March 21, 2024 • 21 mins
In this compelling episode of Hudson Valley's Real Estate Explained, Michael Kahns and Rik Brescia offer a detailed examination of the recent National Association of Realtors (NAR) settlement. This significant legal event has important implications for anyone interested in real estate, from seasoned investors to first-time buyers. Tune in as we dispel myths and misinformation surrounding this crucial topic.
The episode scrutinizes the history of the NAR, tackles the lawsuit's nature, and ponders over the settlement's ultimate outcomes. Learn about the profound outcomes of this event on the real estate industry's future landscape. The hosts delve deeper into the NAR's origins and evolution since 1908, its significant role in setting ethical standards for realtors, and its deep-seated involvement in owning and operating most Multiple Listing Services (MLS).
Through this enlightening discussion, you'll understand the core issues that precipitated the lawsuit and settlement, and gain clarity on the cooperative commission rule introduced in the late 1990s. Get ready to uncover the gritty aspects of the NAR settlement and enrich your understanding of current real estate events and trends.
The show takes a substantial dive into the NAR settlement, a milestone that promises to substantially influence the real estate market. It explores the history of buyer representation, the changes initiated by NAR, and the push from consumer protection advocates for this development.
The hosts share their personal experiences as real estate agents in the days before buyer representation became the norm. They highlight the unintended consequences of the transition prompted by the NAR settlement, including the seeming non-negotiability of commissions, resulting in the Department of Justice's intervention.
This episode explicates what the settlement includes—the $418 million four-year payout, the ban on buyer broker compensation on any NAR-operated MLS, and the requirement for NAR members to have an exclusive right to represent,a buyer's agreement before showing houses. Don't miss this insightful discussion on the fallout of the NAR settlement, its potential benefits and drawbacks, and our vision for the ideal future of real estate.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey everybody, thank you for listening. And before we get started,
I wanted to come on and just share.
Today's episode, we'll be reviewing the National Association of Realtors settlement
that took place last week.
This is a very hot topic. And one thing that I would like to disclose right
up front is while we believe that this settlement will stick,
(00:22):
it still needs to be, at least at this point in time, approved by the Department
of Justice, which we anticipate going very smoothly.
That being said, there's a lot to unpack here, so stay tuned and enjoy.
One, two, three, four. Welcome to Hudson Valley's Real Estate Explained,
(00:43):
your getaway to understanding real estate.
Whether you're buying your first home, an experienced investor,
or just real estate curious, this is the place for you.
So dive in with us as we unravel the intricacies of property deals and investment
strategies guided by industry experts. We're demystifying Hudson Valley real
estate together. Let's go.
(01:03):
Hey everybody, welcome back to another episode of Hudson Valley Real Estate
Explained. I'm your host, Michael Kahn. I'm joined today again with Mr.
Rick Brescia. And today we are coming to you with one of the most relevant topics
that you're going to hear in a while.
And it's on everybody's mind. This is making national headlines and it's being
(01:25):
talked about a lot, not just in the real estate industry, but amongst anybody
that has an interest in real estate.
So if you have heard about the recent National Association of Realtors settlement
that took place in Missouri, and you have questions about that,
then you're going to want to tune in and take a listen because we're going to
do a deep dive into the history of National Association of Realtors.
(01:46):
We're going to look into what the case was about, what the settlement was,
and then ultimately what the the outcomes are going to be and how that's going
to impact real estate in our nation.
So Rick, I'm very excited to dive into this.
I think there's a lot of misinformation out there, a lot of misunderstanding,
and I'm really excited to be a part of helping to set the record straight and
(02:10):
add some clarity to what's actually happening out there.
Michael, the sky is falling. Yeah.
Not even close. Not even close.
But that's what you might think, especially a lot of agents out there when reading
headlines from some of these clickbait articles.
You know, it's interesting. I've always had a distrust for news,
(02:32):
but knowing what I know intimately about this lawsuit, because I've been following
it from the very beginning, what the settlement means and how it's going to impact us.
And when I read the headlines and how absolutely misleading they are,
it's given me this whole new hatred for news articles and news medias because
they really are just completely butchering what's actually happening, in my opinion.
