389 | BREAKING: Effects Of The Bombshell NAR Lawsuit For Investors

Join us for JWB's Q1 2024 Jacksonville Real Estate Market Update. We'll be joined by Gregg Cohen, Co-Founder of JWB Real Estate Capital.

Here's what we'll discuss:

• Current Jacksonville real estate market pricing, rents, and months of inventory (MOI)
* The big difference in residential real estate performance when you separate single family from multi-family
• JWB company stats and Key Performance Indicators

You won't want to miss this opportunity to spend some time with one of JWB's owners and learn more about how you can take advantage of the Jacksonville real estate market. 

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Transcript

Pablo Gonzalez: 0:00

We got some big stuff happening in the world of real estate today with this big settlement lawsuit against the national association of realtors. It is What we in the business like to call it a context shift. And we're going to talk about what this context shift means, you know, what happened, obviously we're going to talk about the effects of it. There's a lot of headlines about prices dropping, about a mass exodus of realtors, about cats and dogs living together, different things. We're going to talk about how this is going to affect. The real estate market, how it's going to affect real estate investors. And a couple of other, not your average insights with me and my boy right here, Welcome everybody to the Tuesday edition of the not your average investor show. I am your host Pablo. And with me as always the man that I affectionately like to call GC because of his genius concepts, because he knows how to generate cashflow because he's a great co host and because his name is Greg Cohen. Say hello, Greg. Hello, everybody. Great to be with you. It is great to be with you all today. And we got kind of, it's kind of like a last call, right? Last call for the raffle.

Gregg Cohen: 2:15

Oh, it is. Yes. We have until March 29th. That is the last day that you can, buy raffle tickets, which supports JWB Cares. Raffle tickets start at 10 pop! 10 pop, there we go. It's good deal. That's good deal. You buy 100 raffle tickets, you buy, you get you get 10 10 25, I can't remember exactly. Go ahead, go to jwvcares. com slash raffle. All of you have been donating. We've raised over 8, 000 in the raffle. It's a 50, 50 raffle. So number one, you're supporting a great cause. All of the money is going to JWB Cares to build a new construction home that will be gifted to a resident of JWB and absolutely change their lives. And then, oh, by the way, it's a 50, 50 raffle. So the winner actually receives the other 50%, which is a little bit over four grand at the moment now. So. Thank you for all of your support. And if you haven't donated slash purchase tickets yet, go to JWB raffle, JWB real estate. com slash raffle.

Pablo Gonzalez: 3:18

Cody put it in the chat. So all you got to do is click, but it is JWB real estate. com slash raffle 8, 000 bucks already in the pool. So you're joining really good company. It is only going to get bigger when you jump in. So. The more we do it right, like this is it's kinda like those Bitcoin people, right? Like, uh, be be a be a diamond hands, right? Like join Join it on the raffle. Sure. Go into the internet Mass hysteria of the JWB raffle. It's a really, really good cause. Do a little gambling with the rest of us here. It's the best type

Gregg Cohen: 3:50

of gambling.

Pablo Gonzalez: 3:50

It's the best type of gambling. A win, win, win win-win. And you get to join. The other people that have pitched in 8, 000 bucks, which are the people that are in our community, which we like to call out in a little tradition that we have when we start a show, which is called what you see the

Gregg Cohen: 4:03

roll call,

Pablo Gonzalez: 4:04

baby. We got Jeff Petty. John kicking us off today, number one, number one, beating the usual leadoff hitter who's batting second today. We got Pamela Meyers saying good morning. JWZ families on the West coast. We got the mouth. I'm on

Gregg Cohen: 4:19

Billy grade.

Pablo Gonzalez: 4:20

Saying good morning from the flagrantly fragrant mountains of Colorado. You're going to have to try better than that. Bill green. We got past star of the show. Glenn, shank it in the house. I heard he was a legend in Daytona bike week. Didn't talk about that. We did. Yeah. We got the man of steel in the house. We got Christopher Lee from Fernandina beach checking in. We got the mama bear in the house. Who's here live with us. We got David Blattner from Massachusetts. David, we got the S. Shama Nadiem Shaw Nadiem Shaw checking in with his trademark. Good morning. Good afternoon. We got bid Merick in the house from Virginia. I'm client. Great meet you. It's good to have you. We got the early bird checking in, Dean Curry saying hello everyone, especially the Twinsies. How

Gregg Cohen: 5:00

that,

Pablo Gonzalez: 5:00

I was wondering how

Gregg Cohen: 5:01

long it was gonna take

Pablo Gonzalez: 5:02

to

Gregg Cohen: 5:02

mention this.

Pablo Gonzalez: 5:03

Greg and I walked in together. He goes, no way. We were, we were trying to take a selfie and we had to walk into the marketing meeting and have Cody take a picture of us because we love to be made fun of. It

Gregg Cohen: 5:14

also is the khaki pants that we're wearing. Yeah,

Pablo Gonzalez: 5:16

we're also wearing khaki pants. We're also wearing, and the same color belt. So, you know, no big deal. we got, we got Charlie Harding from Boston. Charlie, is that a new name? I don't know, but I am so excited you're here, Charlie. Good to have you, Charlie. Hope you, hope you, hope you make it a, make it a habit. I texted this picture to Hervé François, our buddy from Jersey, because he's the one that likes to make fun of us. So he showed up today. Good to have you back in the first

Gregg Cohen: 5:37

thing we thought when we realized how good we looked in the same shirt. And we got to talk to Hervé.

Pablo Gonzalez: 5:41

Imagine, imagine. We got our regulars, Gary and Rosalind Riley from Marietta, California. We regard you. We've got the first family of The Natural Habitat show, Ken and Carolyn Maline, Patrick and Matrick. We salute you. Else we got, oh, we got the five Fs. Our favorite fee fiduciary financial advisor friend Kelly Beba. Kelly Barba in the house. Good to have you. We got Amigo

Gregg Cohen: 6:07

Bill Shield with,

Pablo Gonzalez: 6:09

we got Eddie Harris Hot. Lana, we got Ken PLE in the house. That's the new name. New name. New name. Oh right. Ken, welcome to the show. We got the ringmaster. Drew Barnhill. Drew Barnhill in the house. Who else we got in here? All right, man, let's get a roll. We got my lady. Jack Chadda. Jack Chadda. Good to have you here, Jack. We got Amir from LA or Louisiana. I'm not sure, but Amir, you know, new name. I believe that's another new name. Welcome to everybody, especially the

Gregg Cohen: 6:35

new

Pablo Gonzalez: 6:35

folks. Welcome to the familia. We got the better Greg.

Gregg Cohen: 6:38

Greg

Pablo Gonzalez: 6:38

Stone. Greg Stone in the house. Check in in, we got Beth Whitney from Beautiful Hudson Valley, New York. Beth, we have another name for the Hudson Valley. Beautiful illustrate. It is

Gregg Cohen: 6:48

Illustrate Hudson Valley. You'll have to meet Chris Saga. He's up there too. Yeah,

Pablo Gonzalez: 6:52

he's, he represents the Hudson Valley up there. Beth. Uh, you're in good company. We got Reggie Holmes. Yeah. from the Inland Empire. Jason Sanders from San Francisco, California. Plus we got out here, our wife.

Gregg Cohen: 7:05

Wonderful.

