Home Sellers Sue National Association of Realtors and the Settlement means the death of all Buyer's Agents

Join us, Aaron Morrow and Brian Laflame, we dive deep into the recent NAR (National Association of Realtors) lawsuit settlement. There's a lot of buzz and, unfortunately, a ton of misinformation swirling around out there. We're here to clear the air, focus on the facts, and shed light on what we know so far! We take a sharp look at the National Association of Realtors lawsuit and dissect the fallacy of uniform commission rates. We're here to bring clarity to the table, distinguishing between fact and fiction, and illustrating how this legal battle may reshape the transparency of property transactions. 

Myth Busters: First up, we're tackling the big myths. Think 6% fixed commissions were a standard? Think again. Worried that sellers can no longer cover the buyer agent's commission? We'll explain why that's not the case.

Engage with us on a journey through the complexities of selling your home without an agent's aid—navigating the recent legal settlement, I'll arm you with vital insights and resources for the daring "for sale by owner" path. This conversation is dedicated to quashing the misconception that slashing buyer's agent commissions equates to more affordable home ownership. Instead, we advocate for the critical role of professional counsel in property deals to ensure everyone's interests are safeguarded. Tune in for a candid discussion that promises to bolster your confidence as you step into the real estate market.

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Aaron Morrow Realtor Serving (King, Peirce, & Snohomish counties)
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Transcript

Speaker 1: 0:18

hey everyone. Local realtor again. Aaron morrow here in the greater seattle area. Brian laflame here on aaron morrow's living in the greater seattle area realtor podcast. I forget what I even called this podcast, I Don't remember. We're live again. We took a one-week hiatus. You know, I feel like Brian and I we've done a lot of these, so we're going to just start probably doing like twice a month is kind of where we're sitting.

Speaker 2: 0:41

I think so because, yeah, yeah, we want to bring you guys relevant and engaging content and like that just doesn't come up every single week. Yeah, and also we have day jobs and families sometimes.

Speaker 1: 0:56

You got it. So we're going to right now we're going to try especially over the summertime, we're going to try to at least get you two of these a month is where we're trying to aim for We'll see. Uh but um, none of you have really complained about it yet. But if a lot of you start complaining, you know I'll give you a complaint box in the description on YouTube. But today, what we're actually talking about here, I forgot to hit go live on Instagram for just housekeeping items. Again, I know I do this every time, but we are live everywhere YouTube, facebook, instagram, linkedin, tiktok, clapper, clapper, peeps you all are coming in here by the thousands and droves. Anyways, we are today talking about something that I'm sure you all have heard about, or, if not, some of you have heard about.

Speaker 1: 1:46

There's a big lawsuit going on right now that is most likely going to get settled with the National Association of Realtors on how commissions and compensations are settled nationwide with home sellers specifically. But it affects how you transact with a buyer's agent is essentially what we're going over. To transact with a buyer's agent is essentially what we're going over. I'm going to share some of the a lot of the headlines and a lot of the misinformation that's going on in the news right now. Brian, why don't you take a look at some of these? So the biggest ones again. I just keep seeing these pop up in the news 6% commission fees for real estate agents are going away.

Speaker 2: 2:27

Okay, first, of all, they were never here. They, they were never here. How can they go away? They were never here there was, there's, no. There's no price fixing um there's I very rarely see six percent uh, both as a home seller and home buyer and as a lender yes, it's always been negotiable.

Speaker 1: 2:46

Um, I mean people, you know, people have glib gorgs, no longer living under your bed yeah, okay. And then this other one here, powerful realtor group, agrees to powerful, agrees to slash commissions to settle lawsuit.

Speaker 1: 3:03

So this lawsuit was pretty big, I think it was it up to like 1.8 billion, and the settlement is for 418 million is where it's gonna settle at as long as the judge signs off on it is what we're looking at here, um. What I mainly want to come at with this, though, is really just especially here in washington state, we've been very forward thinking on how to transact with real estate here, so I know I have people watching this nationwide, but I just kind of want to break through some of the misinformation on this and just desensationalize it. I'd rather just go over the facts why this lawsuit came about, um in and really what get down to the heart of it, but how this could actually the settlement itself could actually. There's some pros and cons to it as far as how it will affect us locally, because we've actually had a really good thing going on here locally in washington state.

Speaker 2: 4:09

as far as transparency goes, Well, this kind of sets it back. Washington was way ahead of transparency and this provides way less transparency than Washington it does.

Speaker 1: 4:21

It does and we'll definitely get into that. So these are a ton of articles that have just a ton of misinformation as far as, like saying, a lot of these articles were like saying the seller doesn't have to pay the buyer's agent anymore. It's like, well, guess what? Like here in Washington state, they haven't had to pay the buyer's agent at all.

Speaker 2: 4:46

Yeah, that's an important point of contention. The seller does not pay the buyer's agent and never has.

