Join the movement at Inman Connect Las Vegas, July 30 – Aug. 1! Seize the moment to take charge of the next era in real estate. Through immersive experiences, innovative formats and an unparalleled lineup of speakers, this gathering becomes more than a conference — it becomes a collaborative force shaping the future of our industry. Secure your tickets now!
Here’s what you need to know, as well as steps you can take to cope with this fast-moving tsunami of change.
First, it’s important to note that this is a proposed settlement. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) will probably weigh in on this matter. Moreover, the settlement excludes HomeServices of America, their brokerages and agents. It also excludes another 94 large brokerages that had $2 billion or more volume in 2022.
Second, defendants in Batton 1 and Batton 2 in Illinois,where the plaintiffs were buyers (not sellers) and that Inman called “the mother of all commission lawsuits,” are also not included in this settlement.
Will association membership continue to be a requirement to access the MLS?
On the plus side for NAR, this is a major win since they will not be facing bankruptcy. They will also continue to retain control over a number of MLSs nationally. What’s unclear is whether the DOJ or FTC will force MLSs to eliminate association membership as a requirement to access to MLS listings.
According to RETechnology, 350,000 non-Realtors can already access the MLS systems without being Realtors.
“Many states, including California and Florida, have mandated that MLS providers extend their offerings to non-Realtors for a long time. Whether you’re already on board or contemplating this transition, now is the opportune moment to position your organization ahead of the curve.”
The article also calls on associations and MLSs to provide a “non-Realtor” option with a fee for accessing the MLS.
The buyer compensation field disappears in July 2024
Assuming this settlement is approved, the impacted MLSs will be forced to remove the buyer commission field by July 2024. Now is the time to start transitioning any future listings to this new model.
Based on anecdotal information I’ve heard from companies and those working with large teams, about 60 percent of the time sellers are already asking agents on listing appointments about how they should handle the buyer’s commission. Chances are that almost all sellers will be asking about this ruling given how much press this settlement has received.
For the time being, look to your broker, your company’s legal counsel or your state association hotline for advice on how to handle these inquiries. If you’re going to continue to represent buyers, it’s time to start using buyer brokerage agreements if you don’t already, as these will soon be required for all buyer transactions.
Ignore the naysayers who claim prices will come down significantly
According to The New York Times, “Housing experts expect the deal to shake up the housing market and even drive down home prices across the board.”
These so-called “experts” seem to have forgotten that prices are driven by market forces, not the amount of commission, as Steve Murray correctly noted in an article on CBS News.
“It will have the impact of reducing commission costs for sellers; it will save money for sellers to the detriment of buyers,” Murray said, adding, “Sellers don’t set home prices based on what their closing costs will be — the market sets home prices.”
The number of Realtors will drop dramatically
At last summer’s Inman Connect Las Vegas, I spoke with quite a few industry leaders at brokerages, state associations and MLSs. At that time, most were planning for 20 percent to 40 percent declines in their membership if the MLSs were forced to eliminate the buyer compensation field from the MLS.
The good news for Realtor associations is that most Realtors paid their annual MLS/association dues in January. Consequently, the big hit in revenue and membership won’t really show up until at least 2025.
Nevertheless, according to the latest Inman Intel report, 27 percent of agents are considering joining the American Real Estate Association rather than remaining in NAR. Whether the new trade group is actually a viable option remains to be seen.
Is decoupling the buyer’s commission the demise of the MLS?
In aninterview with Next Home CEO James Dwiggins last fall, he warned that even if the parties reach a final settlement, the DOJ and the FTC are likely to become involved.
“What’s super important for everybody to hear is that regardless of how these civil cases play out, you are very likely going to see the Department of Justice and the Federal Trade Commission get involved and find a way to remove compensation being offered in the MLS,” Dwiggins said.
Nevertheless, he explains why, even if buyer commissions were decoupled, this would not reduce the importance of the MLS.
“The MLS is extraordinarily important. Cooperation is extraordinarily important. The way that data is warehoused, the way that data is secured, all of those things are intact. The difference is an offer of compensation is no longer in the MLS,” Dwiggins said.
“Do I think MLSs will consolidate? Yes. Do I think associations will consolidate? Yes, candidly, they should. There should be fewer of them to begin with anyway, but I do think the importance of those two organizations are still intact — they will just act differently.”
Americans are willing to pay a full commission, provided that they see the value
Dwiggins pointed to research done by 1000 Watt that shows Americans are willing to pay a full commission when they see the value of doing so. He went on to explain why this is the case:
“In 1960, 30 percent of Americans had dual-income households. Today, between 60 percent to 70 percent of Americans have a dual-income household. Because everybody is busy with their careers, kids and other activities, they want convenience. They’re not going to wake up one day and say ‘we need to sell our house’ and do it themselves,” Dwiggins said.
“Studies by 1000Watt have also shown that consumers don’t disagree with what agents are getting paid — we just have to learn how to articulate it more clearly.”
Consequently, it’s incredibly important that every buyer’s agent can articulate the value they bring to the transaction. NAR published a very useful document that outlines 179 Ways Realtors are worth every penny of their compensation. Print up this list and share it with both your sellers and buyers on your next listing or buyer interview appointment.
NAR should work with Freddie Mac and Fannie Mae to roll closing costs and commissions into the loan amount
One of NAR’s core strengths is lobbying. It would benefit Realtors everywhere if buyer’s agent commissions could be rolled into their closing costs.
FHA, VA and USDA loans already have provisions that allow borrowers to roll certain closing costs into their loan under certain conditions. These models could be extended to Freddie Mac and Fannie Mae loans.
FHA loans permit the inclusion of closing costs in the loan amount. Additionally, sellers can offer concessions of up to 6 percent of the loan amount to assist with financing needs.
