly paying me.
Now, if that's the that's apotential you're gonna have to

(44:20):
prepare for on every buyer.
right that there isn't. So youhave to be able to say, hey, you
know, if there's no comp, thisis what you're paying me. And
that's a different conversationthen like, yeah.

So that leads me to question. You know, if we're
talking about where this isgoing, right, are brokers in a
position? Are they committed toenforcing the terms of the buyer
broker agreements? Put anotherway. If you're a broker, and
you're training your agents tosign these to make sure that

(44:57):
these buyer broker agreementsare signed, are you prepared to
put teeth to the paper. Are youready to set to sue? A buyer?
That bails on that obligation?
Right? What do you do?

Excuse me, what are we doing wrong to? That?
That's a question I've beenmyself, you know, struggling
with, because no broker wants tobe seen as the broker that sues
consumers. That's a publicrelations nightmare, right. But
at the end of the day, if, youknow, a segment of the
population, whether it be youknow, consumers or agents or

(45:33):
whatever, know that, you know, Ifrom the, from the agent side,
my broker won't have my back toget my comp and their agent
side, well, this this brokerageis very litigious. You know, one
side wants you to see one sidedoesn't like you to sue, right?
How do you deal with that? Howdo you address the cost of that
with agents? Take Well, there's,there's a big conversation

(45:54):
that's gonna have to happen tosee because you don't want also
be seen as buyers? Yeah. I'm notworried about it. They're not
going to come after me.

Right? Yeah, fine, I'll sign whatever you want me
to sign I'm never gonna pay, andthere's nothing they can do
about it. They can't keep mefrom buying my house. Right. And
I think right now, status ofFlorida law is that yeah, I
don't, I don't see a scenariowhere a buyer's broker can
interfere with the real estatecontract, when the buyer has

(46:24):
refused to pay the commission atclosing, by either bringing that
additional sum to closing orsomething like that. I can't see
a scenario where a seller wouldnot close because the buyer
didn't pay the buyer's agentcommission, I can see a scenario
with sellers like, I don't care,you want to take $6,000 off the
off the total go for it doesn'taffect my net proceeds. I'm

(46:47):
signing right.

Lot of questions in like the lien laws and how
they work in Florida in variousstates. I mean, state by state,
right is, you know, how can yousecuritize that buyer broker
agreement, because there'snothing you can attach it to,
right, they buy one don't payanything with a law change, we
can go after them after

that was that was the thought a couple months ago
was okay, well, no big deal, wecan just roll that into the
mortgage. But you can't becausethat's not part of the
collateral that banks securitizewith the mortgage. So you can't
just tack on 3% of the purchaseprice and add that to your loan
the property has to appraise ator above the value of the
mortgage that's being borrowed.
So unless you have that wiggleroom, which in some cases, maybe

(47:28):
you do, right. But I have hadsome conversations with a lot of
lenders, and they said this isthis is a nightmare, if this is
the route that that it's goingand we have to work away to add
in the buyside. Commission tomortgage Congress, literally
Congress has to change the law.

And the other thing is, is that the right
thing to do for buyers, becausenow you're taking a commission,
and you're financing it at six7% for 30 years.

Now enormous interest rates. Yeah, like

my is that the right thing for the buyers? No.
It's a challenging market forsure. And you know, I think, you
know, right now, there are a lotmore questions and firm answers,
which is how it's designed.
Everybody needs to take deepbreath, relax, let's get through
the quarter approval. There'salso that other little entity,
you know, the insignificantDepartment of Justice, quote,
unquote, right, that still hasto chime in there. They're not

(48:22):
done with the industry. What arethey gonna do? Is this gonna
appease them? Is it not? Youknow, because their big thing is
they want to complete decouplingwhere the listing, the the
seller can't pay the buyer'sagent calm. Right? So that's
what that's what DOJ wants,right? They're not getting that
in this agreement. Are theygoing to be okay with this,
this, and they leave alone backoff, who knows. So there's more

(48:45):
to come on that front as well.
So, you know, everybody justneeds relax, let's wait for the
courts. And then your your staterealtor board will come out with
the forms that you need. I'massuming all the other states
work like Florida, where theyprovide them forms. I know, I
was researching differentlisting forms yesterday or
listing contracts. And eventhough Ontario they have their

(49:06):
real estate associations, we'renot realtor, but real estate
associations, and they provideforms as well. So it's pretty
standard. I'm sure. We wait forthose to come out. And we'll be
fine. You know, make sure ifyou're a broker, make sure you
have a good attorney on yourside, you know, to help advise
you this is not the time to nottalk to your attorneys, make
sure you're having an opendialogue with them and knowing

(49:27):
what are the impacts of theruling of the settlement
proposed settlement? How willthey impact your business and
start preparing today? Don'twait until it's time you know,
start preparing. If you're notusing buyer broker agreements,
start today, start mandatingthat day change your policy and
procedure manual. If you're anagent not using them, you should
be using them have those formalbuyer consultations. You know, I

(49:51):
asked the question yesterday, doyou have origins? Would you go
take a listing without a listingagreement? Absolutely not. I
mean, that the resounding no.
What are you talking about?
That's crazy. That's stupid. Butwe see agents every day do that
with buyers. Why would you takea buyer without a contract? Why

would you drive all around town showing 35
houses to someone without havingsomething in writing

or showing 35?
houses? They need some training?
Fair enough. Fair enough. Threeto five. Okay, right.