Pablo Gonzalez: 7:06

So many new folks coming in. Mej Garcia is back. Sylvie Lumumba is here from Wauchesta, Massachusetts. Susan Parker from Raleigh. This is great. This is great. Welcome,

Gregg Cohen: 7:16

everybody. Thank you for being here.

Pablo Gonzalez: 7:17

Yeah, thank you for being here. We got an anonymous attendee asking, how long will this Zoom call last, please? If you're already sick of us. I'm sorry. I'm sorry. But, uh, this is, this is how we do it around here. It's about an hour. About an hour, give or take should be fine. All right, GC, since we're already getting prompted to like wrap it up here, let's just, let's just get right into it. Right. So we talk about this like groundbreaking thing. What happened is that there was like allegations against the national association of realtors where them and several large real estate brokerage companies have been requiring that people pay inflated buyer, Broker fees in addition to their own broker's commissions. And it was set to validate antitrust litigation. So class action lawsuit came out. They ended up reaching a settlement where they agreed to pay. The NAR agreed to pay 418 million. It's a lot of cash ish. In a settlement of a larger 684. 5 million when you throw in Remax and Keller Williams and Compass Realty, that they're going to pay in annual installments as this settlement, right? I actually, I'm not sure if it was an admission of guilt or not, but usually settlements, there was no admission of guilt, no admission of guilt, right? But like this idea that this money is having to be shelled out by them, Is going to have these big impacts on industry practices in the real estate industry because N. A. R. is a big lobby. They essentially own the term realtor and they just kind of dominate what is happening around real estate transactions. So specifically, they agreed to repeal their commission. Policy, which is mandated that listing agents offer commissions to buyers agents and use the MLS to do all this type of stuff, right? Which is kind of like the point where they control the whole thing And it's expected to change the structure of how brokers are paid and allow homeowners More control over the sale process. Do you see, how did I do summarizing that?

Gregg Cohen: 9:09

You did a pretty good job, right? This was a movement towards transparency in the marketplace. This was for those who were, I guess, on the other side of the NAR. This was a move towards transparency and, you know, the NAR has long stated that commissions are negotiable and they are negotiable, but the, the charge that was being made is that the National Association of Realtors through its practices had basically created this. industry standard that was violating open market practices and leading to increased commissions and leading to increased home prices. And we know how important home price affordability is right now. So you can start to connect the dots on any and all avenues to potentially, you know, side on the side of home buyers and home sellers and potentially make home prices more affordable. So, a lot to unpack here. Yeah. I do think this is going to change how real estate is conducted. So this is a great thing that you're tuning in today because I do think it is going to change how real estate business is transacted. There are a lot of really big claims that are being made right now of like, this is exactly what's going to happen. We've got a few different takes here on the Not Your Average Investor show. As usual. But I do also want to say that this is brand new. Hasn't even gone into effect yet. And I have spoken with a lot of industry experts real estate agents and brokers and my network that I hold in very high regard, and everybody made sure to tell me that, listen, there's a lot more unknown than known right now. And things will get sorted out as this becomes in more, more full effect, but it absolutely is going to change how things done.

Pablo Gonzalez: 10:47

A lot more unknowns than known, but what we know essentially is. The National Association of Realtors who controls the MLS has essentially been a very, very big influence on how real estate is transacted. Because they have such a big influence, they're actually one of the biggest lobbying groups in the United States. We don't have data to figure it out, but like some, some news agencies are saying they're the biggest lobbying group. Which was news to me. Which was news to us. Right? And because of that, you, you won't be surprised that The way that real estate is transacted has not changed a lot in our lifetime while all these other industries have really, really changed, right? So like this idea that this big domino fell to me feels a lot like, you know, Uber disrupting the cab industry or Airbnb disrupting the hotel industry, right? Like it is going to lead way to a bunch of externalities that we still don't understand that being said. If you read a lot of the headlines, there seems to be some commonality of what people are predicting. One of the things people are predicting is home prices dropping. Other things that people are predicting is this like idea that commissions are going to go away, and realtors are going to like flee the industry en masse. Another thing that's happening is this like idea around the lobby weakening. And then, of course, people are asking, What does it mean, you know, Have I bought a home? There's a class action lawsuit people start hearing. Cash bells ringing, right? So, like, we're going to hit on all those things. I think the thing that us, as investors, really, really care about is the idea of Are home prices going to drop because all of a sudden there's 6 percent or 3 percent taken off the top of a transaction. And we want to hit that from a three pronged approach. We're going to talk about the macroeconomics of how real estate is transacted, the buyer side of the, the seller side of how real estate is transacted, and then the buyer side of how real estate is transacted. So, Let's start there. Your overall take on, do you think that it's fair, right? Newspapers are seeing, hey, all of a sudden there used to be a 6 percent fee that for sure was going to happen. If now at least half of that is going to go into dispute. Are we just cutting 3 percent off the top of real estate? Are we cutting 6 percent off the top of real estate? Are real estate prices going to go down? What do you think when you hear that?

Gregg Cohen: 13:10

Well, let's talk about it. I like talking about it from those three perspectives, because then I'll share that's what's going on in my mind. I'm thinking macro, then I'm thinking what sellers are thinking, and then I'm thinking what buyers are thinking, and then we'll, you know, I'll share what my thoughts are as far as home prices going down. or not. Let's first just be real specific about what is changing. There's two major things that are changing as a result of this lawsuit and this settlement. One is that listings no longer will reflect what the buyer commission is on that listing. So prior to this, buyers really didn't have a say or much of a say or much knowledge about the commission No, let me, let me, let me refrain from that. Agents went out of their way to explain in contracts what the commission was being paid As far as the buyer's agent and then they saw it on all the home purchase and sale agreements and things of that nature But the negotiating process wasn't really informed for the buyer and so because a lot of that was done on the multiple listing service where the sellers listing would just show what that cooperative agreement, what that shared commission structure would be with the buyer. And generally it was either two and a half or three percent going to the buyer side. So what's changing here is you're no longer going to see that buyer's commission listed on the listing in the multiple listing service. That doesn't mean that buyers and sellers agents still can't have a cooperative listing agreement. It just means that they are going to do it outside of the multiple listing service. And there's no problem with doing that outside of the multiple listing service. It's just not they're getting away from sort of that standard always done practice and they're increasing transparency and the ability for buyers to negotiate what those commissions are. So number one, you're no longer going to see buyer's agent commissions on the multiple listing service. Number two, all buyers, all agents are going to need to have a buyer's agreement signed. before a buyer's agent shows a home to a potential buyer. This is new, and this is not the way that it was required before, but now agents, buyer's agents, are going to have to come to terms and agree on the rate for their services and have that agreement signed before they show homes to buyers. So those are the two things that are changing. However, this does not preclude A certain amount of commissions from being paid. It is all about moving towards that transparency. So

Pablo Gonzalez: 15:33

all right. So let me, you just said a lot there, right? So in what can get lost when you throw the baby out with the bath water is not this idea that commissions are going away,

Gregg Cohen: 15:43

correct?

Pablo Gonzalez: 15:43

It's just that commissions are going from. This like just understood this is what's happening. There's really no alternative from, from the markets feeling right to, Hey, front and center. We need to have a conversation for you to agree upon this before this actually happens. Yes. And therefore there's an opportunity for that to change.

