Episode #201
06:52 Pick up where the Real Estate show left off!
A bombshell NAR settlement could bring wide-sweeping changes to the housing market. After a snowball of NAR lawsuits, the realtor association agreed to settle for a whopping $418 million and make critical changes to how real estate agent commissions are paid and how competition can be upheld. This significantly impacts anyone buying or selling a home and has life-changing effects for every real estate agent and realtor in the country. The New York Times’ Debra Kamin joins us to break the story.
Debra breaks down the enormous legal loss that NAR (National Association of Realtors) suffered last week and the impacts it will have on the housing market. First, we discuss the new agent commission rules, which may break the standard six percent fee that realtors are used to taking. These commissions are real estate agents’ livelihoods, and a new model that supports lower commissions could force many agents to leave the industry entirely.
We’ll also touch on the turbulent times NAR has faced recently, from sexual harassment scandals to changing leadership and, now, a massive settlement that could lose them more than half of their members. Will a new type of real estate agent form from the ashes of this century-old model? Or, could a brand-new way of buying and selling homes transform the housing market? Stay with us; we’ll give you the entire scoop.
~~~~
Join BiggerPockets for FREE 👇
https://www.biggerpockets.com/signup?utm_source=owned_media
~~~~
Listen to The “On The Market” Podcast Wherever You Listen to Podcasts:
https://link.chtbl.com/OTM
~~~~
Join the Future of Real Estate Investing with Fundrise:
https://www.fundrise.com/bpmarket
~~~~
Find an Investor-Friendly Agent in Your Area:
http://biggerpockets.com/agentmatch
~~~~
Find Investor-Friendly Lenders:
http://biggerpockets.com/findlenders
~~~~
The NAR Will Eliminate 6% Commission Standards and Pay $418 Million in Damages After Settling Lawsuit:
https://www.biggerpockets.com/blog/national-association-of-realtors-to-pay-418-million-and-remove-commission-standards-as-part-of-settlement?utm_source=youtube&utm_medium=description&utm_campaign=none
~~~~
Is It the End of the Realtor? Inside the NAR Crisis:
https://www.biggerpockets.com/blog/the-end-of-the-realtor-inside-the-nar-scandal?utm_source=youtube&utm_medium=description&utm_campaign=none
~~~~
New Agent Lawsuits Could Have Profound Effects for Buying and Selling Homes:
https://www.biggerpockets.com/blog/on-the-market-135?utm_source=youtube&utm_medium=description&utm_campaign=none
~~~~
Read More From Debra:
NYT: https://www.nytimes.com/by/debra-kamin
Website: https://www.debrakamin.com/
Twitter: @debra_kamin or https://twitter.com/debra_kamin
~~~~
Connect with Dave on BiggerPockets:
https://www.biggerpockets.com/users/davem27?utm_source=youtube&utm_medium=description&utm_campaign=none
~~~~
Follow Dave on Instagram:
@thedatadeli or https://www.instagram.com/thedatadeli/
Show notes at: https://link.chtbl.com/OTM
00:00 Intro
01:50 A Huge Legal Loss
06:16 Agent Commission Collusion?
08:55 Commissions Will Change Forever
12:52 The End of Buyer’s Agents?
21:37 NAR’s Massive Lobbying Budget
23:51 Sexual Harassment Scandals
Great work Debra
Great episode! Do you think NAR would lower fees to entice more agents (that sell lower volumes) to stick around, or the opposite, increase their fees as the number of agents decreases (and expecting those that are successful to stick around and won't have a choice but pay higher fees)?
The listing contracts that people sign literally say what is being charged, and what might be going to the Buyer side this lawsuit of not knowing is kind of silly now the lawsuit against NAR they influenced the standard commission prices I agree with however you really should read your contract when signing a professional on to do a job for you it’s in the contract.
