The Crotchety Old Men Podcast
Agents on Notice: The New Frontier of Real Estate Commissions
Listen in as the Crotchety old men dissect the implications of the National Association of Realtors' recent settlement. Traditional commission models are being challenged and we are discussing the implications of this new ruling. Sellers have long footed the bill for both parties' agents, but with this shake-up, we're seeing the possibility of buyers taking on more of the financial burden of paying for agent representation.
Listen in as the Crotchety old men dissect the implications of the National Association of Realtors' recent settlement. Traditional commission models are being challenged and we are discussing the implications of this new ruling. Sellers have long footed the bill for both parties' agents, but with this shake-up, we're seeing the possibility of buyers taking on more of the financial burden of paying for agent representation.
Hello and welcome again to another exciting episode with the Crotchety Old Men podcast. Hey, I'm Gary Smith, one of the co-hosts of the Crotchety Old Men, and joining me right now today is my main partner, george Crumley. Top of the day to you, mr Crumley.
Speaker 2:Top of the day to you, Sweeney. How are you doing today?
Speaker 1:I'm doing exceedingly well. You know, every time I'm in your presence, man, I just feel good all over again and I feel smarter too. I feel smarter too.
Speaker 2:Well, you know that's because we're bringing, you know information to our base that you know you don't get everywhere. You know you get bits and pieces of things, but you know we try to bring some information that's going to help them on day-to-day travels as they do. You know they go through this financial world, so what are we talking about today? They go through this financial world, so what are we talking?
Speaker 1:about today. Well, you know, george, I thought that today would be a good time for us to talk about the decision of the NAR NAR, meaning the National Association of Realtors that has been captivating the headlines for the past I guess about six months or so and understand that they finally came to a settlement uh, about 1.8 billion or 400, some odd million dollars, whatever that fee is and so I thought maybe we would ex, we would explore that. Let's take a look at some of the pros and cons of you know what I'm saying. How is it going to affect not only your consumers but, hey, actually, what impact will it have on the real estate, uh, community?
Speaker 2:so that's a great, great, great subject and, as always, want to first, you know, make sure everybody knows we are not attorneys. Okay, everything that you're going to hear is based on our involvement in that situation. I am a licensed real estate agent and have been dealing with this, like you said, for the last six months through through the agency, through my broker, so I've got some limited knowledge on firsthand knowledge on what's going on with that and, as you, involved in real estate on a daily basis, being licensed also, it's something that's affecting us in different ways.
Speaker 1:Yep, absolutely so. Let's first start off, I think about how did this come about, this whole angst between sellers of home sellers selling their property and paying agent fees? Or does this originate from that?
Speaker 2:Well, you know, it's just been a traditional thing that the seller pays the commission for both his representation and the buyer representation. You know, I've been in real estate for 20 years and that's always been the norm. But one of the things is also understanding. It's always been a negotiable. Ok, it's, it's a negotiable percentage, that's, that's always been negotiable. So that portion of it has not changed. What is now proposed to change?
Speaker 2:And I know you said they have reached a settlement I think the date sometime in July is when the I don't know if that's an appeal date, but that's when I guess the ruling is supposed to actually go into effect, even though I'm seeing some of that now on some of the listings. As far as the traditional 3% which would be offered to a agent representing a buyer, I've seen things of zero, I've seen 1%, I've seen 2.5%. So some agencies are already trying to enact some parts of that because, like I said here again, it's a negotiable. So that leaves us. Where does the industry go? I mean, what can we expect? Is that going to reduce the number of agents? Is that going to hurt home sales? I mean, what are your thoughts on that?
Speaker 1:Well, number one. It will certainly reduce the number of agents. Last time I checked, there's about 1.5 million agents out there.
Speaker 2:You say that so convincingly, smitty, you got an inside track, huh.
Speaker 1:I know the work ethics of most of those agents, okay, and I'm going to beat up on them because I don't want them sending us nasty emails and throwing darts at the crotch of the old man. But hey, the facts are what the facts are. We're talking about. Sellers brought this, people who are actually paying. Those commissions brought this lawsuit up. So, as being on the seller side, I'm going to speak from a seller's perspective here. Yes, it's going to eliminate those agents who don't work okay or don't work hard.