VA loans permit borrowers to include the VA funding fee in the loan amount. Other closing costs may not be financed into the loan, but the VA does allow for seller concessions and lender credits. These concessions can be used to pay closing costs without increasing the loan balance. Closing costs on VA loans can range from 1 percent to 5 percent of the total loan amount. The funding fee varies based on several factors, including the borrower’s type of military service and whether it’s the borrower’s first VA loan. VA loans also prohibit lenders from charging certain expenses, which can save the borrower even more money.
USDA loans require that the property’s appraised value does not exceed the maximum allowable sales price for the borrower if closing costs are being rolled into the loan. Sellers can contribute up to six percent of the loan amount through concessions to lower closing costs for the borrower.
Seller concession fields in the MLS take center stage
Did you notice that the FHA, VA and USDA loans all allow for seller concessions? As we move into this post-settlement environment, seller concessions will be an extremely important tool for putting deals together, especially issues regarding buyer-broker compensation.
Ed Zorn, VP and General Counsel of the California Regional MLS in his ICNY session Anticipating MLS Evolution: The Pathway to Potential Settlements, made a strong case for how the MLSs and the industry should adapt to this new environment by using seller concessions.
Zorn recommends that MLSs create an open seller concessions field. Seller and buyer concessions are a pivotal part of the negotiation process in all transactions. For example, anyone who has ever purchased a home and asked the seller to do repairs, buy down the buyer’s mortgage interest rate, or leave the big screen TV, etc. has negotiated a seller concession.
The open seller concession field will allow the seller to specify if they want to give the buyer a credit that could be used to pay the buyer’s agent a commission, give the buyer a credit towards closing costs, replace the carpet, or any other concession or incentive the seller may want to provide. This is a viable approach that not only allows the sellers and buyers to determine which concessions they would like, but in my opinion, would also be welcomed by the DOJ.
Zorn also suggested that residential agents take a cue from the commercial side of the business. Buyer agents should include the amount of their commission as well as any concessions as a standard part of any offer they present.
Challenges ahead for state and local associations
In the same interview, Dwiggins laid out the challenges facing state and local associations as they go about decoupling buyer commissions.
“Currently, 12 states require broker representation agreements that you must sign before you at least write an offer on a property that’s in the MLS. The 38 other states need to implement the same thing. Local associations or statewide associations need to legislatively go down the path of getting this implemented at the state level,” Dwiggins said.
“State associations need to get together now and go to work at the state level to get a buyer-broker representation agreement implemented as state law like the 12 other states across the U.S. currently do it today.”
This will be especially difficult for the four states that have transaction brokers and for other states that tie the buyer’s broker compensation to sub-agency.
Dwiggins did point out an important benefit for sellers: “They’re not going to have a bunch of looky-loos come through their home who really aren’t serious about buying the property.”
Should the industry move to an hourly rate like attorneys or use a menu of services?
Dwiggins explained the main reason the real estate industry cannot move to an hourly rate model like attorneys use.
“I’ve had a lot of people ask me, do we become hourly? No. Here’s why. First of all, our carve out in that specific statute where we are all 1099 [independent contractors], you can’t charge hourly unless you want to employ everyone,” Dwiggins said.
He also nixed the idea of going to a flat rate or menu of services. The reason? Most flat-rate companies have gone bankrupt. Three notable examples include Foxtons, Purple Bricks and REX.
One step at a time
It’s going to take time to navigate through the changes ahead. There’s going to be chaos and confusion, but the bottom line is that the pent-up demand for real estate is still there and the market is already adjusting to having higher interest rates.
Moreover, today’s transactions are so complex, most people have neither the time nor the ability to navigate today’s real estate transactions on their own.
So, polish up your buyer value proposition (or create one from the NAR 179 ways) and be prepared to help your sellers understand how offering seller concessions can help them attract more buyers, which in turn, will result in a higher price.
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,500 published articles. Learn about her new and experienced agent sales training programs at BrokerageUP.com plus her latest initiative to help women build wealth and secure their financial independence at RealEstateWealthForWomen.com
The moment has arrived — the moment to take charge. This summer, at Inman Connect Las Vegas, July 30-Aug 1, 2024, experience the complete reinvention of the most important event in real estate. Join your peers and the industry’s best as we shape the future — together. Learn more.
Do you pay a lead generation company or a portal such as Realtor.com or Zillow for real estate leads? Do you prospect strangers by phone? If so, there’s a new FCC rule that says, “No telemarketer may make or cause to be made a telephonic sales call to a consumer, without the consumer’s express written consent.”
The big question is how these changes will impact agents, teams, as well as the portals and lead generation companies who are in the business of selling leads, often over and over.
When I first heard about the “express written consent rule,” I reached out to Curtis Fenn, the President of REDX, about how these new rules would not only impact REDX’s lead generation business, but also what the impact will be on agents, teams, and others who rely on a paid leads model. (Full disclosure: REDX has sponsored my Awesome Females in Real Estate Conference since its inception in 2007.)
Major changes in the lead generation environment
Regulations about cold calling, the Do Not Call List, and robo-dialing date back to the Telephone Consumer Protection Act of 1991. These regulations were meant to address early robo-dialing systems that were linked to a computer that randomly made up phone numbers for the system to call. When someone answered a call, they were connected to a telemarketer who pitched them.
“The laws came into play because people were tired of being bugged by these calls. A major challenge for regulators has been addressing changes to these older laws when the technology has changed so drastically,” Fenn said.
“What they’re saying about prior consent is that you must have an established relationship with this person to call them for a business solicitation.”