Gregg Cohen: 16:07

Right. And industry expectations are that when, and the purpose behind this is when there is more transparency and more. Ability to negotiate those rates that buyers agent commissions likely will compress. They will likely come down over time. We're hearing estimates somewhere between 20 to 50 percent reduction in fees because of this. That, that is the intent of this lawsuit. is to drop those commissions because that helps home owners that helps home buyers that creates more home price affordability. Those are all the major things that people are going for here.

Pablo Gonzalez: 16:42

Got it. So what I'm hearing from you is first of all, let's not all rush to assume that it's going to be. One haircut off the top of like fees going away, which you can get lost in the sauce if you're just like reading headlines or whatever.

Gregg Cohen: 16:56

So, yeah. So, you know, on the question of home prices and the articles that I read, and I read a number of them and in talking with folks and listening to podcasts on this. There are some takes out here that all of a sudden people are saying wow home price is gonna drop 3 percent in July when this thing takes effect

Pablo Gonzalez: 17:12

Yeah,

Gregg Cohen: 17:12

and that's just not real. So what's happening? What's happening is this is this is not a coordinated event This is not like in July when this thing happens all of a sudden Every real estate agent and every buyer and seller all of a sudden say well, you 6 percent for these services. Now we're gonna pay 3% That's not happening. That's not going to happen. There are millions of buyers and sellers and real estate agents out there who are all negotiating and navigating these changes over the course of months and probably years. So what I was sharing is that in order for this to have a dramatic effect on the market, the most dramatic effect would happen if you just pushed a button and all of a sudden this took place. This is not that way. In fact, right now it's very common for buyer's agent agreements to be signed at that 3 percent rate right now. Over time, it's likely that those rates will come down through. General marketplace dynamics. Yeah, competitive market, but it's not right now So if we're thinking about a potential decline on prices number one just realize that this is this is gonna take a long time Yeah for people to figure it out how to navigate this and a very long time to kind of standardized within the marketplace. Yeah.

Pablo Gonzalez: 18:26

And we just think about behavior. If we have operated a certain way for a hundred years, it's not going to just overnight flip a switch. And all of a sudden everybody knows how to operate. I think it stands to bear that we're going to start with where we've always been. And then from there, we're going to like take like little iterations until we find a new normal. It's not going to be overnight, which means that while we do foresee a change in the way that Real estate is transacted and how that change will affect. How deals get done and then eventually it's going to trickle into like overall pricing. It's not going to happen overnight, which means that we need to open the aperture to the idea that like there is no real estate never happens in a vacuum. Real estate is a complex transaction with a lot of different stakeholders, a lot of macroeconomic forces and a minus B isn't going to equal a new normal. It's just going to be like a minus B plus all this other like cocktail of stuff that happens, which is the reason why we like to bring perspective into into discussions whenever anything's happening and people think that like one thing causes another and it's like a complete reflection, right? Exactly.

Gregg Cohen: 19:38

Remember when we were doing the Jacksonville real estate market update? Just last week and I was sharing how we have we are under supplied in the Jacksonville real estate market Yeah, and I started to receive some questions on like well if months of inventory is Five does this mean that home prices are going to go up or if months of inventory is? Six or seven does this mean that real estate prices are going to go down or be flat? And what I was very quick to caution everybody is I'm sharing with you one of the, the major impactful indicators of what pricing is going to be over the next six to 12 months. But we need to have respect for what we're talking about here. We're talking about the real estate market. We're talking about prices, which are dependent on supply, demand interest rates, what the Fed's doing, inflation, construction

Pablo Gonzalez: 20:27

pricing, construction prices.

Gregg Cohen: 20:29

What's going on across the world where, you know, things are, you know, So it is a

Pablo Gonzalez: 20:34

employment, the economy,

Gregg Cohen: 20:35

and then potential lawsuits that the NAR might have that could potentially affect commissions on real estate agents too. So a whole lot going into that and your original point of it being a part of the bigger equation is, is very important. And what I think our job here to do today is to say, well, How big of a lever is this on pricing in comparison to the other? Thank

Pablo Gonzalez: 21:02

you for landing us there. Yeah. That's, that's what I was trying to get at. So, so talk to me about that. I know you've got real thoughts about that.

Gregg Cohen: 21:07

Yeah. So the first thing that we should realize when it comes to this effect on home prices is that home prices are a factor of supply. So again, to reference what we were talking about in the Jacksonville real estate market update, if you were listening to that show, you'll know that we are undersupplied when it comes to housing. And that is a challenge for our economy and for people living in our country and for people in Jacksonville. It is a good thing for you as an owner of the asset. That's why I talk so much about this is a great time to own assets because you're in a position of strength because you own where there's not a whole, something that there's not a whole lot of in comparison to how much people want to buy. So right now we are under supplied. No matter what happens with this NAR settlement, we are drastically under supplied. John Burns Consulting released data showing that we are 2 million housing units under supplied currently. And last year, in 2023, you would have thought that's the best year that we could have been. Started to take a chunk out of this supply issue. And last year we undersupplied the marketplace by 300, 000 housing units. We only built 1. 5 million and we had 1. 8 household formations. So we're not even decreasing that undersupply. The problem is getting worse. And what you should realize is this undersupply is the reason that housing prices actually increased in 2023 in Jacksonville and in many other parts of the country. And we're able to withstand, withstand almost 8 percent interest rates. And that problem is not going to be fixed anytime soon. So the biggest lever to pull here, or the biggest thing to understand as far as what pricing is going to be affected is we are still in an under supplied market. And that is going to be the largest. The largest it is going to be a large factor and it's going to be here for a while. It's not going to change in a while.

Pablo Gonzalez: 23:08

So

Gregg Cohen: 23:08

that's the first thing I think from a macro perspective. No, I don't see who else housing price is going down because of that factor.

Pablo Gonzalez: 23:14

Love it. Love it. So to recap of why we're talking about this right now. This lawsuit came down. It's going to change real estate transactions. And there's a lot of conversation around the effect on the realtor and the effect on the home buyer and the home seller on this show, we talk about things from an investor perspective, right? So when we think about what's happening, we're going to get into the transaction and how this affects the realtor, because it's part of the equation. But when we are thinking about the effect of forces on the economy, on real estate, we know. That as real estate investors in rental property investing our biggest lever, the thing that brings the most wealth is home price appreciation over time. So we are first talking about the effect on the pricing of real estate and whether or not the value of real estate is going to go up or down. And what you are saying is that. The transactional effect of a change in what commissions happen during a transaction is one thing that could affect home prices. But we historically know that the biggest thing that affects home prices is supply and demand. Mm-Hmm. followed quickly and, and something that really, really affects demand is interest rates.

Gregg Cohen: 24:30

Yes.

Pablo Gonzalez: 24:31

And we just took a haymaker to the face on interest rates. And that did not bring down pricing of real estate because the supply out there does not come anywhere close to matching the demand. And based on trends that are happening, we still haven't come anywhere close to catching up with the new demand that happened last year with replacing that. And therefore the fact that prices would go down because of a fix to like the transactional cost of real estate in lieu of The historic rise in interest rates, not affecting pricing is unlikely to happen in the immediate future. I

Gregg Cohen: 25:11

think you said that really well, put yourself back in the shoes of an early 2022 before interest rates went up and save yourself. Which do you think would have? A larger effect on potentially lowering housing prices, rates going up from 3% to 8%. Mm-Hmm. or potentially how you negotiate with a realtor. Real estate commissions coming down one to maybe 3%.

