EPISODE NO. 74

What The NAR Settlement Means For Real Estate Agents in the US & Canada

On March 15th the National Association of Realtors (NAR) which is the largest defendant in a class action lawsuit announced a settlement that essentially will change the real estate landscape in the US and likely Canada in the near future. So the question we all have is what does all of this mean? What’s going to happen? How is this going to impact agents and what is going to change?

In this podcast episode Jennifer shares her thoughts, some key takeaways to keep in mind and some actionable tips, strategies and ways that you can pivot in your business to prepare for the changes and thrive!

Hello there and thanks for tuning into the Women Rocking Real Estate
podcast, if you’re new here, I’m Jen Percival and I’m happy to have you here.
Alright I had a different episode planned to go live today, but based on the
historical news that broke on Friday that feels to many like it broke the whole
real estate industry, I thought I should Pivot and put together a quick episode
with my thoughts on what this all means. But more importantly I always like
to give listeners a different perspective that you can take or a fresh way to
look at the situation with the hopes that it will help to set you all up with the
right mindset moving forward. Having said that, I am not an expert on this
topic and everyone listening needs to get their information about this from
their local brokerage and real estate board.
I’m sure everyone listening probably knows the news I’m referring to, but
some of you may have been away on vacation or just don’t pay close attention
to the news…which for the record is a good thing, not a bad thing so no
judgment. I’m not going to go into all of the background on this situation, but
the gist of it is that have been multiple class action lawsuits across both the
US and Canada that essentially claim the real estate industry has been anti-
competitive in some of their business practices and has colluded around
price-fixing - that’s kind of the bottom line. On Friday, the largest defendant
in these class action lawsuits which is the National Association of Realtors
which is US based, announced a settlement that essentially will change the
rules on how real estate agents are compensated among other things. The
settlement is still subject to court approval, but that’s likely just a technicality
at this point and the new rules are supposed to be in place by July. For now,
technically these changes only impact members of NAR in the United States
and I’m sure if you are impacted, you’ll be hearing lots about it from your
Brokerage.
To be clear, nothing changes for agents in Canada for now and the for now
piece is a very important point. There are multiple similar class action suits
underway here as well, and we’d all be idiots to think that this settlement isn’t
going to affect how those cases unfold. The bottom line, is that any practices
that could be deemed to be anti-competitive, steering, price fixing, etc. will
be put under intense scrutiny. If the rules change in the States, it’s just a
matter of time before they change here too, so we are not immune to the
changes coming to this industry as a whole. Because I have listeners in both
the US and Canada and frankly around the world, we all need to be paying
close attention to how this unfolds because the affects will be felt beyond just
the US.
So the question we all have, is what does all of this mean? What’s going to
happen? How is this going to impact agents and what is going to change?
Here’s what I know for sure and these are the x key takeaways I want you to
leave this episode remembering. I’ll dive into each of these in more detail but
at a high level, remember these key things:
1. Number 1 the one thing we know with certainty about this situation, is that
no one really knows anything about what this all means yet. Anyone that
says anything concrete this early in the game is purely speculating.
2. The second thing I know for sure, is that real estate agents aren’t going
anywhere. You’ll likely hear lots of noise that will try to make you believe
otherwise, but there will always be a need for realtors.
3. The third thing I know for sure, is that if you want to come out of these
changes on the other side with a healthy business, you’re going to need to
adapt. The ones that do will thrive and the ones that don’t will dive.
4. The last thing most people expect will happen is that these changes will
lead to an exodus of agents that leave the business because in the short
term at least, it will be harder to make a living. This is a great thing - this
industry needs to be culled.
So let’s go back and dive into each of those takeaways a bit deeper. Because
no one really knows how this is all going to shake out, the one thing I think
everyone can count on, is that it’s likely going to be a bit of a confusing shit
show before it all gets figured out out. The morel of the story, stay calm and
carry on. Don’t jump to conclusions, don’t panic and don’t catastrophize the
situation in your head. At the same time, don’t put your head in the sand and
ignore it. Change is coming, that’s a fact. What’s most important, is that You
need to be educated about this, because it will be a topic of conversation with
people everywhere you go and you need to be able to discuss it confidently