Speaker 1:What will happen is that, in my opinion, that the services that are provided by a realtor is going to be valued More value is going to be certainly highly respected and it's going to help. I believe it's going to help homeowners sell their properties quicker without a whole lot of hassle and all that stuff going back and, more importantly, it's not going's it's not gonna impact the value of the house, uh, and it's gonna help, uh, agencies uh, those who are professional in the agency. They're gonna double in more deals, okay, and they're gonna make money. So they're gonna make more money. But from a seller's perspective, it's gonna reduce our cost, okay, because why should I pay another agent to bring me a client? I know that's the that's, that's that's right, the top of the argument here, or discussion in those cases that you're paying for value versus you paying for that value twice. That's the way I think most sellers look at it, like that.
Speaker 2:Well, I mean, I'm not as convinced as you. I'll be honest, I don't know what it's going to do to the industry. I don't have that type of crystal ball. But as far as from an agent perspective, yes, a buyer's agent will have to sell their services. They will now have to give that buyer a reason for employing them and being paid to represent them, because they will still need representation, because there's so many things that go along in a sale that they may still need that representation, so it just becomes a value proposition.
Speaker 2:So, yeah, the buyer's representation will have to sharpen that pencil and they have to sharpen their knowledge and they have to be on top of their game to sell their services. On why it's important to have, still have that representation. You know, I think also there are some things that concern me, and that's more, because one of the things we always talk about is, you know, getting into the real estate market, that's, you know, home ownership and for those first-time buyers that are on the edge as far as being able to afford a house, come up with a down payment, come up with closing costs, but now having to come up with another two to 3%, depending on what they negotiate, it's going to be a challenge for some first-time buyers, and that's where my concern is.
Speaker 1:Well, you know, that may be until such time they get accustomed to it. But again, from my perspective, I just don't see that. I mean, you know the challenge being that, ok, as a buyer always buyer, beware so you're incumbent on hiring your own attorney. You can't use the seller's attorney to represent you. So why are you trying to? You know? So, yeah, you need to be able to have your own attorney. You can't use the seller's attorney to represent you. So why are you trying to? You know? So, yeah, you need to be able to have your own representation.
Speaker 1:But I'm looking at this buyer agent there and that's the I think you just said it. That's going to be the hurdle. Buyer's agents have got to justify their fee. Why is it that you're, what are you doing for the seller, I mean the home buyer that they can't do on their own? Number one, I mean heck, if you got a seller who can sell his house on his own, a buyer should be able to find one on their own. But here's the other point I'm talking about. If I got a listing agent, well, there's going to be a sign on the property. So you, as a buyer's agent, all you did, you found a sign you didn't even find a house you were riding by, oh there's a house Looks like Mr and Mrs Jones might like that house and you should be paid for that.
Speaker 1:Well, mr and Mrs Jones should be paying you for that Because my selling agent that's who I paid the commission. I paid him to do just that to attract a buyer. The sign is not to attract another agent, the sign is to attract a buyer anyway. Okay. So now if your services, mr or Mrs Buyer Agent, are so profound that the seller wouldn't have found this house without your diligence and riding up and down the street or whatever, they would not have found this house on their own by going to Keller Williams' website. They wouldn't have found this house on their own then maybe your services may be needed.
Speaker 1:But with the websites and all these other AI things that's available to us now in the marketplace of consumers, it's going to be hard to justify that. And if you do justify a fee, should it be equal to what the selling agent did? Because the selling agent has got to put up expenses. That advertising is not free, that sign is not free. So a selling agent has more skin in the game than a buyer's agent. The seller's agent has gone in their pocket first to market that property and all that other stuff. The buyer agent ain't spent nothing, but some gas talking about here's the kitchen, here's the living room. But some gas talking about here's the kitchen, here's the living room it's going to be a hard car, hard sell.
