NAR Settlement 2024: Hot Take by Brett Boettge

NAR SETTLEMENT: Hot Take:

First, understand what happened in the NAR Settlement from a policy change standpoint is a massive departure from how real estate has been done. Next understand that every MLS, Agent & Brokerage will put 90% of their resources into workarounds to keep the status quo vs. looking for alternative models. Why? Because 5-10% of Buyer’s agents likely earn their commission and the other 90-95% feel entitled to that commission even if they didn’t earn it. There are some workarounds and some new models that will arise and over the next 24 months I see those workarounds fading and the new models going mainstream on the Buyer’s side of the real estate  transaction. So where do I even begin? I suppose we start with what changes:

1. The MLS -- I still remember Day 1 in licensing school back in 2006 and the question in the quiz, “What is the MLS?” and that hungover guy in the front of the room (probably named Brock), would shout out when called upon, “It is a place where homes are listed.” Which of course it was, but that was not the answer… the MLS by definition was an offer of compensation, and cooperation between Brokers. This settlement removes the offer of compensation and cooperation and makes Brock’s answer 100% correct. The MLS is now simply a place where homes are listed and at least for now, it is the first place they are listed, but once syndicated to all other websites… the MLS and Zillow become indistinguishable. They both are sites where homes are listed for sale and that is all. 
2. MLS Rules: The settlement puts quite a few MLS rules in jeopardy as once you remove an offer of compensation, a lot of what the MLS is becomes irrelevant. Let’s start with Procuring Cause: This is a rule that says, the agent that is the procuring cause for the offer on the property is the one that earns the commission…. But, with no offer of compensation there really is no procuring cause anymore. “Clear Cooperation” is also in the crosshairs, as the reason REALTORS voted that policy into place was to ensure Listing Agents weren’t getting “Both sides” of the commission… really this was just a grab for data in my opinion which they will have to finally admit because there will no longer be, “both sides” from the Seller. So what does this look like at the street level… Well, let's say a Buyer’s hires me to be their agent, they offer me $10,000 for my services…. What that doesn’t include is home showings…. So that Buyer calls the listing agents for showings, then, once my Buyer finds the home they love, I get the call, call the listing agent again for access and then complete my due diligence on the property for the Buyer and submit and negotiate the offer. The listing agent's job becomes much more labor intensive in this scenario which will create more opportunity for innovation around how home showings are conducted and I work for a flat fee because my job as a Buyer’s Agent becomes much less labor intensive. 
3. Listing Agents: Y’all were smiling thinking this settlement didn’t affect you, but it does. Without procuring cause and you as the Listing Agent offering compensation to a Buyer’s Agent…. There is no set timeline when I as the Buyer’s agent enters the transaction and in an a la carte world, this could triple your hours serving a listing at a minimum. So, I’d start innovating how homes are shown since Buyer’s don’t have Supra Keys. Seller’s, you may not have saved “half” the commission post settlement as the Listing Agents job just got bigger, so now they will ask for more than half the commission just to list the home. Up until the showing of the property, the job truly hasn’t changed over here… Seller’s still need to hire a professional to market, negotiate and manage a sale in order to achieve top dollar. 
4. Buyer’s Agents: Right, Wrong or Otherwise YOU are the biggest loser in this settlement. Many, MANY of the brightest minds in real estate are trying to figure out how to keep the status quo here, and it just isn’t going to happen. Sure, for now the workarounds will be popular like asking in every offer for the Seller to pay x% of closing costs to cover your commissions which are now a closing cost, but the INTENT of the DOJ is clear, they don’t want the Buyer side of the transaction to be paid based on a commission where the higher the sales price of the home, the more money you earn. This is going flat fee / a la carte when you represent a Buyer in the purchase of a listed property. My opinion, that is what is best for the consumer…. But let’s explore what this looks like:
1. Showings: No procuring cause, no compensation from the Listing Agent, then I am happy to take a flat fee for every aspect of the job AFTER you, the Buyer identifies the perfect property. This is an argument of Sitzer… Buyer’s have access to all kinds of information… in some cases they even know more about the home than the agent showing them the property….if I didn’t have to show homes and Listing agents took the access job from me, that cuts 50-60% of the relatively unskilled labor hours from the job. 
2. Offers & Due Diligence: In this world, me, as the Buyer’s Agent will be going head to head with lawyers in this brave new world to handle contract drafting, property and community due diligence, negotiation, contract to close and concierge services.
3. Listing Agents: I’d argue, especially in a Seller’s Market with multiple offers, a Buyer going directly to a Listing Agent is not just their best value, but their best option for securing the property. In the event this happens, the Listing Agent has to be prepared to handle all aspects of the transaction for the total commission listed in the agreement. Let’s say that commission is 50-70% of what has been historically “total commission” the argument becomes, is the Buyer property represented? Well maybe, but if not, they could on their own pay a REALTOR or Attorney a consulting fee. Next, who is really saving the money that used to be commissions? The Buyer or the Seller…. That is a sticky question and leads to an entirely different topic…
5. Appraisals: I am NOT an appraiser, but I for one have always de-coupled my commissions and in all my years of appraisers calling me to verify the facts about my sold listings as they serve as comparables for new values, NOT ONE TIME HAS AN APPRAISER ASKED WHAT COMMISSION WAS OR WHO PAID IT. So now, with a variable so great a value cannot just be assumed, I would imagine that this must now become a sworn statement  to appraisers as they investigate the facts of each comparable sale. This, after all, is the only way to determine who benefitted from any of that $30B in commissions the FED believes will be saved in commissions.
6. A New Buyer’s Agent: So is the Buyer’s Agent screwed? No, but a Buyer’s Agent that refuses to adapt will die a slow death…. So how does a Buyer’s Agent earn the same commission serving a Buyer…. That answer is easy, EARN IT. You won’t be able to chaperone a Buyer to an open house and collect a 5 figure check in the future. and you shouldn’t. My vision for a full fee Buyer’s Agent of the future is more of an INVENTORY SPECIALIST…. These are agents in the marketplace that understand communities and the homes inside of them at the highest level. They have written agreements for compensation with their Buyer’s and are free to target off market listings with extraordinary enthusiasm… They know when John and Mary are pregnant, they are likely going to need to get a larger house and note in their files that their home 3 bed, 2..5 bath 1900 sq. ft. is likely a match for one of their retired downsizing clients. They have their fingers on the pulse….they have mastered their markets and  their inventory. They search using tax records, not the MLS or Zillow….. This is what a Buyer’s Agent should have always been, the cream of the crop of REALTORS, far more powerful than a listing agent and far more valuable. This Buyer’s Agent is a THREAT to listing agents as they get the calls when someone is just thinking about selling because of their massive stable of Buyer’s. At the very least, this new breed of Buyer’s Agent will balance the power that Listing Agents thought they just took. Further, as an a la carte model takes offer, Listing Agents will face increased workloads / labor per listing.
7. Future of the MLS & NAR: It doesn’t look great. What’s left I guess is DATA, data that is freely given to thousands of sites. Sure there is the other stuff….. But the meat and potatoes of the REALTOR value proposition landed squarely on Cooperation and Compensation. A $418M fine, even paid over time, is likely to cripple their power and for the first time in forever, the industry’s trade association could face real competition, think American League vs. National League. It could unleash the full potential of creativity from the brightest minds around the Country as they EMBRACE this moment for change vs. fighting to retain the status quo. I saw this coming. I joined the MLS Committee locally FOR THIS FIGHT, not for picking which input fields are mandatory….. This will matter and the answer isn’t clear, and any path won’t be easy. 
8. Litigation: Despite this Settlement I would imagine this is blood in the water, large brokerages are still at risk, exempt from the settlement and different types of litigation will arise all surrounding commissions well beyond 2024. 
9. Stocks: Publicly Traded Companies will see a slow decline as institutional investors realize the ripple effects the policy changes in this settlement could have. Especially with the FED study out there saying $30B or 30% of the commission revenue could be taken off the table….. Imagine if you said 30% of any industry's revenue is at risk and what that would do to stocks… of course, long term it nobody knows, but near to mid-term this news isn’t great for stock values of real estate companies. 
10. Agent Count: It will go down. An industry rule was always…. “I’ll use my friend to help me buy a house regardless of their experience, but when it comes to LISTING a house, I’d prefer someone experienced.” In this new world, mediocrity will not thrive.