and with authority. Now having authority on this topic doesn’t mean
pretending you have the answers, it simply means that you can converse
about it. Be educated, transparent and unbiased in your opinions about it and
be prepared to answer questions but never in a defensive or dismissive way
however.
Right now there is a boatload of speculation about what it means and there is
going to be a ton of misinformation out there which is going to lead to a lot of
confusion inside the industry, but more importantly among consumers. All
they have to go on are the news headlines and they are ridiculously
sensational and also deceiving. The headline of “6% real estate commissions
are dead” is a perfect example. A general consumer could interpret that
headline a number of different ways. It’s also completely manipulative and
implies that real estate commissions were fixed before and now they’re not.
So provide the facts where needed, educate where needed and be honest
about the uncertainty of what it all means. But get ahead of it. This topic
should absolutely be included in your next newsletter, but again be mindful
of how you position it and let your people know that you will continue to
update them as the situation unfolds.
Alright the second key takeaway that I want you to remember is that real
estate agents aren’t going anywhere. There have always been disrupters in
this industry and there always will be. There have been many attempts by
tech companies to eliminate realtors, but none have been successful. Once
again they are going to be piping up in the news convinced that this time the
real estate industry is finally going to fall like the travel industry did. However
the people who believe this is going to happen, completely fail to understand
the role that realtors actually play in the home buying and selling process. We
are not paper pushers, we are not door openers and we are not instagram
influencers (as a side note, if you’re acting like one please stop. You’re
undermining this entire industry and consumer’s perceptions of it.)
Booking a Disney vacation is not the same thing as investing your entire life
savings into buying or selling a home. Or investing your entire savings into an
income property. The good real estate agents are trusted advisors. They are
knowledgeable experts and bring invaluable skills and experience to the
buying and selling journey. They help clients make decisions by giving them
information that don’t have or more importantly can’t see, because they’ve
got emotions involved. The good real estate agents are advocates for their
clients and they act on their client’s best interest. If you’ve ever tried buying or
selling a property for yourself, you’ll quickly see just how valuable a good
realtor on your side can be. So Real estate will never be a simple transaction
that’s based on information alone that can be taken over by tech. There’s too
much at stake and too many emotions involved for it to ever be done start to
finish using technology. Sure parts of the process may get taken over by tech,
but so much of it never will. People have been able to buy and sell properties
without an agent for as long as I’ve been in the business and the vast majority
have always chosen not to do it that way.
Now having said that, sellers have traditionally paid the commissions for a
buyer’s agent and this is one of the key issues at hand in the class action
lawsuit settlement. Moving forward those commissions will be decoupled and
this will have the biggest impact on Buyer’s agents and frankly buyers in
general. As it relates to the MLS, as I understand it there will be no advertised
offer of cooperating commission. so by the sounds of it, as a buyer’s agent
your commissions will have to be negotiated with the seller in each
transaction. In some situations, if the seller chooses to not pay your
commissions, your renumeration would have to be detailed in a buyer
representation agreement where the buyer is on the hook to pay you and this
is where I see the biggest fallout of this settlement. If it unfolds where buyers
will have to pay for our services out of pocket, I’m going to bet they won’t.
They will opt out of using an agent all together and either end up working
with the Listing agent if that’s allowed under the laws where they’re
purchasing or end up working with service providers that just do the
paperwork. Now I believe this decision will come back to haunt most buyers.
It is absolutely not in their best interest, but the reality is that most buyers will
not be willing to fork over the money that would otherwise be going towards
their new purchase to pay you. It’s just reality. Maybe over time that will
change, but in the near term and especially for first time home buyers, this
could be a big change.
So what does that mean? Well I think there’s a few implications:
Implication number 1 - Listings will be sought after more than ever.
As a listing agent, when negotiating your commissions you be should
inquiring up front what your seller’s intentions are with compensating a
buyer’s agent because if they’re not willing to cooperate and you are going to
be left doing all of the work that a buyer’s agent would normally be doing,
well you’ll need to be compensated for that extra work right? Otherwise the
implication is that as a listing agent, you’re going to have to be doing a lot