(02:59):
Some of them are, for sure. I've seen some that I thought were fantastic.
And then I've seen some where I couldn't believe how off base they were.
Yeah, fair point. I am focusing on the ones that are negative.
No, because there are some really, really good ones, some ones that help people understand.
And I've read a lot of them and, you know, we're going to get right down into it.
(03:23):
So first, what I'd really like to do is just understand, you know,
I think to phrase what we're about to talk about, let's talk about what the
National Association of Realtors is and what role they play in our world.
Awesome. And I have an interesting fact for you.
Go ahead, Michael. Actually, I've got two. Okay.
(03:45):
Do you know when National Association of Realtors was founded?
Do I know? Yeah. Mike, come on.
There's not a lot I don't know.
I'll tell you what. Let me just take a guess. I'm going to say approximately
1908. Good job. Good job.
There's a paper in front of you that says 1908 on it.
So National Association of Realtors was founded in 1908. However,
(04:08):
prior to that, starting in the 1800s, brokers would get together.
And meet, right? And ultimately form what would be considered the first multiple listing service.
So brokers would get together in the 1800s and tell each other about properties
they're trying to sell for people.
And what they would do at those meetings would say, hey, if you know somebody
(04:32):
that wants to buy this property, bring them over.
I'll give you some of my money. I'll give you some of my commission.
And that's when broker to broker compensation or this cooperation really began
And just brokers trying to work with each other,
cooperating to get the job done for people that needed to sell and for people
(04:53):
that needed to buy. And it made a lot of sense, right?
Because you don't have the. It still does. It still does. Absolutely.
So, but after that national association of realtors founded in 1908 and its
role is essentially to set a standard of guiding principles,
a code of ethics for realtors that supersede or go above and beyond state and national laws.
(05:18):
This is, they kind of govern us on what we're allowed to do and not allowed to do.
And they have this code of ethics, which again is above and beyond laws and,
and, and where the law doesn't mingle, they take control and make sure that
everybody is acting appropriately, I guess you could say.
Yeah. And it's, it's quite interesting too, because.
(05:39):
And pardon me, as we know, the general public throws around the term realtor
as anyone in the real estate industry who has a license.
And as we know, that's not necessarily the case.
That is not the case. In fact, not every real estate agent is a member of National
Association of Realtors.
A great example of that is right in Manhattan.
(06:00):
Most of those agents are not members of National Association of Realtors.
There's another association for Manhattan called REBNY, and they all belong to that.
And my, I may be reaching here, but my guess is they feel that a more localized
association governing their code of ethics is more important to them in New
(06:20):
York City representing their values.
Sure. As opposed to a national one. So not everybody is a realtor,
but this is a very robust organization with millions,
I think 1.5 million members, if my numbers are correct, across the United States, which is large,
which is a very, very large organization.
(06:41):
And I would say more real estate agents are members than not by a hefty amount.
Yeah, I agree with that. In addition to that, the MLS or multiple listing service
where transactions, I shouldn't say transactions, where listings are listed.
Inputted so that it can be displayed on websites where other agents can view listings available.
(07:07):
So again, we go back to the 1800s, everybody got together in a room and shared.
Now we're just putting it on a multiple listing service so that other people
can have access to it. We don't have to get together in a room anymore.
Prior to the internet, it was a book, right? It was a big book that would get
shared. There was a large book that was distributed throughout the offices.
You know, I mean, I can only talk from a local standpoint in the Hudson Valley,
(07:28):
but I'm sure that's how it was done everywhere. Yeah.
So they get distributed monthly. And I heard it was sort of weekly.
You would get weekly addendums, right? New updates. You get pages.
Yeah. Weekly pages for new listings.
Once the internet came about, everything went online. So we would enter our listings in there.
Now, here's the interesting thing about MLSs.
(07:49):
There are, as of October 2023, there are roughly 540 MLSs.
Now, I do not, I was unable to get the exact number of MLSs that are owned and
operated by National Association of Realtors, but it is the vast majority.
The National Association of Realtors owns a lot.
(08:10):
Yeah, it's actually 317. Oh, you got the number. Oh, that's great.
Oh, no, I'm just making it up. Oh.