Speaker 2:No, I mean, I disagree with that and I don't know because, uh, I focus a lot on being a buyer agent. I know I provide more value than than uh just being a uber driver. As far as you're saying just finding that, um, there's a lot, a lot of time and effort that goes into. And then, once they find the house, there's a lot of time and effort that goes into. And then, once they find the house, there's a lot of time and effort going into finding the right person to do the inspection, to make sure the paper is working right, to make sure they're getting what they deserve as far as, maybe, a home warranty and things of that nature. There's a lot of things that go into being a buyer's agent than just showing up and showing a house.
Speaker 1:Okay, so do you believe that the seller should pay that?
Speaker 2:No, I think the law is the law. I mean, once they agree on this in July, the law is going to be the law. I don't disagree with you on that, okay.
Speaker 1:Okay, all right, no problem for the buyers.
Speaker 2:I mean what they say the horse is already out of the barn. I mean, this is pretty much already been decided. So it's not up to me in the say if this right or wrong. I think it's up to me at this point to justify. You know why an agent is still needed to, just to explain to the community that's listening that no, this is not going to hurt the market, it's not going to hurt sales, it's not going to hurt the ability to find homes, it's just going to be adjustment to the way we're doing it now and that's something that happens in our industry.
Speaker 2:But I said there are some concerns. As far as my concerns are more from a buyer's perspective and the ability to come up with that additional percentage and how that's going to be addressed and how it's going to be wanted. Because think about it, if I'm qualifying you for a loan, I never necessarily see what your buyer's broker agreement said and how much you're going to pay for that service. So when I approve you for a certain amount and you basically uh, that may change, you know the debt to in in income ratio as far as now, you've got to pay an additional three percent. So here again, it's gonna be.
Speaker 2:It's gonna be up to that buyer's agent to share that percentage with whoever's providing the mortgage up front, so they can add that in also as another line item, so that it's not a surprise at closing that these folks got to come up with another 1%, 2% or 3% or whatever to negotiate. So it's going to be a lot of communication. The other thing is it's going to be some communication between the two agents, because my understanding is the MLS will no longer show a commission at all. So you're going to have to call that agent and say you know, are you willing to pay the buyer's agent anything? And that's going to be yes, no or no. It depends, yeah it depends.
Speaker 2:So that's going to be a here again, and that could be a good thing because you know, here again, more communication. So you know, you just have to look at this and how this thing is going to develop and how you're going to negotiate and how it's going to go through the waters. But here again, you know, our opportunity is to let our audience know that this is coming and there are some workarounds and it's not going to be the end of the. It's not going to be the end of the real estate world.
Speaker 1:Oh, absolutely not. But here's what a buyer's agent is going to have to be careful of. There's a law against steering. Okay, in every state, in every county, you can't steer a potential home buyer to another property because you're going to get higher commission. Okay, there's a law against that. So, buyers, again you got to justify your value. It's incumbent upon the buyer's agents now, and I think that's where all the going to be the hiccup, that's where all the pushback from whatever agents that are tepid or concerned about that, because now you've got to justify your value, that's all. And then you shouldn't be any problem doing it If you, like you said, you know the value that you bring. If you're going to engage in a buyer contract that's not your, that won't be a problem for you, but for the vast majority of them, jokers out there, that's going to be a real issue.
Speaker 1:Like I said I can't speak to that.
Speaker 2:I don't.
Speaker 1:I'm not sure.
Speaker 2:I'm just you know I can only take care of my home so I don't know about the rest of them out there. But, if there's less agents, that means there's more opportunity for me.
Speaker 1:More opportunity. I'm not a licensed agent anymore, and I'm glad I'm not. For what things that I do in real estate? I don't have to be, but the point I'm trying to make here is that it's going to make it better. The real estate is going to be a much more lucrative industry. Okay, people are going to close more transactions. They're going to make a whole boatload more money. And for those who are professional, okay, professional realtors, okay, I'm talking about the professional, y'all hear me. Professionals are probably enlisted unless they're in their car on their way to another appointment. A professional, y'all hear me. The professionals are probably listening, unless they're in their car on their way to another appointment.