Speaker 1: 4:53

Right.

Speaker 2: 4:53

The seller pays their agent Right and pays their agent's brokerage. So, Aaron, you work at Keller Williams.

Speaker 1: 5:00

Right.

Speaker 2: 5:00

The seller. When you list a house they agree to pay Keller Williams, and then Keller Williams and you decide on a cooperating broker's agreement. Can you guys hear that ringing?

Speaker 1: 5:11

I cannot. Okay, good, can you hear it ringing?

Speaker 2: 5:15

No, I feel like I'm crazy. It's on my work cell phone number so it comes on my computer and I closed it out, but it keeps coming out, it doesn't matter. And then, please, this is just outsider perspective, kind of like on the outskirts, kind of obliquely related to the real estate field, of course one step closer to consumers, but not a realtor. So this is how I understand it Jane Seller agrees to pay Aaron Moore on Keller Williams or Keller Williams, excuse me, a set percentage. Aaron Moore says hey, that's great, my job is to sell your house and so we're going to offer a cooperating broker's agreement to all of the agents in Washington so that we can have the most amount of buyers come and see your house. So seller has never paid the buyer's broker. You, aaron Morrow and Keller Williams could say I agreed to sell your house for X percent, I'm keeping all that. I'm going to go sell your house, I'm going to. And that's kind of what's what's happening now.

Speaker 1: 6:08

Right and, if anything, washington state made it more transparent because the yeah, talk about what they did that this lawsuit is having is uh, they're complaining about a lack of transparency.

Speaker 1: 6:21

So one of the problems is brokers get paid too much and it's not transparent on who's getting paid. What so washington? So this lawsuit is asking for, basically, a decoupling of the commission. But Washington State, in my opinion, has had a better solution to the decoupling of the commission, both how we advertise it in the MLS and how we have it in both of our contracts and purchase sales agreements for years. Now, if you take a look at I actually have right here.

Speaker 2: 6:59

Bring up page one of the purchase and sale agreement. Oh sorry, you do it in your order.

Speaker 1: 7:05

I'm going to show you the listing agreement first.

Speaker 2: 7:07

Good, good Okay.

Speaker 1: 7:08

Because this is where it starts. This gets to the, the heart of the matter here, right On the listing agreement here for the for a while and this is probably where it's coming from nationwide there's probably a lot of states Again, I'm assuming because part of this lawsuit was about decoupling commission, so I'm assuming that there's a lot of states that still maybe have a um, a listing agreement that's written, how ours was years ago that it wasn't decoupled, where it just said that one figure, you know, like brian's saying that, uh, it used to be where it just said, right here, um, listing firm's compensation is six percent, basically, and then, like your agent would just decide, or like you and the seller would decide how much of that would go to the buyer's agent, um, but it wasn't, it wasn't in writing. So this we've decoupled it in our contract. So, right, we meet with the seller and the seller hires us to list the property. It's right here, it's plain as day. This is how much you're, this is how much commission that the listing side will receive, and then this is how much that you as the seller now get to decide, if any that you want to put in here now. So we actually, as washington state have decoupled the commission and we made it completely optional to uh offer any to the buyer's agent.

Speaker 1: 8:48

Now there is a huge, huge um disadvantage to not offering any sort of buyer's agency compensation. Uh, just because if we're in a uh, it's all about supply and demand, and if we are trying to fish in a really big ocean and we want the most uh, we want the most possible best fish, we want to cast the widest net. Not only that, we want to employ the most amount of fishermen that we can. Right, I actually heard a really good agent, buddy, uh, from florida that made this analogy that I work with and who would you rather hire? Would you rather offer? You're just working with one fisherman trying to find the biggest fish or would you also say, hey, and we have an award in place for any other fishermen out in the ocean right now with the biggest net that can find us the biggest fish? Right, and if only if they find that fish, well, they get this award and that's what essentially that buyer's compensation is it's huge.

Speaker 1: 10:01

I've heard yeah, it's huge. And then I've heard other analogies that it's like if you're a restaurant and you're trying to bring in, um, you're, you're trying to bring in, uh, uh, uh, a certain amount of business to come in, so you're offering like coupons or vouchers or whatnot, so like buy one, get one free, or whatnot, you're incentivizing to come in, to spend more into the restaurant, to for that restaurant to actually make more on, on, on the on the sales, basically. So what's going on here is there's a lot of misinformation. I one headline I didn't show that I wish I threw in.

Speaker 1: 10:42

Here is there's a headline that I keep being thrown around that this is going to make home ownership more affordable and where the angle that they're trying to come at is they're trying to say collectively, all sellers nationwide are going to agree to stop offering the buyer side compensation which actually basically just makes it where it's more affordable to sell a house. Right, they're saying like there's less costs involved selling a house and then, but they're also saying, in this particular weird made up like, completely made up, like, hypothetical, nationwide, everyone's going to get on board with this, all of the sellers are going to agree on the honor system to just basically reduce what their house cost should be the purchase price by whatever that amount would be.