Randomly saying a number to sound smart. I would actually argue it's probably more than that.
It probably is. I didn't go through and count, but there is a website that I
was looking at yesterday that had all 540 MLSs listed and almost every single
(08:33):
one had realtor owned right next to it.
So if I take the time and count, my guess is it's probably going to be in the
mid 400s somewhere really, really high.
You're probably looking at about 90%. Yeah. Yes. So, needless to say,
this multiple listing service,
how we broker homes is owned by – for all intents and purposes,
(08:58):
it's sort of owned by the National Association of Realtors, so they have a lot
of sway over what happens. Right.
This is such an important piece to the puzzle and it needs to sort of be clarified
because it is really at the essence of what's happening here.
So to recap the introduction, National Association of Realtors is there to set
(09:22):
standards for realtors across America.
Which you'll hear us refer to as NAR probably from this point on.
They own the vast majority of MLSs, and they were sued by a group of home sellers
that said there was collusion in keeping interest rates high.
(09:43):
Commissions. Sorry, commissions. A lot to talk about in real estate,
keeping commissions high.
So let's talk about those core issues that led to the settlement.
So knowing the strength of who they are, most of real estate agents or members,
they own most of the MLSs.
Let's jump into sort of why this is happening.
(10:05):
And it really has to do with transparency and buyer agent commissions, right? Yes, it does.
Another little known fact. In the late 1990s, National Association of Realtors,
or NAR, created something called a cooperative commission rule.
And its intentions were to offer,
(10:28):
and basically the rule was you must offer a commission to a buyer representative
if you're submitting a listing on MLS, which was the way to get a listing out.
So I have to offer up a part of my commission to a buyer's agent.
And this was put in place in response to calls from consumer protection advocates
(10:51):
for buyer representation. So before that, there wasn't a lot of buyer representation.
It was buyer beware. That's correct.
And the intentions were good when this was put into place. A hundred percent.
And I can quickly explain that. Please.
You know, being in the business, when I just started out the first couple of
years, there was not buyer representation.
(11:13):
And it felt very odd to be traveling around with buyers because then you actually,
for the most part, you'd have buyers in your car with you. And you would take
them from home to home and you might do that multiple times and you really get
to know them. You have lunch with them.
Pardon me. You, you even, you know, hold their babies as they go down and look
at a basement. They don't want to bring the baby down to.
(11:35):
And then you're going in to sign a purchase offer.
And part of the paperwork you had to sign was a disclosure statement because
those were still active back then.
However, that disclosure said you worked for the seller. So now this person
that you had befriended and worked with for possibly months at that time,
you had to have them sign something that says, oh, by the way,
(11:57):
I don't represent you. I represent the seller.
And that's where NARS stepped in back then. Yeah. because of a little bit of
pressure, but good pressure, in my opinion.
I think I never remember speaking to an agent back in the day that was not excited
about buyer agency coming in.
I thought it was a great idea and so did all my counterparts.
Yeah, it makes a lot of sense.
(12:19):
Nobody buying a home who needs representation just as much as a seller was really being represented.
Your Your obligation was to negotiate against them all of a sudden, right? Right.
Which doesn't make sense. So there was a big push on NAR to implement this cooperation
(12:41):
agreement where we're going to offer a compensation which enabled buyer representation.
It enabled people that were shopping for homes for the first time to truly trust
their agent, to disclose information to their agent, and to have this professional
relationship that gave them a competitive advantage. That was the point of it.
(13:03):
Indeed it was. And it made sense. For the most part. It did.
It still sort of does. It does. It makes a lot of sense.
But here's what I think the unintended consequences are or were.
When we look at that, we, and nationals or NAR has always said that all fees,
(13:26):
all commissions are negotiable.
And what I think has happened over time is that was sort of lost.
I think when we got a listing agreement signed for whatever percentage we got it signed.
And when we put into MLS, whatever percentage we were offering.
It was presented as a way that it's no longer negotiable. Um,
(13:50):
and it was, and it has been negotiated.
We've renegotiated commissions on certain situations and things like that,
but it's always been negotiable and buyer's agents became very accustomed to
expecting what was in that agreement on MLS,
I expect what's being offered there and where I think the department of justice
in this lawsuit really honed in on is, well, wait a second, is it really what
(14:17):
they should be expecting or is it negotiable?