Pet Peeves: REALTORS up in arms across the country (Buyer’s Agents) consider for a second you ARE overpaid. Consider for a second that compensation is currently set up where you earn more for selling a higher priced home? Consider for a second the CONSUMER is your guiding light and take the opportunity to rebuild a role, a job description and a compensation model that SERVES THE CONSUMER to the highest level and then maybe we won’t revisit this all over again in a decade. 

Next, this is NOT the time to stand on a chair and promote your company as “insulated”, “protected” or “positioned” to best serve agents. Fear mongering bullIshit is a bad look. Put your head down and solve the real problems instead of exploiting fear and grossly overpromising.

In Conclusion: I don’t have all the answers, but I think the lawsuits were a cry for reform and the DOJ made it clear, this time, exactly what they want with an understanding of what gets them there and what doesn’t. No half measures. Now the mythic entities the real estate industry were built on will need to reinvent themselves and representation at the consumer level, for the first time could see innovation and exciting change. I welcome the reform. I welcome the innovation and I certainly won’t be sitting on the sidelines of the industry, I’ll be in the trenches helping forge what’s next. Agents, get involved… and while doing that, start crafting Ritz Carlton level experiences for Buyer’s that you can articulate and MASTER inventory both on and off market. Consumers, our industry is slow to change, so if you think listing your property this weekend for half the commission is going to serve you, it won’t…. This Summer/Fall is where the settlement becomes official and the policy effective….. Between here and there the Streets won’t have caught up to the Settlement and you could be shooting yourself in the foot…. Be smart about your listings, chat with someone you trust.