Speaker 2: 11:43

Let me offer another perspective too. Okay, so I don't think I am. I worked in the government for years, so I don't think I'm stepping on any toes or speaking out of turn for people who are inside or outside of the government, that when the government gets involved, especially on a macro level, rarely does it end up the way they intended it. So saying, hey, if the seller knows 6%, 3% to the seller's agent, 3% to the buyer's agent, my house, for round numbers, we're going to say it's $500,000. So 6% is $30,000, $15,000 each. And if they say, well, now I only have to offer 3% so I can reduce the price of my house by $15,000. But to your point, yeah, right, but they're actually reducing the price of their house way more than that.

Speaker 2: 12:34

Because now, instead of having whatever tens of thousands of realtors that are a member of the North SMLS and other MLS systems where it may be posted, and real estate agents that are in Washington who have buyers calling them all of the time to go look at houses, instead of having an army of people bringing demand to the seller's house, they now have whoever Jane, joe, realtor can find on their own who needs this exact house in this exact place and can afford this exact price, how lucky do you have to get?

Speaker 2: 13:05

So it's going to depress pricing if it is not implemented intelligently, and I think that that's where a lot of the fear comes. A lot of fear on the agent side is oh my gosh one. I have to develop a new skill set. I have to be able, from a buyer's side, to be able to articulate my value much sooner than I had to before, because a buyer's agent normally has their value proven throughout the process, and that's fine, because a seller is paying the listing agent and the listing agent's firm is sharing with the selling agent's firm, so they're proving the vast majority of houses for a cooperating commission?

Speaker 1: 13:44

Yeah, yeah.

Speaker 2: 13:45

So now the buyer has to say, or the buyer's agent has to say to the buyer.

Speaker 2: 13:50

Hey, mr and Mrs Homebuyer, mr and Mr Homebuyer, mrs Homebuyer, whomever you are, hey, homebuyer, this is my compensation. Please trust me that I'm going to earn it. It's a big hurdle to get over and I have so much empathy for people in your position because, while someone from the inside can see your value articulating, that's a different skill set. But you also now have sellers of misinformation saying, well, I have to pay less so I can get more. I promise you. I promise you you're going to get less. It's just the way human nature and economics work.

Speaker 1: 14:23

Now we have a situation where there are some buyers out there that believe that if I don't work with a buyer's agent because they know what I'm doing in there, there are buyers out there that believe that if I don't work with a buyer's agent because they know what I'm doing in there, there are buyers out there that they're probably they don't need a buyer's agent I don't know man.

Speaker 2: 14:40

I bought a lot of houses. I do hundreds of loans a year. I would never buy without an agent.

Speaker 1: 14:45

I know I'm I'm making the devil's advocate because I you have no idea how many trolls I'm seeing out there on this right now while I'm researching this topic. But for all of those experienced peeps out there that don't need a buyer's agent, they believe in their heart of hearts. They are going to go to the seller and the seller is going to pass the savings on to them of what the?

Speaker 1: 15:07

seller is saving by not offering the co-op, but the seller wants to pocket that savings, not not give it to you, the buyer. You know, um, I mean maybe very rare instance. You know, if it's like an off-market deal where you know each other, and that's fine, like if you know your neighbor and you want to do that and you want to hire an attorney, that. But I'd still say you get things in writing, you got to hire professional representation, no matter what I would. You're working with realtors, you're working with an attorney.

Speaker 2: 15:40

We say a lot of this podcast, adults are going to do what adults are going to do, and that's what we live in a country where, for the most part, that's okay. I wouldn't do that. Giving you all the information I know part, that's okay. You, I wouldn't do that, right, giving you all the information I know, that's not a thing I would do. So this is a big deal, but it's a less of a big deal than I think people are making it out. But it's, in washington, more of a big deal because it is a step back in transparency.

Speaker 1: 16:01

Yes, and that's what we wanted to get to. Because one one thing, real quick. I'm going to blast through the best article that I found that is cutting through the misinformation, and this is the best article that I found that really kind of just.

Speaker 2: 16:14

I sent this to an AI translator.

Speaker 1: 16:16

Yeah, you sent it to me I was like I said.

Speaker 2: 16:19

I sent this article through an AI translator and you sent it to me.

Speaker 1: 16:22

Oh, you did.

Speaker 2: 16:23

It was great. I read it, then I sent it to the translator. That's pretty good, really Pretty good, Really.

Speaker 1: 16:28

So it was written in a way that you were still like okay, I'm going to have a double check and make sure.

Speaker 2: 16:33

No, I just wanted to kind of see how it worked and it said the same thing. I just want to throw it out there because it's kind of cool.

Speaker 1: 16:40

Okay. So yeah, like real quick, I thought we might read through just some of it and blast through it.