Pablo Gonzalez: 25:34

Yeah.

Gregg Cohen: 25:35

We all would have said, wow, I would think that. Interest rates going up from 3 percent to 8 percent would have a much bigger impact on potentially housing market declines and price declines happening. But guess what? It went up from 3 percent to 8 percent and housing prices still went up. So it reflects how important this under supply of housing is as the number one lever that's going to affect housing prices. That's a really

Pablo Gonzalez: 25:59

good take GC. So, you know, when, when we were researching this article, every article led with home prices potentially will drop because of this. Now we can put a little cold water on that and say, Hey, you did also say that when the Fed started raising interest rates and you led with that when the Fed started raising interest rates. And at the end of the day, we have not seen a drop in home prices during interest rates. We do not believe that there's an immediate future where home prices drop because of this. That's right, right. From a macroeconomic perspective. The

Gregg Cohen: 26:29

last time that you said that foreclosure filings were going to cause a drop in housing prices, the last time that you said that interest rates were going to create our housing prices, the last time that you said that housing prices already went up too much and that was going to create our housing prices, I think you tacked this onto that list of those things that we'll be talking about in a year from now and saying, Oh yeah, that never

Pablo Gonzalez: 26:49

happened. Got it. So from a macroeconomic perspective, as an investor concerned in like the appreciation of my asset we feel pretty safe, right? So, so now let's talk from a, we just said that the reason why is because from the seller there isn't enough supply, right? So like if there was. If there was going to be an increase in supply, that would mean more people would want to sell their home, right? So let's talk about the psychology and the dynamics of a real estate sale and how that could be affected by all of this.

Gregg Cohen: 27:18

Well, so from the seller's perspective, Put yourself in the shoes, and maybe some of you are in these shoes, of somebody who's thinking about listing your home. When you go to list your home, you most likely are working with a real estate agent, and that real estate agent prepares a comparable analysis of other properties in the area that recently sold that are comparable to your property. And that's how you determine what the sales price is of your home. And this ruling, it has no bearing on what other homes in that area sold for. So even if we push the button and this all of a sudden just took effect right in one day, which is absolutely not what's going to happen, it's going to take months and years for this to normalize, you still are basing your comparable sale, you're basing the sale of your property on comparable sales. And if you're somebody who wants to maximize the sale potential of your house, and you see that something right down the road sold for x price, and your price is the same, and your house is the same, you're going to try to sell it for that price. So while the net effect here might change. People don't base the decision to sell their asset on the net effect. They base the decision to sell their house on what the sales price is. With the market command. With the market command. Yeah, so this is, this is, this is more reason that I don't see this affecting and dropping housing prices because that's just not the way sellers go about pricing their asset. Or really, any person who owns something, you sell it at what the market dictates. Yeah.

Pablo Gonzalez: 28:48

Yeah. Got it. So if I was, if I was to summarize that again with the scope of what this show is about, right? Like we care about real estate prices from the perspective of a rental property investor, because that is where we make the majority of our wealth. And what we are saying is that there is a under supply to the market and an over demand to the market. And therefore, if that's going to change in any way, that's going to stop prices from rising. Then more sellers need to come into the market to. Bring that to equilibrium. And based on the change of what happened with this NAR lawsuit, what is changing is just the commissions that are paid to the openness to negotiation for commissions paid to the agents that are, that are helping out with that sale from a seller's perspective and from a buyer's perspective. And I'm going to bring my home to the market. I'm not going to look around and say, Oh, now that the buyer doesn't have to pay a seller a certain amount of commission, I can sell my home for less because me as a seller, I'm thinking, Oh man, this is what prices are at. That means that. I can sell my home and take this much to the bank to go buy another home, to go, you know, put it in another asset class, to like take it off the top and buy myself a nice vacation, whatever. I'm not thinking, Oh, because now the buyer doesn't have to pay 3%. I'm going to go discount my home because there's no incentive for me to do that because the market is still undersupplied. There are still people at this asking price and therefore I'm not going to, I'm not incentivize in any way to take anything off the top and sell this thing, because I'm going to be able to sell it to somebody else. That's going to pay for that. That money is just going to come to my pocket, not the buyer's agent.

Gregg Cohen: 31:08

Yeah, exactly.

Pablo Gonzalez: 31:09

Yes.

Gregg Cohen: 31:09

Supply and demand is what it comes down to demand or the right demand for the amount of supply that you have. Why would you take a discount?

Pablo Gonzalez: 31:16

So, so there's, so that's it from the, from the seller standpoint, right? If we're going to address the supply side. The idea of the suppl the supplier. Mm-Hmm. Discounting the price of the home is pretty farfetched if you think about just like what's in it for them and what their options are in the market. Right. Well up. So, so now let's talk about it from the, from the buyer's perspective, from the demand side. Is this going to affect prices?

Gregg Cohen: 31:40

Okay. So let's set the scene for what will really impact the buyer decision. People make decisions on buying real estate based on monthly payments. And the greatest lever to pull when it comes to monthly payment. is the interest rate. And we're in an environment right now where inflation has gotten more and more under control. And the Fed, which sets the rate, which indirectly affects interest rates, the Fed has already kept their Fed funds rate the same for multiple quarters now. And they've signaled three rate decreases over the course of the next year. That doesn't necessarily mean it'll happen, but when the Fed signals something, they do it. with intentionality. And they're usually right about what they say they're going to do. So most people in the economy are expecting interest rates to go down at some point in time. It's a matter of when, not if. So if you're thinking about yourself as an owner of assets, Or let, you know what, let's take the, the, the buyer. Let's say you're the buyer here and you're starting to think about monthly payments as the way that you're going to be able to make a decision on buying a house you're in for a whole lot more home price affordability in the near future when interest rates come down than potentially what would happen as far as commissions going down. So I ran some numbers. Okay, the Fed has signaled that interest rates are going to have, the Fed has signaled that the Fed funds rate is going to have three quarter point decreases over the course of the next year. Let's just assume that interest rates dropped three quarters of a point. Home values could go up another eight percent if interest rates dropped three quarters of a point and the payment would still stay the same. Buyers make decisions on payment.

Pablo Gonzalez: 33:41

So as a buyer, you're so, so what you're saying is the fed is signaling, drop in rates, right? And buyers make a decision based on how much home can I afford? It doesn't have to do with the sticker price. It has to do with my mortgage, like what I am substituting my rent for. Right. And if. There's a three quarter drop in rates the same way that we just, which is what the Fed is signaling. And there's an 8 percent rise in prices. Me as a buyer, I'm still thinking, Oh, okay, well, if it comes down to a decision of rent or buy, I could buy, own, have all the benefits of the American dream, and still my payments are going to stay the same, and I get all these other benefits, even if prices go up 8%.