Since REDX scrubs phone numbers of FSBOs and expired listings against the Do Not Call List, I asked him about how that will impact agents who do cold calling in the future.
Fenn began by making an important disclaimer: “I’m not an attorney and I’m not your broker. Everybody is interpreting these a little bit differently.”
He then explained, “I think interpreting all these things comes down to your legal counsel and your broker and the risk profile they’re willing to take. I think the most important thing to consider here is to look at what the consumer really wants.”
Part of the challenge is that there are conflicts within the laws themselves. For example, Fenn said the FTC website says you can call if you’re not soliciting or if you’re doing a survey.
“Over the last five or six years, there has been an explosion of lead generation companies and the portals have also gotten into the business of selling leads. While there have always been big lead generation companies, the amount that have come up over the last five years has been a massive shift for the industry,” Fenn said.
“The FCC is now saying that you cannot say to a lead, “‘Hey do you want to be contacted?’ and then go out and sell that lead to 1,000 people.”
Next-gen real estate agents shift their approach to lead gen
Fenn described a surprising new trend among younger agents entering the real estate industry.
“New agents are coming into the business and saying, ‘My lead generation budget is $1,000 per month. Where do I go to buy leads?’” Fenn explained. “That’s totally different from the mindset from the past where people grew their database starting with their family and friends.”
The impact on the portals and agent teams
Back in Apr. 2022, Zillow started removing agents from its “Premier Agent Program” and shifted to emphasizing their Flex Program. According to the Zillow website,
“Zillow Premier Agents partners receive connections and leads in a specific geographic area by paying for a share of voice in the ZIP code. Agents enrolled in the Flex program receive connections to home shoppers in their service areas without paying Zillow upfront.”
Here’s the catch with Flex — agents pay 30 to 40 percent referral fees to Zillow for Flex leads when they close.
Real estate lead generation companies including Zillow, Realtor.com, and others who sell the same lead to more than one person are now facing a massive shift in how they can do business once this rule takes effect in July 2024.
The problem is not just the FCC and FTC Rules, however.
“Gmail now has new rules that that went into effect February 2023, and the same with Yahoo,” Fenn said.
“They’re saying we don’t want you to email a person who doesn’t want to get your email. The whole idea is you must have a relationship with the person you want to communicate with.”
Stop renting your lead generation funnel and own it instead
Given all these new regulations, many of which have been driven by consumer complaints, Fenn had this important takeaway for how agents should approach their lead generation in the future:
“You can no longer rent somebody else’s lead generation funnel. You’ve got to start owning your own funnel because that’s how you build a relationship, not by using a generic ad that says, ‘Check out your home value,’” Fenn said.
Rather than working with cold contacts, Fenn urged agents to focus on creating warm prospects where the person you’re reaching out to knows you.
The biggest impact of ‘written consent’ will be on agent teams
Fenn had an interesting take on how this will impact both the portals and especially agent teams.
“New agents are routinely advised to join an agent team that will generate leads for them. The written consent rule is going to make this much more difficult since both portals and teams must obtain permission to communicate with someone where they don’t have a pre-existing relationship,” Fenn said.
For decades, the typical number of transactions conducted in residential real estate has hovered around five million, or 10 million sides. In 2023, it fell to about 4.1 million transactions or about 8.2 million sides.
Fenn then shared a stat a speaker gave at a recent conference (which he hadn’t verified) claiming that 2023 with 4.1 million transactions, four billion leads where sold.
This can become a major problem for agent team leaders who often spend massive amounts of money with lead generation companies in order to provide leads for their team members.
“If a team is getting their leads from a third-party lead provider, the new written consent law may mean way fewer leads for their team,” Fenn said. His advice is to:
“Develop a referral-based business by working with past clients and your sphere. The nice thing about doing that Is you can call or text message them and you don’t have to worry. That’s the advantage of owning your own funnel.”
Additional workarounds
Direct mail, door knocking, and open houses are still viable options. You can also reach out to others including owners of expired listings, but your strategy needs to shift dramatically.
When I was training back in Los Angeles, several of our most creative agents would overnight or hand deliver a very detailed CMA to owners of expired listings plus a detailed marketing plan. The approach was pricey, but effective.
A different work around is to use Facebook Messenger or LinkedIn messaging. To the best of my knowledge, you can only use these once unless the person you contact agrees to your friend request or LinkedIn invite.
In terms of what to send them, my recommendation is that you create an “Equity Check Up,” (as opposed to a CMA which is what almost all other agents use). The Equity Check Up includes your CMA along with one of the detailed property reports from NARRPR.com (Realtors Property Resource, a free service from NAR for their realtor members.)
In your direct message, you can reference that you have put together a 25-page (however long our CMA and the RPR report is) Equity Check Up for their home. If they’re interested, ask if they would prefer to receive a link via text or email. At that point you now have a warm lead that you can contact because they asked you to send the report and gave you their contact information.
This is an example of how to work in this new environment using “Give-to-get-marketing” or “attraction-based selling.”
‘Fishing’ replaces ‘hunting’ and ‘farming’
Fenn describes “fishing” as an approach where you make an offer of service (the bait, e.g., Equity Checkup) and ask if the person would like to receive it. You can also use a “fishing/attraction” offer in your print farming materials.
A proven strategy to maximize the response and convert more leads is to use QR code. When someone scans the QR code, you will immediately receive their contact information. Even more importantly, that person obtains the information they requested in just seconds.
Creating custom audiences on Facebook and Instagram
Based upon what Fenn’s most successful agents are doing to generate leads, Fenn recommended that agents who have large databases (or want to create them with the tools his company provides) work with Facebook and Instagram’s “custom audience tools.” To use these tools, you must have a specific audience of at least 1,000 people.