The root of the problem is that real estate agents are independent contractors, and not employees. As an IC, each agent is responsible for ALL aspects of their business – everybody is good at something, but very few people are competent enough at the wide array of skills required to succeed in real estate, and that's why 80% of agents only survive 2 years in the business. Having each agent do everything is like replacing the assembly line at General Motors, and having each person follow the frame down the assembly line, 1st putting the wheels on, then attaching the engine, then the seats, and then the body and windows… HUGELY inefficient! The real estate industry is decades (or centuries) behind the rest of the economy! Changing to an employee-based structure can dramatically improve efficiency, and reduce the cost of marketing and closing real estate by 50-90%! The National Assoc. of REALTORS has no incentive to improve efficiency, because they collect more dues based on their membership numbers, and if their membership drops 90% they'll be hurting big-time!
Sellers can still pay buyer’s agent commission, it just can’t be posted on the MLS. I think sellers will continue to pay buy side commission, with lower percentage going to the buyer side agent.
Buyers will have a hard time, but home prices aren’t going down due to this. Either commission. Are decoupled or similar to what they are now on a case by case basis. At the end of the day sellers will get what the market will pay. Prices will be what they are based on the market and not the commissions.
This is explained very very well, out of all of the videos I’ve watched on this. Wow. What a change it really is going to be in the future but let’s see what ends up happening.
This lady is out to lunch. Sellers now will accept 3% less for their house. Fat chance. It will go into their pockets. Buyers will pay their own commissions or go unrepresented.
No set commissions? But agents don’t really have the authority to do so. The broker ultimately sets the price and established companies have no incentive to compete with each other. A wink and nod between brokers is all it takes.
I can see less commissions, but i dont see the home prices coming down.
Buyer will take cash back on loan and pay a commission which will be proportional to how much the home price can be negotiated down..
The buyer agent is really unnecessary. They are just a door opener.
Typically the sales price is based on current market value. Not commissions packed on price. ok, let's list your house for 15,000 more than it's worth it won't appraise. Sellers have for over 50 years since the 70s factored in the closing costs.
This is all about big corporations wanting to take control if R E wealth. It won't be in the consumers best interest.
I’ve bought 2 properties (my primary residence and a vacation/STR) FSBO…piece of cake. Did due diligence w properties, lender and contract, seller hired escrow it’s really very simple.
Agents are great for negotiating, other than that 🤷♀️
NAR as a Political Action Group powerhouse ended last Friday
She’s wrong about prices coming down. Sellers will still want to get as much as possible.
Values are based off comps. Comps have not changed. I highly doubt I, as a seller would lower my price over this.
Huge…
On contrary, I think the home prices will have a healthy climb due to this artificial commission component being partially absent. Yes,,the prices of the property will be listed lower ( commission component is not baked in now) but that will increase the demand in markets like California making the price rise.
As a realtor I wanted to be angry at this interview but it was actually a good one. She was accurate and realistic about the possible outcomes
Normally class action lawsuits are to protect consumers. The result of these frivolous lawsuits are buyers, sellers and Realtors will be harmed. The only people who win as a result of these frivolous lawsuits are Michael Ketchmark and the class action lawyers. This is purely political lawfare in an attempt to weaken NAR as a political lobby. PERIOD. To sell these lawsuits to the public as a guise to improve the housing affordability crisis is insulting to my intelligence. If it's not insulting to your intelligence then you might not be that intelligent to begin with. If the Department of Injustice wants to help consumers then lower property taxes, reduce the interest rates and regulate the wildly out of control insurance industry………….. but none of those measures would weaken NAR so they won't happen. It's time to grow up and stop pretending that Bidenomics are helping the average consumer or tax payer. They aren't. Then to demonize hard working realtors as a cartel or mafia through the propaganda media, well that's just plain disgusting to me. In Las Vegas Mr. Brandon said he expects Realtors to accept lower commissions to protect buyer……..aka make Mr. Brandon look good and pretend housing affordability would be improved…………the Mr. Brandon closes his speech by saying union contracts improves everyones income…………it's a slap in the face to anyone with two brain cells to rub together.