Gregg Cohen: 34:27

That's right. Compared to what home prices are right now and payments are right now, if interest rates would drop three quarters of a point, like the Fed is largely signaling, your payment would still stay the same. And you have thousands of people each month buying these homes in Jacksonville at this higher monthly payment right now. So, again, I'm thinking about beyond just, like, the feel of this and beyond just, you know, You know, the emotional component that we all want home price affordability to be more and more of a reality for everybody. At the end of the day, the thing that's really gonna move the needle here is interest rates coming down. And if you believe the Fed, that they are largely, that they are signaling lower Fed funds rate decreases over the course of the next year, then that is gonna way trump whatever effect a 1 3 percent lower real estate commission would have on housing prices. So, the long story long here, if you're coming from the buyer's perspective, you're making decisions on monthly payments. Your monthly payments are about to go down if interest rates go down, and likely home prices will go up, which will dwarf whatever potential decline that may come from the commissions.

Pablo Gonzalez: 35:46

So we started, you know, we started the, this segment of pricing, talking about this idea that real estate prices don't move in a vacuum. And we've talked about it a lot on the show. And when it comes to the idea of us as somebody entering the market to purchase a home saying, Hey, now that I can renegotiate with my buyers agents, My negotiation with my buyer's agent is going to allow me to say, eh, I don't want to pay full price for this house. I want to pay 3 percent less for this house or 2 percent less for this house or 1 percent less for this house. And that affecting the overall price point of homes and the value of homes seems unlikely. Based on the fact that a there's not that much supply out. So the buyer is still not the person dictating it But also the idea that as a buyer I make decisions based on what my monthly payment is going to end up being And based on what the fed is signaling What it looks like is going to happen is that there is going to be a decrease in interest rates Which means that as a monthly payment, I'm going to be more inclined to go buy that home for my family that I want to live in and I want to start, you know, creating this like American dream scenario based on what I can afford, I'm going to be more likely to accept higher prices than I am more likely to say to demand lower prices because interest rates are going to go down.

Gregg Cohen: 37:05

You can demand it all you want, but nobody's going to listen to you because there's going to be more demand. There's going to be more house buyers like you that are entering the marketplace and we still are under supplied.

Pablo Gonzalez: 37:15

So

Gregg Cohen: 37:15

that's going to force housing prices. To go up rather than go down. Got it. So,

Pablo Gonzalez: 37:20

summary on the pricing part, right? We're going to talk about pricing. Now we're going to talk about behavior of the market for realtors because they are a part of the ecosystem. But to summarize the pricing discussion, which is what all these headlines are leading with. Every headline is, home prices may drop because of, because of litigation thing with the NAR, right? We've talked about it from the idea of, The macroeconomics of real estate still showing that there is a dearth in supply and an excess in demand and this idea that like the levers that move real estate pricing, the transaction and the commissions in comparison to like how we see interest rates driving it. Is probably not equal. And we just realized that housing prices because of the supply demand dynamics, we're able to survive the historic interest rate hikes. We don't think that that's going to cause prices to lower. Then we talked about from the seller side of it. The idea of supply is the problem here. If I'm going to bring supply to the market. The seller is not going to be motivated to say, Oh, now that there's a drop in commissions, I'm just going to give somebody else a deal. They're gonna say, no, no, no, no, no supply still on my side versus demand. So I'm just going to take that money for myself. So the person that owns the home is still going to like, Want to reap the value. And then from the buyer dynamics, you might be able to go renegotiate with your realtor and say, I want less commission structure, but that still is not going to put you in a position to enforce a price drop because at the end of the day, you're looking at it from what's best for you, what's best for your family, you're going to want to buy as much home as you can and lock that in, and that's likely not going to happen. And again, we're looking at all this because. We are real estate investors, and we understand that the value of our investment long term comes from home price appreciation. So we're evaluating prices from that regard, and we don't believe, you don't believe, GC, if I'm hearing correctly, that this NAR lawsuit in the short term is going to cause the drop in pricing that the media is promised. That's correct. Okay, once again out on a limb predicted that home prices won't drop for probably about the third or fourth time on this show, which I think it's cool, man It's the data with perspective. There you go. So now let's talk about what our realtor friends Um are thinking about and how this is going to affect the residential transaction Two of the things that are, that people are talking about is this commission is going to go away for the buyer's agent. And that means that realtors are going to like stop giving preferential treatment to higher priced homes. And that's really, really gonna affect the, the realtor in all of this because they were originally just motivated by this thing is locked in. So the higher the price I can sell, the better I can do. When you hear about those headlines, what do you think about?

Gregg Cohen: 40:04

You

Pablo Gonzalez: 40:04

know, I

Gregg Cohen: 40:04

think a lot of people outside of the real estate world are like forcing their opinions on what's going to happen here, but people in the real estate world see it very differently. Most people that I've spoken with in the real estate world here agree with what we're talking about as far as the impact on pricing, right? Especially in a world where we see interest rates going down. And kind of the same thing on this idea that you know, agents are, you know, steering folks that would otherwise be in the best interest steering people to houses that would otherwise be in their best interest in search of a higher commission to go and see a different house. You know, and listen, I'm just, I'm thinking the best of people and knowing that these real estate agents are in control of the largest transaction investment in somebody's life. And I just, from my perspective, the agents that I speak with, it's usually not the case. I, I think the idea that it will, you know, lead to I don't know, a better service experience from that perspective is a little far fetched. Just from my perspective. I think most agents have their Still

Pablo Gonzalez: 41:05

a pretty competitive market of just like, if you're not going to help me out, I'm going to find someone that will.

Gregg Cohen: 41:10

Right. So they're still

Pablo Gonzalez: 41:11

competing on like who can do the best service, not

Gregg Cohen: 41:14

just

Pablo Gonzalez: 41:14

who can sell the highest price house. Yeah. I don't

Gregg Cohen: 41:16

see a whole lot of people that are like, well, listen, I can make X commission, but I can make a few hundred dollars more if I stick it to the buyer and make them pay an extra 20 grand. So I, I, that's just my personal fee. I think the best of people and I don't see a whole lot of that happening. But the, the commission structure. I think many people are just quick to just throw this out that agents, you know, can never earn 6%. Again, I see a lot of headlines saying that 6 percent commission is done. I just want to explain that. That's not necessarily the case. It goes back to general kind of business building practices in my mind, right? It, it is an open and transparent marketplace now, where if you are somebody who can represent a buyer and communicate value to that buyer. You are absolutely open to earning 1%, 2%, 3%, 4 percent for your services as a buyer's agent. and the same thing on the seller side, it's your job to communicate value to your person that you are representing on either side of the transaction. And I think that should be a really great thing for our marketplace and it should make our real estate agents excited. Those top level agents, I think are going to separate themselves from from the agents that might not be providing top level service and there's going to be a rush to value. So, while I do think that overall commissions will be compressed over time because there's more transparency and I think that's a good thing I do not, I don't think we should shut the door on people earning 3 percent for buyer's side commissions and 3 percent for seller side commissions. You know, it's just your job to make sure you can deliver that value for folks,

Pablo Gonzalez: 42:56

man. I love that you're thinking about this from the, from the entrepreneurial lens, because for me, it's. When there is massive shifts in context like this, there's just like all this opportunity to be hold. Like you can, you can be the, you can be in the nerd group in high school for four years, and there's really very little you can do to get into the cool club. As soon as you get to college and that, or you change schools, It's wide open. You can be the coolest kid in school, depending on how you act, right? And, and to me, this, this represents that, right? Like under one specific paradigm, there was only one way to, for realtors to make money. There was only one way to compete. Now that this is happening, now that there's a new negotiation, the transaction is going to be looked at different. From the buyer's perspective, from the seller's perspective, the, you know, like the, the, the rules have changed as realtors, there is going to be the folks that have already made a name. And therefore, you know, their reputation is rock solid for how they provide value in that market already. And then there's going to be a whole bunch of opportunity of how you can redefine how this experience needs to be for the buyer and how you add value to the equation that is a great entrepreneurial chance here for you to like completely read. You know, dominate a market. And the thing that you define is the actual problem that you really, really solve. I understand. So, so I think it's an exciting time for, if you were in like that top 0. 1 percent of realtors, you're, you're probably fine. If you're everybody else, man, this is really, really exciting for you to like really think about. what this means from the experience perspective and how you can position yourself to solve that problem that you have always hated and solve it better for, for the buyer in that regard. Just, so just from a top down standpoint, I think this is a giant opportunity for real.