Speaker 2: 16:44

Let's do it.

Speaker 1: 16:44

So number one the settlement forces brokers to reduce their compensation, which is false. The settlement in no way establishes a standard or limitation on realtors for what they may charge, nor services they elect to deliver. Those fees are always been negotiable and there has never been any collective bargaining. In every market, there is a wide variety of fees, just as there are a level of marketing services and competence.

Speaker 1: 17:13

Now I will even say for devil's advocate, because there's a lot of people that are like naysayers out there that are saying no, there's some price fixing going on because it's such a narrow band and the problem is it's just a market of supply and demand.

Speaker 1: 17:28

The problem is it's just a market of supply and demand. You have a lot of realtors that when there's technology involved in what it costs to run and keep business going, to work as a realtor in this market, to work with clients both on buyers and sellers side, yes, everything is negotiable on those fees. But what it what it costs in a profession that it's one of the one of the few professions that you only get paid when you've performed and you've closed on something and there's no other payment. There's no other payment guarantees or anything in this profession. There is a range out there and you could statistically add it up to come up and draw your own conclusion of a standard range that's out there in any market and every market might have a varying range that a market probably has a narrow band between four to six percent total commission around for both a buyer and seller side is what you find for the majority of sales in transactions sales in transactions.

Speaker 2: 18:48

So can we talk about that? Because that's an economic, that's an economic reality of the, of the equilibrium of pricing that goes all the way back to the invisible hand, like of economics. You will find throughout the country that we have a pretty similar pricing from Seattle, Washington to Clearwater, Florida. You will find in Germany they have different pricing. In Canada they have different pricing. The market, if it's not transparent, how come? And their transparency can be established more fully. And Washington had done that, which we're going to get to later. Let's keep teasing it. But if we have been about about four to 6%, I can attest to that and that is what the market bears. And if that's what the market bears, that's what the market pays. If the market would pay 9%, you better believe a capitalist society would take 9%. If the market only paid 2%, you better believe that people would be getting to 2% so that they could still have clients to run their business with, run their business with.

Speaker 1: 19:49

so yeah, we have a band by the way, all credit to this article right here. I'm showing it right in here for fair use.

Speaker 2: 19:56

Uh, this is the article budget way to go, budge, oh, his name is budge husky.

Speaker 1: 20:02

Yes, it is says don't believe national association of realtors settlement miss, because there's a lot of misinformation out there. So number two the settlement will for the first time allow sellers to no longer pay compensation for an agent bringing the buyer. So that's false.

Speaker 1: 20:19

There's never been an obligation for a seller to pay buyer agent compensation, yet it is a practice that has worked well a past rule requiring an offer of some amount of compensation was a rule of display on realtor-owned MLSs, yet it could have been as low as $1. That limitation was removed and today the MLS accepts all listings regardless of buyer-agent considerations. So, yes, this was one of the other complaints that even the MLS forcing it as being as low as $1, that that still technically makes them pay something towards the buyer's agent side.

Speaker 2: 20:58

It makes me feel like it was just like a coding issue, like we've got to put something in there and we don't want to rewrite code.

Speaker 1: 21:04

Well, our MLS for the last couple of years has had it where you can put zero in there and we've seen in Washington State there's been a few zeros. You know there's.

Speaker 2: 21:14

Yeah, I asked a buddy about that. Yeah, go ahead. I asked somebody about that years ago. We keep talking to each other. It's a great podcast.

Speaker 1: 21:21

Yeah, go ahead.

Speaker 2: 21:24

I asked a buddy about that a while ago. Like, hey, what are you going to do if a buyer that you've been working with for a while because you, as you know, when you work with buyers you work for free, as with sellers, but with buyers more, um, uh, it's more discreetly free because they may never close A seller is almost certainly going to sell their house eventually. Uh, I was like what are you going to do if they show you a house that has 0% commission? So I was not willing to increase the listing. It's just not willing to share and the buyer doesn't have the money to pay and he's like look man, this is how I feed my family. I do this for a living. I'm a professional. If somebody wants me to work for free, they're just not my client. Like when I go to a listing agreement and they don't want to pay what I refer them to. You know a couple of you know very inexpensive. We put your house in the MLS, that's all we do.

Speaker 1: 22:15

Brokerages. I have that too, so I have those referrals set up that. I can refer to that if that's what they're looking for. That's what you want, here you go, they've analyzed what the value that I bring to the table, what I can bring both as a buyer's agent or a listing agent, and we're not a good fit.

Speaker 2: 22:35

I have someone I can refer them to, if really they're stuck up on up, or yeah, if they're stuck on the upfront cost versus what they actually get as the return on investment and like if, if this wasn't already negotiable, commissions weren't already negotiable, these, those sorts of companies would not exist right yeah, how would not exist Right.