According to Meta, “A custom audience is an ad targeting option that lets you find your existing audiences among people across Meta technologies. You can use sources like customer lists, website or app traffic, or engagement across Meta technologies, to create custom audiences of people who already know your business.”
Shopify has a detailed Beginner’s Guide that describes the steps required to do this.
Fenn shared the following example of how you can boost a video that is popular with your contacts or other content and share it with a custom audience for about $2.00 per day.
“Let me give you a scenario from one of our customers who was doing an open house where she reached 1,000 homeowners near where the open house would be held. She boosted a video of her in front of the house as well as local landmarks,” Fenn said.
“So, people are seeing her video over and over. The result was when these people met the agent at the open house, she kept hearing, ‘I know you don’t know me, but I feel like I know you from you from your business,’ or ‘Wow, you really do a lot of real estate business here.’ At that point, you have a warm lead that you can contact.”
Fenn’s final piece of advice
Given that business is always changing, Fenn strongly urged agents to stop renting their lead generation funnel and work on generating their own leads starting with past clients and their sphere. In this new environment, attraction is the name of the game. If you’re not already using “fishing” and attraction strategies, the time to integrate these approaches into your business is now.
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,500 published articles. Learn about her new and experienced agent sales training programs at BrokerageUP.com plus her latest initiative to help women build wealth and secure their financial independence at RealEstateWealthForWomen.com
The moment has arrived — the moment to take charge. This summer, at Inman Connect Las Vegas, July 30-Aug. 1, 2024, experience the complete reinvention of the most important event in real estate. Join your peers and the industry’s best as we shape the future — together. Learn more.
Whether you’re a newbie or a 40-year veteran, how buyer real estate commissions are negotiated is about to be changed forever. These changes are being driven primarily by the landmark $1.78 billion verdict for price fixing in Sitzer | Burnett litigation, the DOJ’s demands that buyers should negotiate their commission directly in the Nosalek PIN litigation, and the resulting barrage of copycat lawsuits.
Here’s the rundown on what you need to know, what’s most likely to change, how it may impact your pocketbook and steps to take to be prepared for what’s ahead.
There are four sets of lawsuits that are at the heart of the so-called “bombshell” commission litigation: Sitzer | Burnett, Moehrl, Nosalek PIN, and Batton 1 and 2.
These lawsuits, along with all the copycat litigation, come down to two single issues: NAR’s Cooperative Compensation Rule and mandatory membership in NAR to access the Multiple Listing Service in many areas. Defendants in these suits are charged with violating antitrust laws by colluding to fix prices (commission rates). As a result, sellers allegedly paid much higher commissions than they would have paid had buyers been responsible for directly compensating their own agents.
Judge Bough’s ruling on the final verdict amount in the Sitzer | Burnett litigation is expected sometime in April. At this point, the two remaining defendants, NAR and Berkshire Hathaway Home Services of America, (Anywhere, Keller Williams and RE/MAX have settled both Sitzer | Burnett and Moehrl), will have 30 days to post a bond large enough to cover the amount of the verdict. Failure to do so usually forces the defendants to settle with the plaintiffs or, in some cases, declare bankruptcy.
Flying under the radar is Batton 2: ‘The mother of all commission lawsuits’
The Batton 1 lawsuit was originally filed by Judah Leeder in 2021 and Mya Batton ultimately replaced Leeder as the lead plaintiff. The suit was dismissed in 2022, but the plaintiffs amended their complaint. Here’s the latest on Batton.
On Nov. 2, 2023, Mya Batton filed a new lawsuit known as Batton 2 in Illinois. Like Batton 1, in this litigation, the plaintiffs are homebuyers — not sellers. Inman called it the “mother of all commission lawsuits.”
The anti-competitive effects outlined in the complaint boil down to the following:
Homebuyers have paid inflated total commissions which have been incorporated in the purchase price.
The retention of a buyer-agent has been severed from the setting of the broker’s commission; the homebuyer retains the buyer-agent, while the homeseller sets the buyer agent’s compensation. (This is the situation that the DOJ insists must be eliminated.)
Price competition among brokers has been restrained; agents are “incentivized” to steer their buyers toward properties that have higher commission homes, and the quality of buyer-agent services has reduced.
A potential problem for Anywhere, Keller Williams, and RE/MAX is that their settlement agreements in Sitzer | Burnett and Moehrl only reference homesellers — not homebuyers. Batton 2 could result in these companies being dragged back into the fray.
NAR doesn’t have enough assets to post a $1.78B bond for an appeal
Assuming Bough leaves the jury verdict of $1.78 billion in place and denies the post-trial motions to set aside the verdict, NAR lacks sufficient assets to post a bond for $1.78 billion which would be required to mount an appeal, much less $5.34 billion.
According to Propublica’s Non-Profit Explorer, an organization that aggregates the 990s (the form non-profits use to report their income to the IRS), NAR doesn’t even have enough assets to cover $1 billion and certainly not anything over that amount.
The chart below shows that while NAR does have $1 billion in assets, its liabilities at the end of 2022 were $263 million, putting NAR’s value at $767 million.
State associations and publicly traded real estate companies don’t have the money either
In terms of the copycat suits naming state associations, the three largest state associations of realtors have the following net assets:
In terms of the copycat suits naming additional brokerage defendants, the publicly traded real estate companies show the following net assets on their SEC filings:
RE/MAX:$89.8 million (Sep. 30, 2023) RE/MAX took a $59.5 million loss in that quarter to settle the Sitzer | Burnett and Moehrl lawsuits
Confused about what’s ahead and what to do?