more work for the same amount of money. In addition to that, because there
will be more competition for listings, there will likely be an associated
downward pressure on commissions. Now this is speculation, but it just does
make logical sense at least in the short term. However because there will be
an overall reduction in the number of agents, I suspect that commission
compression will be short term and that it will likely balance out in the future.
So for listing agents, you’ll need to be prepared to adapt. You’re going to need
to adapt your listing presentations to inform and educate sellers. You’re going
to really need to focus on your systems and processes to stay organized. and
you’re really going to need to implement automations in your business
everywhere you can - I DO NOT mean lead gen automations, I mean
transaction-related automations. Because the bottom line is that listing
agents will likely be taking on more work. You’ll also want to re-evaluate at
how you charge commissions and explore different scenerios. Get innovative,
obviously within the rules of your laws, but look into different ways to
structure your commissions from a la carte formats to flat fees to
combinations of different structures. But play out different scenarios and stay
on top of what others are doing to remain competitive.
Implication #2 - is that regardless whether you are working on the listing side
or the buy side, you are going to need to up your game all around. Your
service offering, your expertise and the value you provide will matter now
more than ever. It’s also time to sharpen your Negotiation skills because this
will become a skillset that will set the winning agents apart. For buyer’s
agents in particular, The value you provide needs to be next level. You’ll have
to demonstrate that you play an invaluable role in the buying process, one
that is worth paying for and you’ll have to fight now for a commission that
used to kind of be taken for granted. Those who provide real value will rise to
the top, so demonstrating your authority has never been more important.
Alright the last key takeaway from this settlement is that there will likely be
an exodus of agents from the business and that’s a great thing. When there
are more agents than there are properties to sell, that’s a sign that the
industry is oversaturated. So the agents that got into this business just
looking to make easy money, might as well cut your losses and leave now. The
agents that got into this part-time for extra gravy money, but have another
full-time job that they have no intention of leaving, well it’s just not going to
make financial sense for them either. For the rest of you, even if commission
dollars do get reduced a bit, the number of transactions the agents left will
do, will increase. So it will all balance out.
For the agents that have established businesses (especially established listing
businesses) this could end up being a great opportunity to increase your
market share. But like I said earlier you’re definitely going to need to adapt
your business - specifically your systems, processes and automations
otherwise you will end up working yourself into the ground. Flying by the seat
of your pants will have no place in this new real estate landscape. So if you’re
in the US and are affected by this settlement, use the time between now and
July to get your business organized, optimized and systemetized. If you’re in
Canada or somewhere in the US that is not affected by the settlement, you’ve
got a bit more time, but don’t ignore what’s happening. Set your business up
now to succeed for when the changes come.
For agents that work primarily with buyers, do not panic and abandon that
side of your business all together. That would be dumb. We really don’t know
how this will all shake out, but it’s probably going to be a bit rocky until it all
settles. While that is happening keep doing what you’re doing, but start
focusing a little more on generating listings. The strategies you use to do this
don’t actually change that much. If you’re in my Accelerator Coaching
Membership, make sure you come to this Wednesday’s coaching call as I’ll be
diving into things you can do in your business in more depth. If you can’t be
there, make sure you watch the replay.
So to recap, although the situation is clear as mud right now there are a few
take aways that you can rely on:
Number one, don’t panic or jump to conclusions. Let things unfold a bit and
know that there’s going to be some uncertainty in the short term. Keep
yourself well-informed about what’s happening and be ready to educate and
inform friends, family, clients and everyone you talk to essentially.
Number two, know that you and your business are going to need to adapt.
People are terrified of change, but I actually love change. It’s invigorating, it’s
exciting, it shakes things up and re-energizes me to get creative and
innovative. I see change as a challenge and one I’m inspired to rise up to. You
have choices in how you perceive this and how you respond to it. Rise up girl,
rise up. Thrive or dive, it’s your choice. You got this.
Make sure you tune into next week’s episode that was supposed to go live
today….this episode is actually a perfect segue for it. So be sure to follow and
subscribe to the show so that you’re notified when it goes live.
Until next time.

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