Speaker 1: 22:51

How would they exist there's plenty, hey guys, we're educating you. There's actually plenty of companies out there that there's flat fee MLS brokerages where you can pay like a flat fee service, like 500 bucks to go for sale by owner and still get your house listed on the MLS.

Speaker 2: 23:12

That's all they do. It's for sale by owner.

Speaker 1: 23:13

You do for sale by owner.

Speaker 2: 23:16

You do your hold the open and hey.

Speaker 1: 23:18

I will short plug, guys. I'm actually uh, if anyone's listening to this and they're curious and want to learn how to do that, I actually host a um I. I do this every once in a while, so reach out to me if you are dead set and you're like I want to sell my house for sale by owner, but I'd like to kind of learn how to do it correctly. I actually teach a class on that. So if anyone would like to learn what it takes to sell and list your house properly on your own without paying agents, reach out to me. I'm throwing that out there. I'm probably going to get a lot of heat from other agents on that, but I'll. I'll show you exactly what it takes every step you need to do what I do to basically replace the agent If you want to do the work yourself and tell you what man yeah, nobody who is not confident in their skills can prop, can provide something like that.

Speaker 2: 24:12

Hey, I can help you do this because I'm confident that you're going to get value from this, or you're going to get value from my full service, and I think that it's pretty obvious that people are going to get more money from your full service.

Speaker 1: 24:28

If they don't see it that way, that doesn't mean they don't get to get served. Yeah, exactly. So reach out to me if you're interested in that too, um, and I can get you on my next uh, on my next webinar that I host for that um. But one thing I wanted to point out, because brian is, uh, I'm I know I'm ping-ponging on here, but I'll show you the buyer broker agreement that we have as of uh, as of um, as of washington state. Actually, before I do that, the thing that I want to point out, that I do not like about this lot the the settlement the most, is my issue with the transparency. So the biggest thing on this lawsuit is where is it? Um so right here? So did it say Okay? The settlement prohibits sellers from paying a commission to a buyer's agent and relieves sellers of financial burden False. The mandate restricts properties with an offer of buyer agent compensation from displaying on the association-owned MLS, yet the practice can't be restricted in any other form of marketing.

Speaker 1: 25:35

Sellers may still elect to pay buyer's agent compensation to differentiate their property. So savvy sellers that want to set their property apart are going to have a strong listing agent that knows how to market this properly. I mean, you're a buyer's agent, so what it's going to do now. Let me explain this, guys, because washington state was at the forefront, one of arguably the most transparent states as far as transparency on the north of some of us saw this coming and took appropriate action yes we've been very proactive on this In Washington state.

Speaker 1: 26:10

You can go on our listings Like you, as the public can go to public sites like Zillow, redfin. You can go on there and the commission will be advertised of what your buyer's agent is going to be paid or offered from the seller. That's completely transparent. That is going away from the settlement of this lawsuit. They are rolling it back to hide that behind a curtain now, where that will no longer be advertised on an MLS Can we stop there?

Speaker 2: 26:47

Can we stop there for a second? Yeah, it's mind-numbing. This is what I meant by the government's implementation is never their intentions. Well, not never, but in this case. Mostly they say this is for transparency. The settlement reached in and now the DOJ is weighing in, and the DOJ is making it even more restrictive, it seems, but they're making it less transparent. They're saying you can't say what you're going to pay, right, or if you're going to pay for transparency, so what? Right? Uh-huh, yeah, yep, you can't.

Speaker 2: 27:21

Okay, I want to be transparent with you right now, aaron go ahead I'm sorry that was me being transparent the way that oh, yeah, I was going to be transparent. I really need to tell you something, but I'm not going to tell you if we're just what the heck you're not going to actually tell me in full transfer what's happening.

Speaker 1: 27:39

Yeah, I know, and so what it's going to do is now your buyer's agent is going to have an extra step when you're working with them to make. Basically, if it's not advertised anymore, your buyer's agent is going to have to make a phone call to figure out if there's any sort of um, any sort of compensation offered if the seller has agreed to or disclosed it.

Speaker 2: 28:03

And then it has to be imagine you had to go into work every day and call your boss and say hey, am I getting paid today?

Speaker 1: 28:10

that's what it is or not even that.

Speaker 2: 28:13

Say you, you have deliveries that you're making as a fedex person, right, and you got a call between each delivery and say, hey, am I gonna get paid for this? Hey, am I gonna get paid for this? Hey, am I like? That's what's happening yep, exactly I.

Speaker 1: 28:25

You had a good point, because I'm gonna bring up the. Uh, I'm gonna show everyone on real quick the where it is on the psa, because that's still gonna be in there where you can. Um, let me bring this up real quick, okay, so PSA right here.

Speaker 2: 28:50

You guys see that picture of Aaron Morrow on his Superman.