And if it's negotiable, then we should change how it's being done.
Does that make sense to you, right? Yeah, it makes sense. I think there was
also an issue with the fact that the seller was basically paying a commission to their listing agent.
And of course, the listing agent would then be giving a portion of it to a buyer's
(14:37):
agent who would not be working in the best interests of the seller.
The buyer's agent is working on behalf of the buyer, trying to get their best deal on the property.
So that's where they found some issue as well, which, which when you say it
out loud, you can actually understand it.
But if we go back to the very beginning, we need help.
(14:58):
Correct. I can't service the entire market when selling a house.
We need somebody else to help bring buyers, right?
We need somebody that knows somebody that might be
interested in that house to bring them to us so we we have to have
a balance agreed a buyer and and and listing agents so let's get into the settlement
(15:19):
breakdown so i'm gonna so what we're gonna do right now is just really hone
in on what national association of realtors settled on.
Then we're going to dive into how that's going to impact buyer representation
as well as their compensation and where we feel the future of real estate is
going to look like going forward.
(15:39):
And I think this is a good time to just set a little disclosure that what we
are saying here is our own opinions.
We are not representing our brokerage compass in any way or shape or form.
And yeah, so for more information, feel free to reach out directly to us.
So let's get into it. The settlement breakdown.
(16:01):
The settlement is broken down into three very specific parts.
Number one, National Association of Realtors is going to pay out $418 million
over the course of four years.
Okay that's a that's
a pretty straightforward one and this particular payout
covers any and all members
(16:22):
and or brokers that did less than two billion dollars annually in sales yes
so it does not include several large brokerages they are going to have to negotiate
their own payout terms with,
with the lawyers and the judge.
So that $418 million payout is going to be significantly higher. It's already higher.
(16:49):
There are several brokerages that have already negotiated their payout.
Um, and there are still some that are negotiating now, and we're,
we're going to see where that lands, but $418 million specifically from national
association realtor is going to be paid out over the next four years. Yeah.
In addition to that, National Association of Realtors is going to ban,
(17:12):
so eliminate, the option of
being able to offer buyer broker compensation on any MLS operated by NAR.
NAR. Which is, as we said before, the vast majority of MLSs. Yes.
So we cannot offer on National Association of Realtors operated MLSs.
(17:35):
We will not be able to offer any type of compensation.
That does not mean a buyer cannot get, a buyer's agent cannot get compensation.
We can't advertise it. That is correct. And we definitively can't advertise it on the MLS. Correct.
On the NAR-owned MLS. Correct.
In addition to that, the third big point is going forward,
(17:58):
word, NAR members will be required to have an exclusive right to represent or
a buyer's agreement in place prior to showing houses.
Great idea. A phenomenal idea. And we're going to dive into some of the reasons
why as we look into the future.
Yeah, there's an upside to anything, you know, if you look, and this one,
(18:22):
you don't have to look too hard because it's actually, it's a wonderful idea.
It's something that a lot of agents were already doing. Not a majority by any
means, but it protects both the buyer and the agent at that point.
Yeah. And if they weren't doing it, I guarantee you most wanted to do it,
but they were operating out of a fear of losing the client. I agree.
(18:43):
So number one, paying out $418 million over the next four years.
Number two, no longer allowed to advertise a specifically buyer's agent commission in a NAR-owned MLS.
And number three, a requirement that a buyer agent sign an agreement with a
buyer prior to even showing houses. So if you want to call us up and say,
(19:06):
Hey, I like this house, can I see it?
I need to, you know, we need to have a consultation and you need to sign an
agreement, which will include terms, what the responsibilities that I owe you,
what I expect from a buyer, as well as what sort of compensation model we have chosen.
So all good things. And so those three things are the entire basis of this settlement.
(19:30):
Correct. So all the other things that you're seeing on the news,
on social media, where I've seen it butchered, and in any other outlet,
it breaks down to those three simple things.
Yeah, and essentially we're decoupling the. Uncoupling? Decoupling,
uncoupling. I like uncoupling.