Speaker 2:Okay, I'm listing the point, but the professional agents out there they're not.
Speaker 1:They're not saying a word hey, you know, they bring it because we, we control most of marketing, because they're listing all right, it's those other folk out there, that's you know. Just, oh, my buyer's agent. I got these services and stuff, but man, doggone it. You're gonna to justify, I'm not. And I look at that cost, george is just another cost of doing business. I mean, you know, heck, if the bank says and we've seen this before you may get approved today. Today is April 2nd.
Speaker 1:I had an X rate, uh, one point for your loan origination, stuff like that and you close on April 30th, everything does, everything does change. Okay, you find out you got to pay a point and a half versus a point. Are you going? Is that going to kill your deal? It could, you could, okay, so the same thing. You got to factor that in. What's your closing cost? Every, every astute professional agent usually sits there by her down and say here's your closing costs, okay, and what. They are kind of hoping that the buyer doesn't, the person don't see it. And here's my fee for that cost. Well, no, put it up top. Have confidence in your ability, have confidence, like you say, in the value proposition that you bring to that transaction. Oh yeah, oh, absolutely.
Speaker 2:I mean, you've got to have these conversations early on, when you you know, when you meet a prospective client, you're going to have to tell them that you know this, these are my services, this is what I'm providing and this is what it's going to cost. You know up front. They know that because you can't, you know, and that's one of the things that you know I always try to do is get my buyer's broker agreement signed up front. I'm not showing you a house unless I have an agreement, and on that agreement it has the percentage in which I'm going to be compensated. So there's a lot of agents out here that don't do that. They wait until they find the house and they say oh, by the way, mr Customer, you need to sign this buyer broker agreement.
Speaker 1:Those are the ones that get in trouble, because, look here, it's the seller's agent that does all the negotiating for the fee to begin with, the buyer's agent tagging along with that. Okay, how much did you get? Well, the seller selling agent had, the listing agent had to negotiate that fee. The buyer's agent wasn't nowhere around. Okay, but you're going to dub, parachute in and split that fee. Oh, heck to the no, that mess got to stop. Okay, if the listing agent can negotiate his or her fee, then doggone it. The buyer agent need to be able to negotiate his or her fee with the buyer. I see that just as clear as day, okay, so I don't even know what all the pushback is about. Buyer's agent become lazy because the negotiating has already been done. Okay, that's a disgrace to the seller's agent. The listing agent, I gotta split my fee with you. I went over and negotiated a fee. Now I gotta split it with you because what you saw?
Speaker 2:my sign well, I think so. Well, I I hear what you're saying for a minute, but I think there's still going to be some level of conversation from a seller perspective, because here again you want to take advantage of every opportunity out there. So it may still behoove you to offer some type of percentage to that agent to get a good agent, I mean get good buyers coming in. I mean there's always that, okay, I'm going to offer zero and then let's see who comes and looks at, know, looks at my house. But you know, you go two, three weeks and nobody comes. You may have to adjust your strategy. So I don't know if this is cut and dry, as you say, especially at the beginning here of this. You know, once this thing goes into effect so, like I said, if the law is going to be the law, things are going to change. That's evident. You know how the community reacts is going to be totally, totally different and I'll be out there just to see, just like everybody else.
Speaker 1:Well, you know, I see this is that as a seller, as a listing agent, that if I'm a seller and I hire you to list my property, I'm expecting you to sell it, because I could put my property on poop net or zillow my doggone self and advertise it. Ok, so if you put my property out there and somebody from XYZ company buys it, I'm really not all that thrill. Ok, I'm going to have more respect for your service as a listing agent because you found a buyer. You didn't find an agent with a buyer, you found a buyer, okay. So, yeah, you justified your fee. You listed the property, listed my house 30 days or less. Hopefully you come back with a qualified buyer because so many deals and here's another thing, this thing about the buyer's agent don't want you talking to the seller's agent and you can't have these discussions about whatever. See that secretive mess. That's another thing that muddles up real estate transactions Because you both have two different agendas the buyer's, agent is look.