Speaker 1: 28:56

Anyways, so this is. Yeah, I have not changed my Chrome background since. I was like in high school. Let's see here. So this is so, this is the purchase and sale agreement. And right here, this is where it explains um, let me, let me see if I can make this bigger there we go okay. So right here, um fire, my mouse is on here. I forget where my mouse is. It's kind of trippy doing this stream thing.

Speaker 2: 29:28

So right here this is where you put the compensation as offered.

Speaker 1: 29:32

So you just find out what it is, and you'd still just put it here, so it's going to be transparent once you're making the offer.

Speaker 2: 29:40

It already was transparent. This is it. Line 17 is not new to Washington.

Speaker 1: 29:44

Right, this is in there already.

Speaker 2: 29:46

We're already doing it.

Speaker 1: 29:47

So we're not changing this up. But what is going to change from this is from my understanding of all the research I've done is one thing that they are changing is how we currently have our buyer broker agreement set up in. Ours is one of the um we've been. I've been told by some other agents sending this around and some other real estate attorneys in other countries that are not countries, other states that we actually have one of the best uh buyer agency agreements for for the, for our state um, and with this one because it's the most thorough, it's the most like crystal clear on what it means and there's so many lines here of explaining how your, how your buyer agent will not only work for you but how they get paid, exactly how they get paid in like every situation.

Speaker 2: 30:42

So can we yeah, can we drive home this point that we're not saying that one buyer's agent shouldn't be paid or two buyers shouldn't know how and how much they're paid. We're not saying that. We're saying this makes that harder. We're saying that's what was already happening and the new settlement, if it continues the way it is, has been settled to already.

Speaker 1: 31:03

If that continues, on it all it's, it's, it's not, it's doing the opposite make it harder, because how it used to be is the majority of the time now, uh, a lot of agents, uh, I know there's a lot of agents out there that probably never bothered to get one of these signed in other states and they just went off of, like you know, building up the rapport and getting getting the buyer to go under contract and 99 of the time they found a house where the seller was offering some sort of compensation. It worked out, um. But now this makes it crystal clear because part of the um in washington state, actually, as of the beginning of this year, they made it mandatory that a buyer has to sign one of these before a buyer's agent starts performing buyer's agent services it used to be optional and have zero teeth, so a listing agreement now.

Speaker 1: 32:00

it has Now your agent is definitely operating outside of their licensure if they're performing broker services for you without signing this Now I mean you can. So there's. There's so many different ways to go about this. Like well, I don't want to just sign with first Joe Blow I've ever met and I haven't properly researched him, because there's a lot of agents that have a model of finding the buyer through just like a quick open house or like a Zillow lead.

Speaker 1: 32:35

They've never met before and so like this is going to disrupt a lot of models. But like Zillow's model of charging a lot of money for their leads, like up to like sometimes I hear like $1,000 per lead, or Zillow has like a referral. Just to also make this really transparent, guys, zillow also has like a flex program where agents have signed up where, instead of paying up front for leads, they're going to pay a referral fee on the backend for their buyers, but they're actually giving Zillow 40% of the commission.

Speaker 1: 33:14

Maybe we, that's what we call it in Washington state, I'm going to say compensation. Whenever I say compensation in other States, it means commission, just to. I mean Washington state means compensation. So anyways, that's neither here nor there. But buyers are going to be reluctant to want to sign one of these before they go just see a property, right. But a way to get around that to build rapport is an agent could have a buyer sign an exclusive agreement just for that property to you know, and then like say, hey, we've seen a couple of these and we can either just keep doing this or now it's time to. Now it's time to figure out do you want to work with me or not?

Speaker 2: 33:56

Like actually, yeah, look, real, one of these, you know. I mean signing a buyer's agency agreement off Zillow. Uh, of meeting an agent from Zillow is like proposing on the first online dating date. It doesn't make any sense, but that's what it. That's what the unintended consequence of this can be.

Speaker 2: 34:12

Um, because, like you speak to this before, if you sign a listing agreement with a seller, between a seller and agent, and they decide Aaron, I don't want to work with you anymore. You could say well, we have a six month listing agreement. You cannot list your house with another agent within the next six months, or there's a BNC recourse. That's been the case for a while. The buyer's agency agreement was always hey, will you sign this so that we have a formal relationship to working together? But if they decide to go work with the buyer's agent, there's really no recourse.

Speaker 1: 34:40

That you had agent. There's really no recourse in your head. Yeah, like basically, basically, uh, on the buyer's side, if they just decided to like say, all they had to do is just give you a written notice that they no longer wish to work with you text or email is fine.

Speaker 1: 34:54

Yeah, yeah, and all you were protected with was any houses you showed them prior is basically because the language in there is like it's supposed to protect that buyer's agent for like any house that they sent through the mls. But it's really hard to follow the digital paper trail and that'd be really like who are you going to go after at that point if someone, if a buyer, wants to burn you that hard on that one transaction? They weren't a good client, a good fit, and it's best to not go after them like I mean, you know I'm not, I've never gone after anyone for screwing me over, you know.

