[00:00:00] Intro: If you're a real estate agent earning 200, 000 a year and you want to grow your passive income, this show is for you. Learn secrets other agents use and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities, so you can take your commissions and turn them into cashflow.
[00:00:20] Intro: Here's your host, Randall. Let's dive in.
[00:00:22] Randal McLeaird: All right. Welcome back. It has been a long road. I'm getting a ton of emails coming out and they are all About the NAR settlements. I've got people reaching out to me and I've got not only San Antonio border realtors, the other board that I'm a member of the national association realtors are all sending messages out.
[00:00:39] Randal McLeaird: I've got all kinds of investors and clients and everybody reaching out, wondering what is going on and what the implications of the national association realtors settlement are going to be. Today, we're going to cover the national association realtor lawsuit and. The settlement that they have now agreed to, but it has to be approved by the court.
[00:00:58] Randal McLeaird: And so I keep getting a [00:01:00] ton of info. And like I said, just a second ago, I'm getting and getting all these emails and people are wondering what's going on. Let me break it down. I literally was just watching videos on what the president put out. His name is Kevin Sears. And, uh, what the chief legal officer there was, what is her name?
[00:01:15] Randal McLeaird: Katie Johnson putting out about the settlement. So just high level, what has happened? National Association of Realtors had three options and they picked the path that was the, the least worst option. They were all bad. They could have either appealed and they would have had to put up a, about a 5 billion bond.
[00:01:33] Randal McLeaird: That was a potential maximum. Penalty that they could have been handed down because it was three times the original and the original case said someone 1.8 billion. So they were looking at a 5.8 $0.3 billion potential claim. And so in order to appeal that, they would've had to put up a bond in order to cover that.
[00:01:52] Randal McLeaird: There was, they, they didn't have the assets available to do that, and so that was option one off the table. Second option was [00:02:00] if they went to appeal, so they could post the bond and they went on appeal. It still would have left all the additional associations around the country open to litigation, right?
[00:02:09] Randal McLeaird: The third option, which was working out a settlement, would be One to settle with an AR, but also to settle all of the copycat cases that have popped up around the country for all the individual MLSs and other brokerages and that sort of thing. And so they have chosen to do the third option, which is settle.
[00:02:27] Randal McLeaird: And the settlement is for 418 million over a year. A four year period. So let's break down exactly what happened. So they secured a broad release of liability for all MLSs and brokers of 2 billion or below. So if you're an individual broker or a brokerage of 2 billion or below, then you should be covered.
[00:02:46] Randal McLeaird: It does not release any, anything in any of the agents who were with home services of America. They were also named defendant in the case or any other defendants who were separately listed in the case. Okay. So it is. [00:03:00] They settled for 418 million over four years rather than a potential 5 billion claim against them.
[00:03:06] Randal McLeaird: Second thing that happened was that they are agreeing that We are no longer able to advertise buyer compensation on MLSs. So let's break down what that actually means. So we're currently on an MLS or prior to this. I think it's, they're going to enact these changes in July is what they said. But prior to this, you would go on the MLS.
[00:03:27] Randal McLeaird: You would look at all the listings of commercial and residential. It didn't really matter land anything. And. It would say the buyer's compensation on there. So 3 percent is being offered from the sell side to cover your buyer coming into that deal. So as an agent, you could go and you could see that and say, oh, nice.
[00:03:46] Randal McLeaird: And then you may have another one that says 2. 5 percent or one that says 1 percent or one that says no. And what the whole crux of that lawsuit was that would steer people, steer buyers, reps, representatives [00:04:00] into the 3 percent commission deals. And I don't disagree with that, but again, like I said, on a prior podcast, it's never been the case where you can't go and get your compensation from a, from the buy side as well.
[00:04:13] Randal McLeaird: It's just, so let me dive into that in just a second, my actual take on this whole deal in just a second. But so you can no longer actually advertise that on the MLS. So the MLSs are all going to, every one of them is going to cut this out. It's just going to be a, whatever the negotiated price is. However, in the statement from NAR, they state.
[00:04:33] Randal McLeaird: A few easy loopholes that you could immediately get around this, right? And they say that you can talk about it offline. So either a phone call, which again, all right, I'll get into that in a second. The last thing that, that the settlement states is that you must have a written buyer rep agreement going forward.