Speaker 2:So are you thinking that the seller's agent should represent both?
Speaker 1:Represent both. Of course the seller's agent should represent both. Represent both. Of course the seller's agent knows about the deal. The buyer's agent don't know about the deal. The listed agent knows more about that deal than the buyer's agent knows about that deal.
Speaker 2:But the only problem with that is from a seller's perspective. He treats him as a client. If he's bringing in a buyer, he can't treat him as a client. There has to be a distinction. He him as a client. If he's bringing in a buyer, he can't treat him as a client. There has to be a distinction. He's not a client, he's not a client.
Speaker 1:So you're not.
Speaker 2:Yeah you're not getting his a hundred percent attention. His attention, his alliances to is to the seller, not to the buyer. So I mean, I'm not saying it doesn't happen, but those situations you know, I, I'm not, I'm, I don't think that's the best for this.
Speaker 1:I'm putting like this if you're a listing agent, I want to know, before you see this, this listing I got, that you qualify to buy it right, yeah, I'm not gonna as a buyer's. I'm gonna take you through that process. Are you fine at that? Where all this other stuff? Okay. I'm gonna ask the question that probably have. That buying agent is not gonna ask well, they think they got a client. You don't have a client, don't go until they buy some. So in the buyers agents mind this is my client.
Speaker 1:Well, I didn't ask the right question, and that's how a lot of deals blow up at closing. No discovery.
Speaker 2:No, no, no, no, that's not no, no, you, you, before you uh make an offer on us, you got that person has to be uh approved, hopefully, underwriting approved already, funds verified. I mean, you don't want to go into a deal making an offer and then there's still a lot of questions as far as can this person buy?
Speaker 1:that I'm not saying that's why I'm just pro listinglisting agent, pro-seller, you know, buyer agent. Well, until you can justify that you know all this, you know everything else, Because I've seen so many closings blow up and the buyer said well, I didn't know this. Well, I didn't know it, so you didn't educate and buy that new Cadillac before we close. Okay, Okay, All right. Well, I didn't know they were going to buy. Well, see, that's not a good answer for me. No, it's not a good answer If I'm the seller and we all set to close and now they can't close because you didn't know or you didn't tell them not to go buy the Cadillac. Either one of them is a crappy butt excuse. Control your client, Mr Buyer Agent. If you're going to close and most buyers don't have, they got about as much control over the daggone client as I do over the daggone universe.
Speaker 2:Well, Smitty, I think we kind of got an idea how you feel about this. This has been another exciting episode of the Crotchety Old man.
Speaker 2:Yeah, I mean, you know, I hear what you're saying and let's hopefully all the deals don't go that way. You know, sounds like you've had some pretty crappy deals out there. So you know we're going to hopefully that doesn't continue. But anyway, as we always do on the crotch of the old man, I mean where you can see us on YouTube and as far as all the other podcast platforms, we always going to leave you with some words of wisdom. So what you got for us, mr Smitty, today, Well, this is from former Secretary of Treasury.
Speaker 1:No, janet Yellen, I think she still is Secretary of Treasury. The US economy has never worked fairly for Black Americans. I don't know where that come from, but that's her quote. Is that the end of the quote? That was the end of the quote. Oh wow, the US economy has never worked fairly for Black Americans. Secretary of Treasury Janet Yellen.
Speaker 2:I don't know if that's a good way to end the podcast.
Speaker 1:I found that and I said I don't like that one as well. But I went right to her and I'm thinking why did I go right to her? So, in all fairness to our audience, let's see if we can't come up with a better one.
Speaker 2:Yeah, because I think that's one you already know. You don't have to say if you didn't know you already know.
Speaker 1:You already already know. You don't have to say if you didn't know, you already, know you already, we already tell us something we didn't know. Right, we didn't already know I think you can appreciate this one. I am always willing to learn and the tombstone will be my diploma. Now that was by eartha kitt there you go much better.
Speaker 2:And as we always say on the Crunchy though, man, if you didn't know, now you know Take care, be safe, peace, peace, peace, peace.