Gregg Cohen: 44:51

And I think you'll be rewarded substantially financially by, by this commitment to value for the people that you're serving, especially on the buyer side.

Pablo Gonzalez: 44:59

Yeah.

Gregg Cohen: 44:59

Because what, there are some unintended consequences to this settlement and to the change of practices. That's not going to affect everybody the same. One part, one cohort that I'm very, very concerned about that could be that could have negative unintended consequences are our first time homebuyers. Because, you know, now, and there's still things to figure out exactly how this is going to transpire as far as how payments are made to buyers brokers, There's some discussion. Do buyers brokers need to be paid up front when they sign that agreement before they go and see a home? Is it something that will be put as a concession on the settlement statement when they close the home? Is it going to be financed? There's a whole lot to figure out, but. But one thing we know is it's more of a financial burden right now to be able to buy a home because now you're negotiating your buyer's agent commission with that person, that agent right up front. And you didn't do that before. So there's more pressure financially. And for those who have the greatest, Vulnerability to that would be our first time homebuyers.

Pablo Gonzalez: 46:06

Yeah, and and Sherry J Hill actually called it out earlier in the chat Like we knew we were going here, but she brought up this idea of vulnerability for first time homebuyers But you have some ideas around how how it could get better for them, right?

Gregg Cohen: 46:17

Well, the first thing is I I think a group that can benefit the most from incredible buyer side representation are our first time homebuyers You know, these are the folks that have never owned a home before. And owning a home is a major step in somebody's life. And so having somebody who has your back to help you through that transaction and help you prepare for all the things that come along with that transaction is an incredible value that I'm really passionate about, we're really passionate about here. And if I'm thinking about you as an agent out there trying to kind of Navigate this change start to think about where the greatest need is and how you can create the most value I see first time homebuyers as being an incredible value. So not just from your expertise But, the things that we're doing internally here to make sure that we're taking care of first time homebuyers, even before this lawsuit came, but definitely now, is, is to make sure not only is there education, so we do first time homebuyer seminars, you all can host first time homebuyer seminars, and you'll, your local market, and create value for your first time homebuyers. And then we are experts in grants and down payment assistance programs. Many people don't know this in Jacksonville. But you can get up to 75, 000 of down payment assistance and grants. Most of these don't even need to be paid back for your first time home buyers. And you can, you can absolutely change somebody's life by representing them in this fashion to not only give them the expertise, but maybe create a scenario that they can buy their first home without having to come out of pocket. So before we just write off and say that buyers will net buyers, agents will never earn 3 percent again, think about the value you could create, how you could change somebody's life. If you were able to help them get these down payment grants and assistance programs, walk into their dream home and not have to come out of pocket and never have to pay those loans back. And you did first time homebuyer sessions to create this value. Do you think somebody would be super excited for you to earn 3 percent as a buyer's agent commission? Absolutely.

Pablo Gonzalez: 48:19

Yeah.

Gregg Cohen: 48:19

Right. So there are absolute ways that you can make an impact and create value. You just got to be entrepreneurial. You got to think with that, that seeing the problem that is in most in need of a solution and being the best to create that value for somebody.

Pablo Gonzalez: 48:35

Yeah. So start, you know, I'm a big believer in businesses starting with a problem first, right? Like JWB, you realize that it was too hard for people to invest in real estate on their own. So you based your entire business model around how do we create. You know, opportunities for people to purchase homes without having to spend too much time with it. How do we spend opportunities for people to have that home managed without having to worry about it too much? And you have completely engineered your business around that, all the way to the point of just like, how do we make sure that these homes succeed long term by affecting the macroeconomy? In the same way as a realtor, if I'm thinking, okay, so now the biggest population that's going to be underserved is this first time home buyer economy. I think, how can I serve the first time home buyer economy? And it might not be, how do I take a rip off of the transaction fee as much as how do I become a source for financing for first time home buyers? How do I become a source for subscription education for first time home buyer? How do I become a. An event for first time homebuyers that also allow you to then educate them as they go through the process and maybe it becomes a subscription economy thing that you are there for the, for the, for the, for the duration of like their first time home purchase and experience and then you're there for when they go to upgrade a home and now they have equity and now they have all these different things, right? But like, there's many different ways to skin the cat if you're thinking problem first. From technology to service to education and content and all these different kinds of

Gregg Cohen: 50:09

100 percent And this isn't to say that those who serve the higher priced homes in that community that you can't come up with a way to create extreme value for your clients there as well. I think about agents that help clients who are overseas. Sometimes our own forces need help buying their homes here and they're overseas. Wow. They would be so excited to help. To have your help to buy a home for you to be a trusted advocate for them. And we'll be happy to pay you 3 percent as a buyer's agent. But it's just all about that communicating that value.

Pablo Gonzalez: 50:38

Yeah, a hundred percent. So you got to just find yourself in the path of value. When things shift, there's missing parts in the market. Put yourself into one of those missing things. Think of something and serve, right? Okay. So beyond that, so that's this idea of. Realtor behavior. The other thing that they're saying is a bunch of realtors are going to are going to leave realtor in right? You know, I see this. I remember when we had Andrew Smallwood on on the show, he talked about this idea that they built their company's second nature around. There's there's a massive change in context that's going to be happening in the residential space. Multifamily residential went from like being managed by mom and pops to being managed by real professionals. And they see this idea that in the single family home, When the economy changes, when things happen, tons of realtors go into property management. So this idea that realtors are going to have to find it because they need to find a way to like supplement their income. So the, the thought came to me that If there's going to be a much harder way for realtors to make money in the transaction of homes There may be a big flood of realtors that go into Oh, i'm a realtor and i'm a property manager And I want to do all these different kinds of things because I want to slice up different pieces of the equation what do you think about that? Do you think that that becomes a vulnerability to the real estate investor? And the property manager that is doing this for a living

Gregg Cohen: 52:03

potentially, potentially, I mean, I remember in the great recession and the max the movement from just straight real estate agent to accidental property manager. And so, you know, and I lived through that, and I do think that there will be more. People will look to create sources of income under the real estate industry. So I can definitely see that happening. But I think there's, there's a difference here. You know, the income potential for those who don't, aren't committed to finding value, the income potential for buyers agents here likely is dropping. And I don't see that changing unless you're willing to put the work into it. That wasn't necessarily the case back in the day. I mean, yes, home sales went down and that was dropping, but you could still, you know, convince yourself that you're going to be able to earn 3 percent as a buyer's agent or a listing agent earned 6%. you know, and, and the market was going to come back. And so I think it's a little bit different now. This is a seismic shift to the industry. I do see the earning potential for call it average buyers, agents coming down. And so I do think that you'll see more agents. leaving the marketplace, more agents leaving being buyers agents than necessarily moving over to property management property managers.