I’ve been covering the commission lawsuits in this column since 2015. Based upon my conversations with those involved in the litigation, those who hold leadership positions in brokerage, state association and MLS leadership, plus other experts who have offered viable solutions, here’s what I see ahead in my crystal ball:
Past commission models that will remain viable in the future
Exclusive buyer agreements: This type of contract continues to grow in popularity, not only among exclusive buyer agents but among agents who represent both buyers and sellers. The buyer’s agent is paid a specific commission amount, regardless of whether any seller/listing broker compensation is offered. Rocket Mortgage has an excellent discussion of what these agreements are, how they work, as well as facts you need to know about this type of contract.
Fee for service: This model unbundles real estate services that full-service brokers provide and allows the buyer to select the services they want. For example, if the buyer is purchasing from a neighbor but they need help navigating through the transaction and/or obtaining a loan, they can hire an agent to provide those specific services. Real Estate Witch, powered by Clever, has a list of their top 10 fee-for-service real estate companies.
One-party listing agreements for a single buyer: This model works especially well with off-market properties and For-sale-by-owners (FSBOs). When there is little inventory, agents are desperate to find something to sell. Many experienced agents actively solicit one-party listings (a listing for a single buyer) for off-market and FSBO properties. The buyer agent is typically the exclusive agent of the buyer and negotiates a buyer commission that the seller will pay if the buyer’s offer is accepted and closed.
Rebate models:Homebay has a list of the top companies that charge 2 percent or less in commissions. In this model, agents from traditional firms agree to provide a rebate to the buyers. For example, Clever reports an average rebate of $3,000 for buyers or up to 1 percent of the agent’s commission at closing.
Buyer representation agreements must become the new normal
At Inman Connect New York (ICNY), Russ Cofano, president and CEO of Collabra Technology, Inc., made a powerful argument that buyer representation agreements must become standard practice across the industry in the same way we currently use seller listing agreements.
Cofano said that approximately 14 or 15 states already have these in place and that he would like to see these adopted in all 50 states.
If you plan on representing buyers in the future, it’s imperative that you immediately sign up for training on how to use buyer representation agreements in your state.
In addition, Cara Ameer’s excellent article outlining nine tips for getting prospects to sign a buyer-broker agreement is a must-read.
The DOJ wins: ‘Contractual offers of compensation’ end
James Dwiggins opened the “What Comes Next for Buyer Representation” panel at ICNY by categorically stating that contractual offers of compensation will cease to exist on the MLS.
In other words, there will no longer be a field in the MLS where the listing agent can post a commission percentage or amount payable to the buyer’s agent.
While NAR should lead the way in implementing a national change, it seems highly unlikely given their current leadership. Nevertheless, state associations, MLSs, and brokerages have it within their power to require their agents to use buyer representation agreements.
The buyer’s agent commission field in the MLS is replaced with a ‘seller concessions’ field
Of all the potential workarounds that will allow buyer agents to negotiate directly with both buyers and sellers, Ed Zorn, VP and general counsel of the California Regional MLS in his ICNY session Anticipating MLS Evolution: The Pathway to Potential Settlements, recommended the creation of an open “seller concessions” field. This is the best option I’ve seen so far.
Seller and buyer concessions are a pivotal part of the negotiation process in all transactions. For example, anyone who has ever purchased a home and asked the seller to do repairs, to buy down the buyer’s mortgage interest rate or leave the big screen TV has negotiated a seller concession.
The open seller concession field will allow the seller to specify if they want to directly pay the buyer’s agent a commission, replace the carpet, give the buyer a credit towards closing costs, or any other concession or incentive they may like to provide. This is a viable approach that not only allows the sellers and buyers to determine which concessions they would like but in my opinion, would also be welcomed by the DOJ.
Zorn also suggested that residential agents take a cue from the commercial side of the business. Buyer agents should include the amount of their commission as well as any concessions as a standard part of any offer they present.
National settlement or bankruptcy
Because NAR has insufficient funds to pay the judgment in Sitzer | Burnett, one of two things will happen — ultimately there will be some sort of national settlement or NAR will be forced into bankruptcy.
Based upon the conversations I’ve had with multiple experts, if NAR were to file bankruptcy, plaintiffs would be more likely to settle as opposed to dealing with the bankruptcy court.
MLS data should be available to all real estate licensees
The three Sitzer | Burnett and Moehrl settlements all contained a provision that agents in these brokerages would no longer be required to belong to NAR, follow its Code of Ethics or its MLS handbook.
By the same token, belonging to a state or local association should not dictate whether a licensed agent should be able to have access to the MLS. MLSs who implement this model can charge an access fee, but being an association member should no longer be a requirement.
According to RETechnology, 350,000 non-Realtors can already access the MLS systems without being Realtors.
“Many states, including California and Florida, have mandated that MLS providers extend their offerings to non-Realtors for a long time. Whether you’re already on board or contemplating this transition, now is the opportune moment to position your organization ahead of the curve.”
RETechnology also advises that now is the time for local and state associations and MLSs to take affirmative steps to provide a “non-Realtor” option that includes a fee for accessing the MLS.
Killing off the commission lawsuits will require a single national settlement
While there could be rulings from the DOJ, FCC or FTC that might impact all the commission lawsuits, the most viable route would be a single national settlement. Since the people who benefited from the higher commissions were agents, it’s impossible to go back and obtain money from them after the fact.
At ICNY, several people suggested a fee-per-transaction model. Here’s a hypothetical outline of how that could work.
Assume five million transactions (10 million sides) per year for the next four years.
Agents on each side would pay a $100 transaction fee that would generate $1 billion annually, and $4 billion over a four-year-period. Agents would participate based upon the number of transactions they close.
In terms of the payout, 2025 would pay off those sellers who transacted during year 1 of the agreement; 2026 would be for those who transacted in year 2; 2027 would be for those in year 3; and 2028 would be for those in year 4.