(19:52):
Isn't decoupling and uncoupling the same thing? Maybe not. I don't know.
I can see it's something we're going to be talking about later.
By the look he just gave me, by the way, guys. I don't know.
If I'm wrong about that, please let me know.
But uncoupling commissions from the MLS. So commissions can still get paid.
Buyer's agents need to be compensated. good buyers agents provide an incredible
(20:15):
service for their clients.
They help them from making bad decisions. They can save them money and they
are essential in my opinion to this industry.
However, how that's going to happen is changing dramatically.
Okay, guys, we're going to pause it right there because this particular episode
is going quite longer than our norm.
(20:36):
And we are focused on keeping this to one commute per episode.
So we won't make you wait too long. The part two will drop very, very soon.
And we hope you tune in for the rest of the discussion on the NAR settlement
and how that's going to impact the real estate industry going forward.
Thank you guys. We'll see you around the Valley.
(21:00):
Music.
Hey everybody, thank you for listening. And before we get started,
I wanted to come on and just share.
Today's episode, we'll be reviewing the National Association of Realtors settlement
that took place last week.
This is a very hot topic. And one thing that I would like to disclose right
up front is while we believe that this settlement will stick,
(00:22):
it still needs to be, at least at this point in time, approved by the Department
of Justice, which we anticipate going very smoothly.
That being said, there's a lot to unpack here, so stay tuned and enjoy.
One, two, three, four. Welcome to Hudson Valley's Real Estate Explained,
(00:43):
your getaway to understanding real estate.
Whether you're buying your first home, an experienced investor,
or just real estate curious, this is the place for you.
So dive in with us as we unravel the intricacies of property deals and investment
strategies guided by industry experts. We're demystifying Hudson Valley real
estate together. Let's go.
(01:03):
Hey everybody, welcome back to another episode of Hudson Valley Real Estate
Explained. I'm your host, Michael Kahn. I'm joined today again with Mr.
Rick Brescia. And today we are coming to you with one of the most relevant topics
that you're going to hear in a while.
And it's on everybody's mind. This is making national headlines and it's being
(01:25):
talked about a lot, not just in the real estate industry, but amongst anybody
that has an interest in real estate.
So if you have heard about the recent National Association of Realtors settlement
that took place in Missouri, and you have questions about that,
then you're going to want to tune in and take a listen because we're going to
do a deep dive into the history of National Association of Realtors.
(01:46):
We're going to look into what the case was about, what the settlement was,
and then ultimately what the the outcomes are going to be and how that's going
to impact real estate in our nation.
So Rick, I'm very excited to dive into this.
I think there's a lot of misinformation out there, a lot of misunderstanding,
and I'm really excited to be a part of helping to set the record straight and
(02:10):
add some clarity to what's actually happening out there.
Michael, the sky is falling. Yeah.
Not even close. Not even close.
But that's what you might think, especially a lot of agents out there when reading
headlines from some of these clickbait articles.
You know, it's interesting. I've always had a distrust for news,
(02:32):
but knowing what I know intimately about this lawsuit, because I've been following
it from the very beginning, what the settlement means and how it's going to impact us.
And when I read the headlines and how absolutely misleading they are,
it's given me this whole new hatred for news articles and news medias because
they really are just completely butchering what's actually happening, in my opinion.
(02:59):
Some of them are, for sure. I've seen some that I thought were fantastic.
And then I've seen some where I couldn't believe how off base they were.
Yeah, fair point. I am focusing on the ones that are negative.
No, because there are some really, really good ones, some ones that help people understand.
And I've read a lot of them and, you know, we're going to get right down into it.
(03:23):
So first, what I'd really like to do is just understand, you know,
I think to phrase what we're about to talk about, let's talk about what the
National Association of Realtors is and what role they play in our world.
Awesome. And I have an interesting fact for you.
Go ahead, Michael. Actually, I've got two. Okay.
(03:45):
Do you know when National Association of Realtors was founded?
Do I know? Yeah. Mike, come on.
There's not a lot I don't know.
I'll tell you what. Let me just take a guess. I'm going to say approximately
1908. Good job. Good job.
There's a paper in front of you that says 1908 on it.