Speaker 2: 35:30

No, you never want to be the guy who sued your client yeah yeah, like, not only do I not want their reputation, I don't want that energy in my life okay, you don't want to work with me no I just rather figure out who's not a good.

Speaker 1: 35:44

We're not a good fit.

Speaker 2: 35:45

Like from the jump.

Speaker 1: 35:47

That's like. That's my whole goal is to figure out. Hey, let's figure out real quick If, if, if you think I'm good for you and I'm good for you quicker than down the road.

Speaker 2: 35:59

Yeah, Can we touch on one other thing? So this buyer's agency agreement is now when you sit down with a client. There's some goods and bads. The bad is buyer broker service. In the beginning you had to have signed. They had the buyer's agent's compensation on the contract, but outside of that, the increased transparency they had is what NAR is taking away. They had the buyer's agency compensation listed on the NMLS.

Speaker 1: 36:41

Publicly. Publicly, not privately, you knew if your agent was steering you or not. And the whole thing, this whole complaint is they're worried about agents steering clients away from those properties.

Speaker 2: 36:57

This is yeah.

Speaker 1: 36:58

Washington state has it as public, transparent the main point of how Washington was doing.

Speaker 2: 37:03

Not only was it on the MLS for agents to see and for people, like when you sent them MLS, like when you looked on Redfin or some other site for a house, it says right on there on that website, buyer's compensation to be the buyer's compensation is and it says so the buyers already all new in washington state yeah, the problem is some other states did not have it set up this way, but really they should have looked at what washington state was doing and just said, hey, this is what we should adopt nationwide.

Speaker 1: 37:34

Is my is that's my hot take on this, because now what's going to happen?

Speaker 1: 37:40

that's what gets me we are going to have to actually restructure our buyer broker agreement, if I'm interpreting the research that I've done correctly and what? At first I didn't think we had to, but now I've done some more digging on it and it sounds like because at first we had a good thing going here how it was written. We were very crystal clear on this about basically this agreement is set up. To explain myself as an agent, this is the minimum I am going to get paid for working with you. If I help you close on a property, no matter what, whether it comes from the seller or you, someone is going to pay me at least minimum X amount once we close. And we've explained it up front and the buyer understands in my you, my uh, my uh.

Speaker 1: 38:40

What's I'm playing on the word here, my uh compensation, your value, your compensation well, well, yeah, you know, like, uh, when I do my consultation with the buyer, um, so we explain this out, but it also explains in there, because everything's negotiable. This so notice in here in washington state this can be exclusive or non-exclusive. This could be, uh, your agent can say this is how the minimum I'm gonna get paid. So, like, let's say, your agent, exclusive or non-exclusive. That means that that makes it mean nothing yeah, it makes it mean nothing, like it's literally just to now.

Speaker 1: 39:17

It's like to protect and I can tell you that, uh, they're, unless it's a very specific circumstances, no way. There's not an agent that knows their worth and is going to deliver their time isn't going to be agreeing to non-exclusive shoot, I wouldn't.

Speaker 2: 39:37

I wouldn't enter in an agreement with my boss and say not a good fit, hey boss, you're gonna pay me, maybe or not. The boss is like hey, you're gonna come or maybe no, right right like um.

Speaker 1: 39:49

But so this agreement explains the agent and you negotiate and set what the minimum amount is that your agent states that they will be compensated at closing uh, in the event, um. And then it also explains like in a very rare instance that if there's dual agency involved that you and the seller have to pre-agree to. That would be in the event that you find an off-market deal or like a for sale by owner, where you want now your agent to represent both parties. I actually don't do dual agency. What I do is I write the agreements to explain that in a for sale by owner situation, I will be my buyer's representation and I can facilitate sending the paperwork for the seller to sign. But I'm not going to give them any sort of transactional advice or real estate advice on their end. Transactional advice or real estate advice on their end, they either need to hire their own representation or um, it's. It's not going to work, you know?

Speaker 1: 41:06

um yeah because I represent my buyer. You know in if, if we're working on a with a buyer, you know um, but that's what that is there for. This agreement also is thorough because it explains in the in the event that, uh, it explains what happens where, if you find a property where the sellers is offering a buyer's compensation, where it's more than what your agent has explained, what their minimum is, that they need right or what their compensation is, who does that go to? It's negotiable. You can either right here clearly say your agent might want you to agree that it goes to them, you know for the hard work that they've done, or you get it credited back to you as a buyer, or you know it's all negotiable here. This part, by the way, is going to probably go away. It's going to be restructured because the the settlement has explained that it has to be basically now. Basically, it's like there's no double dipping.

Speaker 1: 42:08

It has to be a specific amount that your agent has stated is their compensation, no matter what, whether they get all or all or some from the seller or you, but they cannot get no more than that. So here's the other thing that you're going to run into as a practice. There's a lot of agents in our state that like, say, I, I know this because they want to lighten the burden with their buyers is they'll? They'll set their minimum amount a little bit lower than like three percent, for instance? Right, they don't go for the three, right at first? Right, some I mean some agents go for three or four, whatever, it's all negotiable, right?