Pablo Gonzalez: 53:22

Yeah, that makes sense. The last time around where they all floated to this, it was because they had to tread water until the market corrected itself. They didn't know what was

Gregg Cohen: 53:28

happening. This is

Pablo Gonzalez: 53:29

more like a cliff.

Gregg Cohen: 53:29

Yeah, this is a big shift.

Pablo Gonzalez: 53:31

Yeah, this is a big shift. Okay, so that makes a lot of sense. Alright, good. Interesting take. Other things that I'm hearing is, National associations of Realtors, one of the most powerful lobbies in America. Who's going to be out there lobbying for the real estate industry. Does that mean that rent control and the lobbies that like keep that away from different jurisdictions go away? Does that mean that landlord friendly policies are going to go away because now, you know, the national association of Realtors isn't driving the bus in DC and in your local, in your local areas, what do you think of that shift?

Gregg Cohen: 54:05

I never really thought of the National Association of Realtors as a major lobby that was, you know, lobbying for my interests as a real estate professional. I'll just put that out there. Maybe I'm just done for. Yeah. As a real estate

Pablo Gonzalez: 54:17

investor.

Gregg Cohen: 54:17

As a real estate investor.

Pablo Gonzalez: 54:18

Yeah.

Gregg Cohen: 54:19

Sure. But you know, we're a property manager, right? We are first time home buyer advocates. We provide affordable housing. I mean, Yeah. You know, so we were vertically integrated. So we see all angles of it. I've never really thought of the national association of realtors as being an advocate for kind of the real estate industry. And I, I guess I, I know that they're an advocate for the real estate industry. I never thought they were a major lobbying group, I guess.

Pablo Gonzalez: 54:41

Yeah.

Gregg Cohen: 54:41

So as I was reading these articles, I'm like, wow, I, I didn't really, we didn't really know about that. Like, for example, when I think about things like rent controls I see major initiatives being implemented by property management associations by real estate investor associations. They're very they're very knowledgeable on what bills are potentially going to be passed in certain jurisdictions and I see them really starting the charge for. Potentially, you know, eliminating rent controls if they would come up because rent controls lead to a lower quality of life for those living in those living in those properties because there's not an incentive to continue to provide a great quality of life. Because your rental income is capped. And so I see, I see other factions really starting to, or not starting to, other factions historically have caught my eye and said, wow, they're really leading the charge for policy. So I, maybe I'm a little uninformed, but I never really thought of the NAR as kind of like, being behind all of these things. So it never entered my mind until I started reading these articles that it would go away or that somehow we would be vulnerable to it.

Pablo Gonzalez: 55:47

Yeah.

Gregg Cohen: 55:47

Maybe, maybe that's just my lack of knowledge.

Pablo Gonzalez: 55:49

Yeah. I mean, that's an honest answer, man. Like, you know, what I'm, what I'm hearing and what you're saying is. Your execution as a real estate investment provider and one of the biggest property managers in, in the U S and like all these different things, you've never had to like rub up against the national association of realtors in any kind of a fight together or against each other or anything like that. So it's just never really affected the way that you operate. If the, if they go away, Yeah, there stands, there stands to be a reason that if there isn't a giant lobbying group doing this thing that real estate at all gets affected and that affects you, but you don't see it as something that directly affects your business very much.

Gregg Cohen: 56:30

I think real estate is hyperlocal and the decisions and the policies that would affect Jacksonville, I know who's making those decisions and I'm very aware of that. And so it's like this idea of the National Association of Realtors really kind of, Maybe setting the stage or, or being that intimately knowledgeable about what each market needs, I think is a, just doesn't jive for me. So I think we need to have advocates to make sure that everybody is protected the right way in each of our local real estate markets. And I'm sure there will be some groups, you know, potentially now that the NAR is a little bit seems like their membership is going to be challenged here. So the dollars are going to be challenged here. But I think you've already had those advocacy groups happening in different ways, shapes, and forms. So I, it wasn't a concern before I started reading these articles. I read the articles and said, wow, the lobbying power of the NAR is going to go away. What does this mean for, you know, real estate? Local real estate. Yeah, local real estate. And I was like, oh, interesting. But it never happened. It's not a vulnerability that I'm concerned about. Yeah,

Pablo Gonzalez: 57:31

I think that's, that's the whole, I think you said it. Real estate is hyperlocal. So, like, something that can affect trade and can affect this and that in real estate is going to happen at the industry level, but on, like, the home pricing and the transaction level, it's hyperlocal. All the data points are hyperlocal. The zoning is hyperlocal. Like, all these different things are very local. And, again, it's another Argument in favor of total vertical integration into one market as opposed to spreading out across a bunch of markets And that's what you guys have done. You've gone a mile deep into jacksonville so that you know what's happening in the local economy You understand things that happen outside of the boundary of your real estate deal and the investors real estate deal that you sell to because you have decided to just like Go a mile deep here and develop downtown and do all these.

Gregg Cohen: 58:16

And if there would be challenges or things like rent controls, it allows us to be so knowledgeable and to have an influence and an impact on that to make sure that we can provide the best experience for our renters to make sure that they're in a position, high quality of life and having a fair. Fair transaction and also provide for a return on investment for our clients and our investors so that everybody can win it.

Pablo Gonzalez: 58:39

Awesome. Awesome. Alright, GC, so before I ask the last question, I'm just like, are we all going to make some money here? Because I hear clash action and I hear, I hear the cash register ringing. Right. Two things. One, I think that, This show has been really informative, really great action in the chat. A lot of people sharing some great ideas. We didn't really get a chance to hit the Q and a so much cause there was so much to cover. But we can get to that stuff in future shows or in the Facebook group. So stay tuned. But the number one thing that I'm thinking is just like, if I'm, if I'm a real estate investor, this gave me pause, know that. If you are, if you are interested in buying rental properties, still a good time, we still think that interest rates are going to drop. We still think that prices are going to do well. So if buying rental properties is in your future, go to chat with JWB. com or shoot an email to info at JWB real estate. com JWB companies. com

Gregg Cohen: 59:31

info at JWB company info

Pablo Gonzalez: 59:33

at JWB companies. com or to Cody, who's in the chat and you can shoot her an email. And get that conversation started. This is not a cause to panic. You as a business you guys sell residential real estate. You sell to investors. As an investor, was I paying one of these commission fees? Is this has changed the way that you guys like kind of like change your transaction in any way?

Gregg Cohen: 59:54

Oh, I'm glad you point that out because JWB does not charge a commission for either the buyer or the seller on the turnkey properties that we sell. So this actually has no change to our turnkey sales process at all. Okay. And let's look at some of the numbers here. So, you know, this 418 million settlement, man, I started to think about that. It's a lot of quiche. And it I'm not sure how far back it goes for, for buyers and sellers who are a part of those transactions. But the, that settlement there is to, you know, provide financial. Payment to those who were negatively affected by these practices. So in our heads we might be thinking, wow, I could have potentially thousands of dollars coming to me if I bought or sold a home in the last two years. Not sure how far back it goes. Call it three years. That's not necessarily the case. So if you looked at the 419 million dollar sum, divided by the number of potentially qualifying consumers, it comes out to about ten bucks a person. Ten bucks. Ten bucks a person. Interesting note, the lawyer, and the lawyer, the legal team, as a part of this class action lawsuit is requesting to be paid 80, 000.