So National Association of Realtors was founded in 1908. However,
(04:08):
prior to that, starting in the 1800s, brokers would get together.
And meet, right? And ultimately form what would be considered the first multiple listing service.
So brokers would get together in the 1800s and tell each other about properties
they're trying to sell for people.
And what they would do at those meetings would say, hey, if you know somebody
(04:32):
that wants to buy this property, bring them over.
I'll give you some of my money. I'll give you some of my commission.
And that's when broker to broker compensation or this cooperation really began
And just brokers trying to work with each other,
cooperating to get the job done for people that needed to sell and for people
(04:53):
that needed to buy. And it made a lot of sense, right?
Because you don't have the. It still does. It still does. Absolutely.
So, but after that national association of realtors founded in 1908 and its
role is essentially to set a standard of guiding principles,
a code of ethics for realtors that supersede or go above and beyond state and national laws.
(05:18):
This is, they kind of govern us on what we're allowed to do and not allowed to do.
And they have this code of ethics, which again is above and beyond laws and,
and, and where the law doesn't mingle, they take control and make sure that
everybody is acting appropriately, I guess you could say.
Yeah. And it's, it's quite interesting too, because.
(05:39):
And pardon me, as we know, the general public throws around the term realtor
as anyone in the real estate industry who has a license.
And as we know, that's not necessarily the case.
That is not the case. In fact, not every real estate agent is a member of National
Association of Realtors.
A great example of that is right in Manhattan.
(06:00):
Most of those agents are not members of National Association of Realtors.
There's another association for Manhattan called REBNY, and they all belong to that.
And my, I may be reaching here, but my guess is they feel that a more localized
association governing their code of ethics is more important to them in New
(06:20):
York City representing their values.
Sure. As opposed to a national one. So not everybody is a realtor,
but this is a very robust organization with millions,
I think 1.5 million members, if my numbers are correct, across the United States, which is large,
which is a very, very large organization.
(06:41):
And I would say more real estate agents are members than not by a hefty amount.
Yeah, I agree with that. In addition to that, the MLS or multiple listing service
where transactions, I shouldn't say transactions, where listings are listed.
Inputted so that it can be displayed on websites where other agents can view listings available.
(07:07):
So again, we go back to the 1800s, everybody got together in a room and shared.
Now we're just putting it on a multiple listing service so that other people
can have access to it. We don't have to get together in a room anymore.
Prior to the internet, it was a book, right? It was a big book that would get
shared. There was a large book that was distributed throughout the offices.
You know, I mean, I can only talk from a local standpoint in the Hudson Valley,
(07:28):
but I'm sure that's how it was done everywhere. Yeah.
So they get distributed monthly. And I heard it was sort of weekly.
You would get weekly addendums, right? New updates. You get pages.
Yeah. Weekly pages for new listings.
Once the internet came about, everything went online. So we would enter our listings in there.
Now, here's the interesting thing about MLSs.
(07:49):
There are, as of October 2023, there are roughly 540 MLSs.
Now, I do not, I was unable to get the exact number of MLSs that are owned and
operated by National Association of Realtors, but it is the vast majority.
The National Association of Realtors owns a lot.
(08:10):
Yeah, it's actually 317. Oh, you got the number. Oh, that's great.
Oh, no, I'm just making it up. Oh.
Randomly saying a number to sound smart. I would actually argue it's probably more than that.
It probably is. I didn't go through and count, but there is a website that I
was looking at yesterday that had all 540 MLSs listed and almost every single
(08:33):
one had realtor owned right next to it.
So if I take the time and count, my guess is it's probably going to be in the
mid 400s somewhere really, really high.
You're probably looking at about 90%. Yeah. Yes. So, needless to say,
this multiple listing service,
how we broker homes is owned by – for all intents and purposes,
(08:58):
it's sort of owned by the National Association of Realtors, so they have a lot
of sway over what happens. Right.
This is such an important piece to the puzzle and it needs to sort of be clarified
because it is really at the essence of what's happening here.
So to recap the introduction, National Association of Realtors is there to set
(09:22):
standards for realtors across America.
Which you'll hear us refer to as NAR probably from this point on.
They own the vast majority of MLSs, and they were sued by a group of home sellers
that said there was collusion in keeping interest rates high.