All the money should go into a single escrow account, with the judge determining how much is allocated to the plaintiffs and to the attorneys, the same way it did in the Anywhere and RE/MAX settlements. That number will most likely be 30 percent.
What appeals most to me about this approach is that Michael Ketchmark will have to duke it out with all the other attorneys as to what his share of the 30 percent will be.
The problems with this approach
The biggest issue with this approach is that the agents and brokerages who “benefitted” from the higher commission rates are not necessarily the ones who will be responsible for paying the judgment.
If I’m a new agent or I worked for a brand that was not part of the litigation and then joined a brokerage that is part of the settlement, why should I have to pay into this settlement?
If you have to pay through your brokerage, should you also be charged through your local or state associations, and/or NAR? This scenario could be a definite deal killer for many agents who can easily exit these organizations and still retain their MLS access.
3 reasons you should keep your NAR, state and local association Realtor membership
For 2024, NAR dues are at $156 per member. NAR computes 35 percent or $55 to be nondeductible for the member’s income tax purposes due to NAR lobbying efforts. Please note that the entire $45 Consumer Advertising Campaign special assessment qualifies as fully deductible.
Quite frankly, I have no idea whether NAR survives given all the scandals, leadership issues and its refusal to face the realities outlined above. Nevertheless, here are some important NAR benefits you should consider before deciding to terminate your membership.
You could pay thousands of dollars just for the Market Intelligence Reports, for all the property research this site provides, plus for the training that shows you how to use this powerful tool to immediately convert leads by using the NARRPR app. Best of all, potential clients happily provide their phone number or email address to get the information they want right away.
In my opinion, the value of NARRPR, especially to new agents, is worth significantly more than the $156 per year in NAR dues.
Protecting personal property rights and independent contractor status
NAR and your state and local associations serve as a political buffer by lobbying lawmakers at all levels to protect property ownership rights, fight rent control, and to block efforts to end IC status and make agents employees.
Expanding homeownership
NAR actively promotes making homeownership available to more people through affordability, Fair Housing, and other initiatives that help more people become homeowners.
In addition, here is a list of NAR benefits that you are probably not using but could be. Major categories include discounts on the following:
Computers and mobile technology
DocuSign
FedEx
GE appliances
Insurance including health, dental, vision and pet insurance as well as auto, home and renter’s insurance.
Junk removal
Marketing campaigns, print marketing, and websites
Risk management and identity theft protection
Sentrilock lockbox systems
Specialized niche training including Realtor certification programs
Travel and car rental
The bottom line
In this new post-commission lawsuit environment, the entire industry must come to terms with treating buyers the same way sellers are treated. The steps outlined above provide a viable path out of this quagmire that could lead to both new and experienced buyer’s agents never unlocking a single door for a buyer unless they have a signed buyer representation agreement.
The question is: How long it will take for the industry, and NAR in particular, to embrace this new reality and let us get back to the business of listing and selling real estate?
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,500 published articles. Learn about her new and experienced agent sales training programs at BrokerageUP.com plus her latest initiative to help women build wealth and secure their financial independence at RealEstateWealthForWomen.com
Mark your calendars for the ultimate real estate experiences with Inman’s upcoming events! Dive into the future at Connect Miami, immerse in luxury at Luxury Connect, and converge with industry leaders at Inman Connect Las Vegas. Discover more and join the industry’s best at inman.com/events.
Since ChatGPT first burst on the scene in late 2022, there has been an onslaught of columns offering advice on how to put ChatGPT to work in your business. While this advice was great for 2023, in 2024, it fails to tap into the power the generative AI provides.
In his talk at ICNY, MIT professor Dr. R. David Edelman, who served as tech adviser to three presidents, explained how we can best navigate what he called the “perilous pivot” that is now occurring where AI has moved from big data and machine learning (its “infancy,”) to the generative AI of today.
What exactly is AI?
When I asked ChatGPT to provide a clear definition of AI for Inman readers, here’s how it responded:
“Artificial Intelligence, or AI, refers to computer systems designed to perform tasks that typically require human intelligence, such as recognizing speech, making decisions, and understanding natural language. It encompasses a range of technologies that enable machines to learn from experience, adjust to new inputs, and perform human-like tasks, streamlining and enhancing various aspects of work, including in the real estate sector where it can analyze market trends, predict property values, and personalize customer interactions.”
Edelman had a slightly different description of what AI does:
“AI classifies huge volumes of information, finds subtle patterns and correlations, learns from behaviors, and ultimately makes predictions based upon machine learning (applied statistics),” Edelman said.
Edelman said the critical thing to understand about AI is that these systems are prediction machines, whether the prediction is what word is going to come next or the prediction of what a certain configuration of pixels means.
In fact, almost everything we’re seeing in the press is about big data and machine learning.
“Most enterprises have just crossed this Rubicon of using big data and machine learning to try to predict a little bit about what they’re doing every day,” Edelman said.
It’s important to understand that “Vanilla AI” has resulted in tremendous breakthroughs in a wide variety of areas, including education, reducing CO2 by using machine learning to predict better bus routes in Boston and preventing deaths from sepsis, where there is a 40 percent mortality rate.
Edelman said that ChatGPT is experiencing what he calls a “perilous pivot” where generative AI is transitioning from its infancy just over a year ago to “Armchair AI” that you can do at home,” Edelman said.
“What I mean by generative AI are these large language models like ChatGPT or Claude and image generators like Dall ·E 2 or Midjourney,” Edelman said. (For a glimpse of astonishing photo-realistic images, follow the Midjourney link.)