I think that real estate agents should be invested. 💯%
The people on this video clearly have not worked with buyers. There is far more work involved working with buyers. Sellers are so greedy these days. If they list with current comps they should immediately reduce their price by 3% +/- as all current comps include representation by two sides. MLS creates a level playing field for buyers and sellers. There is so much competition in this industry, it would make your head spin. This is a ridiculous law suit that will ultimately will hurt buyers. Prices will not go down. The corporations that are swooping up fixers and flipping them will prevail by using their own agents and save a bunch of money playing into this farse. Can someone please follow the money here and let us know who started this nonsense? Check out how many homes in the recent years have been flipped by corps. It's creating untenable rents and contributing to the homeless situation. What a dam shame!
This won't lower home prices. Argument doesn't make sense. Appraisers go by what has sold and homeowners aren't going to lower their home's price out of the goodness of their heart because now they'll be paying less commission lol they're going to pocket the money. Let's be real.
Listing agent is unaffected for the most part, investors lose big time, buyers agents lose big time, lawyers win in all aspects
1000s of transactions are 1,2,3,4,5and 6 percent! Some a flat fee! You don’t know what you are talking about. They did not go and get a lawyer. Lawyers reached out to them saying “ they might be eligible for compensation for misrepresentation, commission fixing… blah blah! A very major search engine set up the lawyers to send out post cards stating that nonsense to people who have brought homes within the last few years. The same post cards that we all received over Wells Fargo class action lawsuit over the over draft fees. 🤬🤬🤬. . It was collusion to falsify what agents do and are and it’s foul
The delusion here is sad. The lawyers charge 40% and all those sellers in the law suit won’t even see 40 bucks hardly. But the lawyer gets 200 million
Is she tracking zillows money??? They have way more influence!!
Alleged sexual harassment
Dave has interjected like 8 times that him and Debra are trying to stay fact-based and devoid of opinions and then Debra goes on to say things like "chokehold" and predict that home prices will go down. I REALLY appreciate her factual statement on this matter haha. Nice try Dave you are an awesome host. You really tried your best to steer this conversation away from a opinion/prediction discussion.
As for my opinion/prediction on home prices? They aren't going down. Debra seems to not know how prices are set. When you go to price a home, you don't think "oh what would I like my take home to be" and then add commissions on top. That was such an irresponsible interpretation on how this works from Debra. How it really works is you compare your home to what's in the market. If a home sold in your neighborhood that has your exact same floorplan, lot size, appliances, finishes, etc for 500k then your home will probably sell for 500k. Then you would subtract closing costs from it (e.g. agent commission fees). Do you really think a seller is going to want to price their home to 485k (500k – 3%) because now they aren't paying a buyer commission? We have full blown capitalism here so no thats not going to happen. The seller is obviously going to take home an extra 15k now.
In terms on how this will effect the market? Debra is wrong again. There will be a transition period which I believe that its going to last at least 1 year and probably no more than 4 years. First time home buyers, second time home buyers, and new investors are going to be confused and discouraged to enter the market because now they have to pay their own agent and its not like sellers are going to help them by bringing their home price down. Now agents will probably niche down more which will probably result in less overall buyers agents. Buyers agents will now have do more work to get a buyer to work with them and probably have to accept a less commission from what they are used to. In my opinion, this will probably result in less buyers in the market (i.e. lower demand) which should put pressure on prices downward. I just don't see that realistically happening with such low inventory and buyers seeming to enter the market regardless of how favorable it is to sellers.
My opinion is subject to change just like everyone else's. I've been an agent in Houston for 4 years now and I am excited for the change (not in terms on my loss of commission when dealing with buyers) because I will be able to witness such a dramatic change to the way we handle real estate. In terms of what my buyers agent model will look like (also subject to change). I was thinking 1% of sales prices due to me at closing and $100 for the first showing of the day then $75 for the subsequent showings due up front.
I think it would be cool if the show could read some comments about agents and buyers and what they want models to look like. This indeed an interesting time.