Pablo Gonzalez: 1:01:08

The economics of class action lawsuit, man, is not the individual what is it plaintiff that gets it? It's kind of the lawyer that makes it. But, you know, man, at the end of the day, there is this feeling around the American system has a pretty good balance of capitalism and protecting the consumer. And when this antitrust litigation stuff is real, right? Like if we don't squeeze out monopolistic competition at the top and create avenues for that then it really does start to quash what we are known for, this American dream, this ability to like, move up socioeconomic ladders without all the power being concentrated in one way, and I come from a country where those systems aren't in place, and therefore there's a lot of, there's a lot of have nots and very, very little have nots. And. When I look at an industry that really hasn't changed the transactional model as long as I've known it and I look at every other industry, the, the motivation to change and the motivation to adapt and the motivation to, to rethink it and create some new slivers of opportunity for people thinking different. I don't think it's a very bad thing.

Gregg Cohen: 1:02:18

I think there's a lot of positives that are coming from this lawsuit. I think transparency and I think that creates a rush to value for the consumer. I'm generally in favor of So I'm excited about where this is taking our industry. I think for real estate agents out there, I hope you have that same kind of positive attitude because this is an opportunity for you to rise your income to rise if you commit yourself to value there. I also kind of think that the National Association of Realtors and realtors in general are sort of, you know, taking, you know, getting a kind of a black eye. For this and you know, that's not always the case. I did want to point out that early in the 90s, which is something that's interesting, this whole model of kind of the shared cooperative listing agreement model actually came to be in the early 1990s. Do you know why it came to be? Why is that? It was a push to make it more accessible and affordable for people to be able to buy homes. Because prior to that, the cost of a buyer's agent were borne by the buyer. And it was causing more out of pocket costs for the buyer. So, this was actually a reflection and a reaction to the marketplace saying, hey, how can we make this easier on Buyers back in the day. And the national association of realtors did that in order to, to do this in order to satisfy that need in the marketplace. You know, unfortunately today, but I did want to just shine a different light because there's a lot of unbelievable real estate agents and real estate brokers and the national association of realtors as well. Who have done a lot of really good things that I don't want people to feel like somehow they were taken advantage of by the system.

Pablo Gonzalez: 1:03:59

Yeah,

Gregg Cohen: 1:04:00

it was actually changed to do this to, to help at one point to be able to share those. Yeah, that makes sense.

Pablo Gonzalez: 1:04:05

Somebody had to board the same way that this attorney has to bear the cost and therefore the profit of like changing the system. Somebody had to bear the cost of. Creating the MLS and bringing it and making it easier for buyers to like get in on the market. I guess what's really changed is that now technology has taken that place. There is ways to find this stuff without just the MLS. It's now essentially open source and you got to be able to like ungate keep that part where everybody already already knows what's going on.

Gregg Cohen: 1:04:35

It wasn't creating as much value because the place changed. Now, this is forcing the marketplace, this is forcing real estate agents to To lean into value. So I'm excited about it. I think it's good changes that are going to industry longterm. And I think consumers are going to benefit as well.

Pablo Gonzalez: 1:04:53

I like it. Miguel Angeles, a new low came in late and asked, has anything changed? I'm going to try to summarize it all in one minute before that. I want to say Thursday, we've got a great show coming up. We're going to be talking about 401k loans. Do

Gregg Cohen: 1:05:05

you see anything you want to tease about that? Absolutely. We talk about the number one concern that we hear on the phones. As far as people getting started in their real estate portfolio or adding more turnkey properties to their portfolio, it's not like, I don't have the money. I don't have the money. I've always talked about how the number one easiest part of this equation is actually finding the money. And a 401k loan is one of those tools that we're going to uncover and div, dive, div, dive, dig, dive, dove ish. We're going to dove, dive. We're going to hang out in that little place talking about 401k loans on Thursday. So if you're wondering how you can find the capital, you might already have it in your retirement accounts. I'm going to help you access that.

Pablo Gonzalez: 1:05:45

I'm excited for that one. That was such a taboo subject for me when I came into the workforce. And now that I know we're a community of financial engineers, I realize that it's just a tool and you just got to know how to use it the same way you need to know how to do calculus. And I'm excited to get into that. So you ready for me to try to summarize everything? Go for it, brother. We came into this with a massive change in context because of the NAR lawsuit. And when we're looking at it from an investment standpoint, we realized that all of the headlines are talking about prices dropping, a change in real estate transactional behavior. And then other long term implications. When we look at the prices dropping, we think about it from the macroeconomic standpoint, we still see that supply has not caught up to demand. We realized that that is the most significant lever. After that, we believe the next lever is interest rates, which increase and decrease demand in a big way. We've already survived like a really, really big. the levers of the supply side based on interest rates. And that did not move pricing because supply is still so short. So we don't think that from a macroeconomic perspective, a small change in fees is going to change the price of homes as real estate investors from the supply side, bringing more stuff to the market. We looked at it from the seller's perspective and from a seller's standpoint, Prices are based on who else is going to come in and pay me the price that I want. So I'm not going to be motivated to give a buyer a discount just because this thing shifted. I'm going to be more motivated to just take that money for myself. So from a buyer, the person that holds a supply, I have an advantage. It's not going to make me want to drop prices. We don't think prices are going to drop because of that. From a buyer perspective, the idea that interest rates seem to be coming down is what the fed signaled. That is going to make me make the decision. That I normally make, which is not how much does the house cost? It just, it is how much does the house cost me monthly. And therefore we believe that there's going to be a, an 8 percent rise in prices based on what we think interest rates are going to do is still going to motivate me to, it's still going to have. A similar payment from a month to month standpoint, which is what guides my decisions. And therefore as a buyer, I'm going to be more motivated to get in based on the interest rates drop, then to like hold out and demand a price drop. So we don't think prices are going to drop from that standpoint. And as real estate investors, We know that home price appreciation is what we're in it for the longterm. Cause that's what causes wealth creation beyond that. There's a shift in the market. There's opportunities for realtors. There's opportunities for innovation things all over it. That's going to allow that to change. And, you know, we're excited for it. There is a big, big opportunity and helping first time home buyers. Cause they're the ones that are most at risk and therefore it's the biggest problem to solve. So start trying to solve for that. You're gonna unlock some great things. As far as a lobbying force goes for the NAR. Real estate is a local market. This is a national lobbying group. So at the end of the day, local data, local advantage is always gonna trump whatever's happening on a national level. And if you think you're gonna get rich off of this litigation, the average class action settlement, it's gonna be about 10 bucks per person. So probably gonna buy you lunch, but not gonna make you rich. There

Gregg Cohen: 1:08:56

you go. How'd I do? Well talk about it. You

Pablo Gonzalez: 1:08:58

like that? Any pieces of advice before Thursday? Do you see? Don't be average. See you on the shelf.