These new tools are hyper-advanced and represent the forefront of innovation. What took massive amounts of time, resources, and millions of dollars worth of computers to do in the past is now accessible to you at home for only $10 – $50 per month.
Working with generative AI? Your job description is ‘BS management’
Given the powerful capabilities of generative AI, the percentage of enterprises using generative AI in customer-facing areas is shockingly tiny. Edelman attributes part of the issue to anxiety about the limitations of generative AI. The reason?
“The answer is there is an anxiety, probably a reasonable anxiety, that has crept into the space on the basis of the appropriate recognition of the system’s limitations,” Edelman said.
“The best way to think about generative AI for your enterprise is that it’s like an Ivy League intern who is extremely articulate, supremely confident, and completely full of it ten percent of the time.”
In terms of using generative AI, “Your job now in the world of managing generative AI is BS management, specifically managing to understand what that ten percent is and when that’s happening,” Edelman said.
“Sometimes they [generative AI systems] get it wrong, and the reason they get it wrong is because of inherent limitations in the technology due to how the technology works.”
Challenges ahead
The real-life problems we are already facing in real estate and other areas will explode over the coming years as the use of generative AI continues to spread.
One of the most concerning examples is the so-called deep fakes, where AI can very realistically mimic voices. Scammers are now using these fake voices to verify wire transfers.
“It’s happening all over, and you’ve got to be aware of it,” Edelman said. “The answer is not lines of code, but smart organizational planning, creatively thinking like the bad guys, and recognizing that, especially in industries like yours that are so human, those relationships. Those relationships are as fragile as the technologies” hands that you put it in,” Edelman said.
How do we move forward?
At the beginning of his session, Edelman shared the following quote from science fiction writer Arthur C. Clark:
“Every sufficiently advanced technology is indistinguishable from magic.”
Edelman said that when something seems like magic and people don’t understand it or fear that it is beyond their comprehension, they may become scared or try to cast it out.
“These are systems that we designed ourselves with limitations that we’re aware of that we can actually work through and work around them,” Edelman explained. “They have flaws that we can manage. In other words, AI isn’t magic—it’s math and code.”
Difficult choices that must be made now
Edelman is highly concerned about the choices we need to make right now about this technology and how it interacts with our lives and our livelihood.
We’re in an environment where someone can steal your face and your voice and use your identity without your permission. As we go into another election, Edelman said that one survey showed that only somewhere between two and seven percent of companies are working on political stability or national safety concerns.
“So now at the enterprise level, and at the human level, we must decide what AI should and shouldn’t do, “Edelman said.
The next big step: how to team up with these machines
Edelman’s final piece of advice was to “Team up with AI, be smart about it, and don’t be afraid that AI is going to take your job,” but he then warned, “But someone who knows how to use AI just might.”
For fun, I went to ChatGPT and plugged in this article and asked for its commentary on Edelman’s session. Here’s its take on what Edelman had to say:
“As for commentary on Edelman’s advice, it appears he provides a thorough and realistic assessment of AI’s current and potential impact on various sectors, including real estate. His focus on the importance of understanding AI’s predictive nature and the distinction between generative and traditional data-driven AI is crucial for real estate professionals.
He rightly points out that AI should be viewed as a tool rather than a replacement for human expertise, emphasizing the importance of managing AI’s limitations while leveraging its strengths.”
Edelman provided a road map in terms of what generative AI can do, but how do you prompt it to obtain the best results for your real estate business when the old strategies for 2023 fail to tap into the full power of generative AI
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,500 published articles. Learn about her new and experienced agent sales training programs at BrokerageUP.com plus her latest initiative to help women build wealth and secure their financial independence at RealEstateWealthForWomen.com
February is New Agent Month at Inman. Follow along as we go deeper on the tools, tech and tips you’ll need to survive and thrive in 2024. For curated content crafted just for first-year agents, be sure to subscribe to our weekly newsletter, The Basics.
You’re a new agent, and you just received a great listing lead. The challenge is that the sellers are interviewing other agents. What do you need to do to beat the experienced agents, win the listing, and avoid that dreaded question new agents fear most: “How long have you been in the business?”
What does it take to win the listing even against the most experienced agents? First, you must be prepared to conduct a “listening consultation” rather than a “listing presentation.” Second, you must be prepared with robust property reports and pricing data. Third, you will also need a premium marketing plan that provides the property with maximum exposure to the marketplace, resulting in the maximum price.
1. How to conduct a ‘listening consultation’ rather than a ‘listing presentation’
A “listening consultation” is based on asking questions rather than “presenting your services.” Here are four key questions that help you quickly build rapport with the seller while also increasing the odds that you will get the listing.
1. What have you enjoyed about living in this property?
This is an excellent question to use at the beginning of your listing appointment. Instead of doing a “listing presentation,” ask about the seller’s experience with their home, especially about what they enjoyed most about living there. While they explain, take notes. This sends a nonverbal message that you care enough about what they say to write it down and that you have heard what they said.
2. Will these features be important in your next home?
This sets up the closing process in two different ways. You can offer to search the Multiple Listing Service for properties that meet their criteria for their next home. By doing this, you increase the probability of getting the listing plus representing the sellers on their next purchase.
If the sellers are moving outside the area, offer to locate three potential agents they could interview. If your company does not offer relocation services, you can go to RateMyAgent.com to locate top agents in the area where the sellers will be moving.
3. Would you like to obtain the highest price possible for your property in the shortest amount of time?
Virtually all sellers will answer “yes” to this question unless there is a divorce or some other unusual type of dispute. This question helps you transition into discussing your Premium Marketing Plan that will help the sellers obtain the highest possible price for their property. Generally, it’s a good idea to discuss three or four unique ways that you will market their property.