That's a 35. I meant three to five. Oh, that's

you, man. Okay, that works. Yeah, yeah, that
better. So, any final thoughtsbefore we close it off for
today? No,

I just bring it back to where we started, right?
Keep calm and carry on. It's notthe end of the world. It's not
the end of the industry, theworld, the sky is not falling,
we'll figure this out. And, youknow, we're gonna see some real
changes in July. That'll beinteresting. I'm sure we'll
probably do another podcast onwhat those real changes are and
how they affect local analysishere. But it's not the end of

(50:50):
the world, despite what thepundits have been saying this
week.

And also think my final thoughts is as an agent as
broker owners, if you're in thisindustry, you need to be paying
attention to the news. Good orbad. You need to be watching, I
was speaking with an agent theother day, it's like I just
don't like the news. I tuned itout. I said I get it. But your
your customers are your clientsare. And if you don't know what
they're seeing and what they'reconsuming out there in the

(51:16):
media, you're not going to beprepared to be able to respond,
right and make sure take thetime, download the settlement
facts dot realtor B kit,download the fact sheet, the
settlement everything. Paragraph5858 of the kind of the
settlement will go through allthe practice changes they're
proposing. Oh, one final thing,paragraph 59. First sentence,

(51:38):
what hashtag What the

I? So I honestly, I don't know. I've reviewed it a
couple times. So I'll share withwhat it is. Yeah. So there are
59. The first sentence ofparagraph 59 basically says that
all of the settlement terms kindof drop off after seven years,
so they expire. God. So in areally strict reading of that,

(52:02):
it seems that this thedisappearance of the offer of
comp fields might result in areappearance seven years down
the road. I really don'tunderstand it. And I mean, it's
it kind of boggled my mind. Tosee that there. There has to be
some reason but in I just Ican't glean it from the, from

(52:25):
the document itself.

It's an odd it is when you asked me if I'd read.
The first is a 50. How am Igoing? I'm sure he's referring
to the sentence. I was likegoing, WT H about right. But
like, I opened up my yep, that'sthe one. It's Yeah,

it's weird. It's weird. There's probably some if
I had to guess there's probablysome confidential reason why
that specific term had to be inthere. I don't know. Maybe it's
bankruptcy protection? I don'tknow. But there has to be some
compelling reason for one sideor the other for why that needed

(53:00):
to be in there. And for why

the plane has allowed it. Right. Right.

Maybe it's look, this is a temporary stopgap
measure until we have a morepermanent solution. So we'll so
NARS offering to give sevenyears of this. Let's see how the
market reacts after seven years,we'll see if consumer if
consumers if the market drivesdown the average commission,
right? Because our position isthat no rule that we have ever

(53:28):
set out, has actuallyartificially inflated the cost
of commissions,

right? Who knows?
No, that was a ratherinteresting one. But anyway,
back to my saying is, you know,follow the news. Follow the
headlines, read the settlement.
Make sure you know what it saysso that when a a seller or a
buyer has a question, you cananswer it with confidence.
Remember, you're not anattorney. So don't don't cross
that line. But the facts are outthere. Like internally, we have

(53:55):
an FAQ document we're runningand I preface it or I worded it
as if are the sellers askingoriginal question how the agent
can respond based on the factsof my effect. I use chat, GBT
uploaded the settlementagreement to you like you have
mastered that thing trained itso it's actually doing how you
can now feed it in a news storyand ask it to fact check it and
it's hilarious. I thought it'sit's nailed it every single

(54:19):
time. So it's been kind ofinteresting to watch it fact
check stuff but so definitelymake sure you know the facts.
Make sure you know what's in themedia. And don't trust the
headlines. Don't trust thestories fact check everything.
Be the expert. Be the calm,cool, level person that's going

(54:40):
to bring some sanity and talk toyour customers. Make sure they
know what's going on and knowwith a timeline of everything.
Don't go crazy. Don't panic.
Don't be don't be that agent.
Right? There's plenty of themout there doing it for us. Don't
be that agent. No. So all right,everyone. Thank you so much for
tuning in. into the 121%podcast. If you're listening on

(55:03):
your favorite podcast app,please do us a great, great big
favor. And make sure you followus there. Make sure you give us
a review give us those fivestars. It helps the algorithm
push our podcasts out to otherfolks. If you're watching the
video on YouTube, make sure youhit that like button. Make sure
you subscribe to us and hit thebell so you can be notified the
next episode. Next episodeshould say is released. So

(55:25):
remember the 121% podcasts. It'sthe 50% education it's 50%
motivation, but the differencebetween ordinary and
extraordinary is the extra 21%Thank you so much for watching.
We'll catch you next time.
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