(09:43):
Commissions. Sorry, commissions. A lot to talk about in real estate,
keeping commissions high.
So let's talk about those core issues that led to the settlement.
So knowing the strength of who they are, most of real estate agents or members,
they own most of the MLSs.
Let's jump into sort of why this is happening.
(10:05):
And it really has to do with transparency and buyer agent commissions, right? Yes, it does.
Another little known fact. In the late 1990s, National Association of Realtors,
or NAR, created something called a cooperative commission rule.
And its intentions were to offer,
(10:28):
and basically the rule was you must offer a commission to a buyer representative
if you're submitting a listing on MLS, which was the way to get a listing out.
So I have to offer up a part of my commission to a buyer's agent.
And this was put in place in response to calls from consumer protection advocates
(10:51):
for buyer representation. So before that, there wasn't a lot of buyer representation.
It was buyer beware. That's correct.
And the intentions were good when this was put into place. A hundred percent.
And I can quickly explain that. Please.
You know, being in the business, when I just started out the first couple of
years, there was not buyer representation.
(11:13):
And it felt very odd to be traveling around with buyers because then you actually,
for the most part, you'd have buyers in your car with you. And you would take
them from home to home and you might do that multiple times and you really get
to know them. You have lunch with them.
Pardon me. You, you even, you know, hold their babies as they go down and look
at a basement. They don't want to bring the baby down to.
(11:35):
And then you're going in to sign a purchase offer.
And part of the paperwork you had to sign was a disclosure statement because
those were still active back then.
However, that disclosure said you worked for the seller. So now this person
that you had befriended and worked with for possibly months at that time,
you had to have them sign something that says, oh, by the way,
(11:57):
I don't represent you. I represent the seller.
And that's where NARS stepped in back then. Yeah. because of a little bit of
pressure, but good pressure, in my opinion.
I think I never remember speaking to an agent back in the day that was not excited
about buyer agency coming in.
I thought it was a great idea and so did all my counterparts.
Yeah, it makes a lot of sense.
(12:19):
Nobody buying a home who needs representation just as much as a seller was really being represented.
Your Your obligation was to negotiate against them all of a sudden, right? Right.
Which doesn't make sense. So there was a big push on NAR to implement this cooperation
(12:41):
agreement where we're going to offer a compensation which enabled buyer representation.
It enabled people that were shopping for homes for the first time to truly trust
their agent, to disclose information to their agent, and to have this professional
relationship that gave them a competitive advantage. That was the point of it.
(13:03):
Indeed it was. And it made sense. For the most part. It did.
It still sort of does. It does. It makes a lot of sense.
But here's what I think the unintended consequences are or were.
When we look at that, we, and nationals or NAR has always said that all fees,
(13:26):
all commissions are negotiable.
And what I think has happened over time is that was sort of lost.
I think when we got a listing agreement signed for whatever percentage we got it signed.
And when we put into MLS, whatever percentage we were offering.
It was presented as a way that it's no longer negotiable. Um,
(13:50):
and it was, and it has been negotiated.
We've renegotiated commissions on certain situations and things like that,
but it's always been negotiable and buyer's agents became very accustomed to
expecting what was in that agreement on MLS,
I expect what's being offered there and where I think the department of justice
in this lawsuit really honed in on is, well, wait a second, is it really what
(14:17):
they should be expecting or is it negotiable?
And if it's negotiable, then we should change how it's being done.
Does that make sense to you, right? Yeah, it makes sense. I think there was
also an issue with the fact that the seller was basically paying a commission to their listing agent.
And of course, the listing agent would then be giving a portion of it to a buyer's
(14:37):
agent who would not be working in the best interests of the seller.
The buyer's agent is working on behalf of the buyer, trying to get their best deal on the property.
So that's where they found some issue as well, which, which when you say it
out loud, you can actually understand it.
But if we go back to the very beginning, we need help.
(14:58):
Correct. I can't service the entire market when selling a house.
We need somebody else to help bring buyers, right?
We need somebody that knows somebody that might be
interested in that house to bring them to us so we we have to have
a balance agreed a buyer and and and listing agents so let's get into the settlement
(15:19):
breakdown so i'm gonna so what we're gonna do right now is just really hone
in on what national association of realtors settled on.