For a list of seven ways, you can help the sellers obtain maximum exposure to the marketplace that results in the maximum price, check out the following article that explains these concepts and tools in detail. Make a list of these items and share the list with the seller.
4. Which of these services would you like to use in marketing your property?
Once you have reviewed the services that you provide, then ask the seller, “Which services would you like me to use in marketing your property?” The sellers almost always answer, “All of them!”
This question will assist you in defending your commission should that topic become an issue later. If the seller does ask you to lower your commission, follow up by saying,
“This is my Premium Marketing Plan. If you don’t want premium service, I’d be happy to put you in contact with a limited services agent who charges a lower commission and doesn’t provide this level of service.”
Since most people love discounts, always use “limited services” to describe agents who discount their commission since almost no one wants “limited services.”
2. Nail your CMA
The most important step in doing a CMA (comparable market analysis)is choosing the right comparable sales. There’s a simple guideline that you must follow if you want to come up with the right pricing on the property. It’s called the “10 percent rule.”
Here’s how it works: When you’re selecting your comparable sales, only select properties where both the square footage of the improvements and the square footage of the land are within 10 percent of that of the subject property.
For example, if the house is 2,000 square feet, and it’s located on a 5,000-square-foot lot, the comparable sales you should use would be 1,800 to 2,200 (plus or minus 10 percent) for the improvements and 4,500 to 5,500 square feet for the land.
Assuming all the comparable sales you select meet the “10 percent rule,” you can determine the price per square foot by dividing the selling price by the square footage of the improvements.
The next step is to determine if this property is in the top 20-25 percent in terms of its amenities and location, is it “typical” of the area (average), or is it in the lowest 20-25 percent in terms of price and location?
If the property is a top-tier property, you can use the highest comparable sales. If it is “typical” (never say average) for the area, use the average price per square foot. If it is in bad condition and/or in a less-than-ideal location, use the lowest price per square foot sales.
3. Put the portals to work for you
One of the most common comments you will hear from sellers, especially if your CMA comes in lower than Zillow’s Zestimate is, “But Zillow says my house is worth more.”
To be prepared for this contingency, check the Zillow Zestimate for the property, but you should also check Realtor.com’s RealEstimate.
Here’s an example of what this looks like — you can show the sellers this online or do a screenshot. It’s important to note that these numbers go back to 2019 and about three months into the future. Consequently, you and the sellers can see exactly how their house has changed value over time.
In terms of understanding the numbers, Collateral Analytics has 12 AVMs (automated valuation models) that are used in residential, commercial, appraisal and mortgage valuations. CoreLogic relies primarily on MLS data to calculate their values.
What’s important to note is that the Quantarium AVM is the only AVM that factors in up to 900 of the interior features (cabinets, flooring, lighting, counters, etc.) into the price.
As an added benefit, Realtor.com also provides you with a list of nearby comparable sales. Simply click on the “Nearby home values” tab, directly below the RealEstimate.
With all these different numbers, this raises the question, “Which price is right?” In most cases, when two or more of these estimates are close, especially if they align with your CMA numbers, those numbers are usually a good estimate as to where this property will sell.
4. Create your ‘premium marketing plan’
When you’re first starting out, you may not have a lot of money for marketing. To compete with more successful agents, have professional photos taken of the listing if possible.
You can also use a company called BoxBrownie to make your listing photos look more attractive, remove unwanted items, and/or virtually stage vacant properties.
In addition, here’s a list of the other things you will need to do.
1. Go to NARRPR.com, and download its property reports
One of the most important benefits of being a member of NAR is its Realtors Property Resource (RPR) reports. These highly detailed reports can include up to 25 or more pages of data on the property.
Print them out so the seller can see them or an even better choice is to download the RPR app on your phone and order the reports you want. You can then show the sellers what you’ll provide to buyers looking at their home, at an open house, and in response to sign calls or other inquiries.
To better understand exactly what these reports provide, listen to this video that explains how these reports work.
2. Use QR Code
Rather than hassling with print brochures, a much better approach is to obtain a QR code that can be used not only on your brochure box, but on your print marketing, on your signs, at open houses for information, etc.
I asked ChatGPT to evaluate which companies are best for real estate agents who would like to use QR codes, and it gave me these three companies as its top recommendations: QRListings, RealBird QR Code Studio and Flowcode.
3. Instant lead conversion at open house
In my opinion, Spac.io is the best lead conversion tool for open houses. One of the major benefits of doing an open house is that it puts you face-to-face not only for buyer leads for the listing but potential leads for other listings as well.
Prior to your open house, load your RPR report into Spac.io, and you can share it with your open house visitors. All you have to do is ask the open house visitor for their cell phone number or email where you can send them the property information. Spac.io automatically thanks them for attending your open house and makes the lead follow-up simple — it’s well worth the $25 per month.
4. Create your digital and social media marketing plan for little or no cost
When you explain to the sellers that your goal is to help them achieve the highest possible price for their property, it’s important that they understand that “maximum exposure to the market results in the maximum price.”
There are a wide variety of ways to maximize your listing’s exposure. For a detailed discussion, check out seven great options that cost nothing and definitely increase the property’s exposure to the market.
If you do everything listed above, there’s a high probability that you will not only get the listing but also never even be asked that dreaded question, “How long have you been in the business?”
Just in case the seller does ask, “How long have you been in the business?” here’s what to say:
“Not that long, but compare my comprehensive reports, my premium marketing plan, the pricing tools, and the other services that I provide against the services any competing agents may provide. At that point decide, who has the best game plan to help you get the highest possible price for your property.”
Take the time to follow these simple steps on every listing appointment you go on and watch how many seller leads turn into signed listings — just make sure you deliver what you promised.