With 500,000 real estate agents expected to leave the industry, there will be fewer agents available, creating higher demand. Discount Realtors will face an influx of clients, prompting them to raise prices to cope with demand and hire more staff. This could lead to real estate agent fees rivaling those of attorneys due to the greater demand for realtors.
No one has a problem shopping at Amazon, putting Main Street out of business. Why should anyone cry about the democratization of real estate?
I've never, in a listing presentation, suggested a list price with realtor fees tacked on top of what my market value analysis price is. I show my sellers the comps, we collaboratively decide on a list price that's in the market to make sure we don't have an appraisal issue. Then, we discuss the listing agreement and compensation.
Well done. NAR should never have allowed their listings to be hijacked by the consumer sites. They owned the system(MLS) and rightly should have protected their members and thus the organization. Labor unions know this but NAR was drunk on the dues money flowing in and lost site of what they were supposed to do and what to protect. NAR destroyed themselves. You'll never see the corrupt Teaches unions do this as too much of their money gets funnelled back to DC and into Democratic money coffers.
The commission fee isn't going to lower. Fiduciary duty is dead, Dual agency is alive, and well. The listing agents will do twice the work facilitating the whole transaction, and Realtors will be in nonstop litigation being sued by buyers that felt taken advantage of, or all sellers will now become FSBO. Congratulations to the POS that got this started because now millions of Realtors will be out of work, buyers, and sellers will spiral into complete chaos, and lawsuits against eachother. Realtors will start working as transaction coordinators for flat fees, and buyer agency will be dead, which is so sad, because they are really needed.
If the 6% commission was not being required, isn't it just like it is already illegal to pay women less than men.
The buyer agents I have worked with didn't add a lot of value to the process. I bought 8 houses in my lifetime the last 2 I didn't use a buyer's agent. 1 we didn't use agents. We used a lawyers.
As a real estate agent in NYC, excluding Manhattan, I’ve observed a significant compression in commissions over the past 15 to 20 years due to intense competition. Listing agreements explicitly outline the percentage allocated to the listing agent and the buyer’s agent, with attorneys typically involved in the process. It’s worth noting that buyers often finance the purchase, which could be argued as them effectively covering costs for both sides
Ah- NYT – no wonder you hate the way this country works
Awesome interview again Dave. Good job! My question is what do I do now? I'm currently selling a property and it's a given I have to pay 6% to the realtor. This is approximately 26K which will eat into the down payment i trying to get back when I initially bought this house. Any suggestions will help
I am a full time Real Estate Agent and a longtime listener of Bigger Pockets and loved when On the Market came out. I have been listening since day one and love the hosts insightful wisdom on various topics, however a reporter is not a market expert.
I would love to see you all interview a person in the industry not one who studies it to make controversial takes. This makes great news articles but not actual application.
The president of Real has an amazing video out. Also the founders of AREA are Nar members with a great take that holds NAR accountable while being an on the ground expert.
Personally I do not think this will affect home values. We have a supply and demand issue. Appraisers will look at recent home sale values to give valuations. Somehow someway a commission will be apart of the transaction, therefore applicable to the price in one way or another.
Ehh I wish this lady Debra knew more of what she is talking about especially if bringing her on a big channel like this. Competition already exists… you can sell on your own, you can list for flat fee of as low as 199, you can literally decide you won’t pay any buyers agent fees. No one is forcing you to use an agent and there is no set commission. She also has 0 clue how the other countries real estate operate yet she brought up 2-3%… in those other countries such as Australia, Great Britain etc and housing is a lot more expensive there. Those countries still work on royalty politics and doesn’t even have the same politics as us which changes how an economy operates all together… you are not comparing apples to apples. Also aren’t aware in those countries they have fees up front they have to pay which sometimes goes up to 2% whether a home sells or not which are not as common here as most only get paid once sold.
I don’t think I've ever lost more respect for a podcast that quickly. This use to be a great spot for facts. Why would Dave bring on someone from outside the industry? She made so many false claims and assumptions in the first 12 mins, I just had to turn it off.