Then we're going to dive into how that's going to impact buyer representation
as well as their compensation and where we feel the future of real estate is
going to look like going forward.
(15:39):
And I think this is a good time to just set a little disclosure that what we
are saying here is our own opinions.
We are not representing our brokerage compass in any way or shape or form.
And yeah, so for more information, feel free to reach out directly to us.
So let's get into it. The settlement breakdown.
(16:01):
The settlement is broken down into three very specific parts.
Number one, National Association of Realtors is going to pay out $418 million
over the course of four years.
Okay that's a that's
a pretty straightforward one and this particular payout
covers any and all members
(16:22):
and or brokers that did less than two billion dollars annually in sales yes
so it does not include several large brokerages they are going to have to negotiate
their own payout terms with,
with the lawyers and the judge.
So that $418 million payout is going to be significantly higher. It's already higher.
(16:49):
There are several brokerages that have already negotiated their payout.
Um, and there are still some that are negotiating now, and we're,
we're going to see where that lands, but $418 million specifically from national
association realtor is going to be paid out over the next four years. Yeah.
In addition to that, National Association of Realtors is going to ban,
(17:12):
so eliminate, the option of
being able to offer buyer broker compensation on any MLS operated by NAR.
NAR. Which is, as we said before, the vast majority of MLSs. Yes.
So we cannot offer on National Association of Realtors operated MLSs.
(17:35):
We will not be able to offer any type of compensation.
That does not mean a buyer cannot get, a buyer's agent cannot get compensation.
We can't advertise it. That is correct. And we definitively can't advertise it on the MLS. Correct.
On the NAR-owned MLS. Correct.
In addition to that, the third big point is going forward,
(17:58):
word, NAR members will be required to have an exclusive right to represent or
a buyer's agreement in place prior to showing houses.
Great idea. A phenomenal idea. And we're going to dive into some of the reasons
why as we look into the future.
Yeah, there's an upside to anything, you know, if you look, and this one,
(18:22):
you don't have to look too hard because it's actually, it's a wonderful idea.
It's something that a lot of agents were already doing. Not a majority by any
means, but it protects both the buyer and the agent at that point.
Yeah. And if they weren't doing it, I guarantee you most wanted to do it,
but they were operating out of a fear of losing the client. I agree.
(18:43):
So number one, paying out $418 million over the next four years.
Number two, no longer allowed to advertise a specifically buyer's agent commission in a NAR-owned MLS.
And number three, a requirement that a buyer agent sign an agreement with a
buyer prior to even showing houses. So if you want to call us up and say,
(19:06):
Hey, I like this house, can I see it?
I need to, you know, we need to have a consultation and you need to sign an
agreement, which will include terms, what the responsibilities that I owe you,
what I expect from a buyer, as well as what sort of compensation model we have chosen.
So all good things. And so those three things are the entire basis of this settlement.
(19:30):
Correct. So all the other things that you're seeing on the news,
on social media, where I've seen it butchered, and in any other outlet,
it breaks down to those three simple things.
Yeah, and essentially we're decoupling the. Uncoupling? Decoupling,
uncoupling. I like uncoupling.
(19:52):
Isn't decoupling and uncoupling the same thing? Maybe not. I don't know.
I can see it's something we're going to be talking about later.
By the look he just gave me, by the way, guys. I don't know.
If I'm wrong about that, please let me know.
But uncoupling commissions from the MLS. So commissions can still get paid.
Buyer's agents need to be compensated. good buyers agents provide an incredible
(20:15):
service for their clients.
They help them from making bad decisions. They can save them money and they
are essential in my opinion to this industry.
However, how that's going to happen is changing dramatically.
Okay, guys, we're going to pause it right there because this particular episode
is going quite longer than our norm.
(20:36):
And we are focused on keeping this to one commute per episode.
So we won't make you wait too long. The part two will drop very, very soon.
And we hope you tune in for the rest of the discussion on the NAR settlement
and how that's going to impact the real estate industry going forward.
Thank you guys. We'll see you around the Valley.
(21:00):
Music.
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