[00:04:52] Randal McLeaird: So that document has always been in place and available from all the associations. And like the text association has one. [00:05:00] Tax association realtors and it's promulgated form. You could use it and you should have been using it this whole time anyway, because then it guarantees your compensation. If the sell side doesn't pay you, right?
[00:05:10] Randal McLeaird: And then it's an agreement between you and the buyer, how much you're actually working for. If you don't have that in the sale side decides not to pay you, then you end up not getting paid. You've done all this work, you know, get paid. And if you can't justify that with your buyer, Um, that you should get paid for driving them around showing them 20 houses or for orchestrating a lease on their behalf for a commercial building or whatever you are doing in order to earn your commission, then you probably shouldn't get paid anyway, but the value is there that you're providing, and if you can't sell that to them, then that's again, you should always be using these things again.
[00:05:41] Randal McLeaird: Let me go down and break down. This second part and why I think it's somewhat silly, because if you're able to simply go on now and you can talk to an agent and say, Hey, how much are you paying me on the sales side? They'll tell you. So now it's just going to be a quick phone call, which is causing a little bit more friction in the transaction [00:06:00] process, which makes very little sense.
[00:06:03] Randal McLeaird: It's still going to happen. So essentially the biggest thing that the lawsuit was about was advertising these, the compensation and the sellers ultimately being responsible for paying the buyer's fee and feeling that they overpaid or, yeah, were charged too much to sell their properties, right? What essentially I feel like is going to happen is there's going to be this secondary market.
[00:06:26] Randal McLeaird: Somehow it's going to be a mechanism where the. seller or seller's agent is simply relaying to the buyer's agent how much compensation they're going to get. That's one thing. I don't know. I don't know. Maybe sellers now are going to be only arguing for 3 percent or maybe less, or I don't know. So I'm not sure how it's going to work out on that front, but I do know that things are getting, going to be shaken up just a bit.
[00:06:51] Randal McLeaird: But if it turns into a deal where the seller, because here's, here's the crazy thing. The, what is her name again? Katie Johnson from NAR, [00:07:00] chief legal officer. She says, I want to be clear that all this means is that you cannot advertise that rate on MLS, you can, and you can go to the video.
[00:07:11] Randal McLeaird: I'll click a link. I'll share a link to the video in, in the show notes of her actually saying this. You can, however, still have the seller offer to pay all the buyer's closing costs. If now the commission's going to be paid by the seller or the seller's agent or the list agent. And on the residential side, you're going to have a buyer rep coming in and Still wanted to get paid and the buyer has agreed to pay them 3%.
[00:07:34] Randal McLeaird: Okay. What happens if the seller now has to pay or offers to pay buyers closing costs equal to 3%? It's shenanigans of a different name. So if that is what happens and that's the trend and now you just see a bunch of 3 percent closing cost credit being paid by the seller to the buyer at closing, it's the exact same thing happening.
[00:07:54] Randal McLeaird: It's just a different line item and NAR is not shy about sharing it. It's on this website. [00:08:00] Again, if that's. Yeah, I don't understand what this litigation would have solved other than just making a lot of attorneys some money. Uh, anyway, that, that's what I see on, on that front and that's what's actually happened with the settlement.
[00:08:12] Randal McLeaird: Uh, it has to be approved by the court, so it's not finalized yet. But I think both sides have agreed and they've submitted to the court for approval. I don't see what would stop that. Maybe we'll find out soon enough. Okay, so that's what's going on on the local brokerages side. If this settlement goes through, then it shouldn't be a thing any longer other than the changes that have to be enacted.
[00:08:32] Randal McLeaird: Okay. So that's the latest that we've heard on the nationalization in AR settlement. And so if you have any questions, you want to talk about it, feel free to reach out to me, emails, podcasts at agents about the cashflow, happy to chat about it and get your feedback on what you think is going to happen and the possibilities for brokerage going forward, you guys have a great rest of your day and.
[00:08:53] Randal McLeaird: We'll see you on the next episode. Did you know that 80% of the agents we speak with got into real estate in order to gain passive income so they could obtain [00:09:00] financial freedom and become work optional? If you wanna stay up to date, the best way is to make sure you're subscribed. So if you haven't done that, go ahead and do it now.
[00:09:08] Randal McLeaird: We'll catch you on the next episode.