Speaker 1: 42:51

you may shoot yourself but now you cannot go back up because if your agent on the new hiring agreement it's going to stay, basically, if the if the settlement makes uh, if basically washington state adopts the same practices that the settlement is asking for, um is basically uh. Now your agent is just saying let's save two and a half percent, just to make numbers. Your agent's saying I'm going to get 2.5%, no matter what. If you now go to a property that that seller is actually offering 3% as a buyer's comp, that they found out through back channels. Now, because it cannot be on the MLS.

Speaker 2: 43:37

For transparency, not be on the mls uh transparency.

Speaker 1: 43:39

Yeah, that agent has no recourse to take the other half. There's no. Like it will go to the buyer now or, who knows, maybe the seller just gets to pocket it I don't know how.

Speaker 2: 43:52

No for lending we haven't even said whether or not it can go created yet for it yeah, fha has said hey, we're watching this and we don't think, we think that we'll be able to be a closing cost or a credit to the buyer. Uh va has already said, as is forever said no, you can't roll agent compensation into uh closing costs and fanny and freddie haven't really commented on it yet. I, it, is going to work out where.

Speaker 1: 44:16

So that was the other thing not yet yeah.

Speaker 1: 44:19

So the other thing I wanted to point out is this article here. I had to copy and paste it because it was really hard. It was actually in my email and I don't want to show off my email because of I've got a lot of clients anyways. Uh, so this is from. This is called uh hozo or hazoocom. This was uh breaking. This was an interesting one. I got this last week. It was talking about the mls's, uh responses nationwide to what's going on. Because it's basically like nar like stating okay, this is what we'll settle on. But then the mls is because some of the mls's aren't now owned, like northwest m, it's actually group member owned. It's not owned by NAR. So like even our local MLS here on Western Washington side Did I say that right? Yeah, western Washington side. So like here. Some things I want to point out uh, the the filing asked the court to disregard the doj statement of interest. The council states that doj's recommendations won't have the impact it intends and may harm the consumer's interests.

Speaker 1: 45:34

The doj just uh suggests ban on sellers offering compensation to buyer brokers would violate antitrust laws and then the policy may adversely impact first-time homebuyers, lower-income buyers and minorities, Because here's the truth, 100% real. But no matter what, there are going to be more situations where a buyer is going to have to figure out who they're hiring and even if they wanted the proper representation, their agents might require a minimum compensation that now the buyer feels like would be a little too risky to work with if they can't find a house. That anyways go ahead.

Speaker 2: 46:23

So let's talk about that if they say the seller cannot pay at all because that's price fixing, so it cannot, has to come from the buyer. What you've just done is you have either taken, you know, let's say just, let's say 10 grand, um, ten thousand dollar buyer agent compensation. We can get into where all that money goes in the future. The buyer, aaron Morrow, doesn't get $10,000 when he sells your house as a buyer, like it goes to a lot of different places in your own business. But let's just say it's 10 grand. So you have done now down payment, closing costs and $10,000 of buyer agent compensation.

Speaker 2: 47:00

A buyer, a first time buyer, a low to moderate income buyer, is going to say I can't afford those, I'm not doing it. So either I'm out of the housing market, it's not going to happen or now I'm going to go and I'm going to work with a person who has a first and fiduciary responsibility to another party, the seller. I'm going to work with the agent who represents the seller first and cannot negotiate on your behalf in good faith, because they represent the seller and when they, if they do that to you, they're not giving it to seller and they could lose their license. That's what it's. That's what setting up. This is what I've talked about. Intent may be good, implementation so far is atrocious.

Speaker 1: 47:32

Yep. Now so the one. The one thing I will stick our own state to is I think dual agency should be outlawed.

Speaker 2: 47:41

I do too.

Speaker 1: 47:42

There's other States that do dual agency better, so, for instance, colorado, where I actually came from. I was licensed in Colorado for two years before I came back to Washington because I've been a. Washingtonian all my life, except for two years while my wife was going through her master's degree. Um, in colorado. It has the contract set up where you switch from a uh, a fiduciary to what's called just a transactional broker. Basically, it forces you into not giving any agency to either party.

Speaker 2: 48:17

You're like an escrow company.

Speaker 1: 48:18

You're just facilitating, yeah.

Speaker 2: 48:22

You guys find it out.

Speaker 1: 48:25

But these are the two things that are floating around online. That or the three things are either basically, buyer can go directly to the listing agent and the listing agent will now represent the transaction for them, or the buyer can go do all their shopping through open houses and then hire a real estate attorney to write up the offer for them. Um, the problem with that model is the real estate attorney isn't gonna uh, they're not paid on performance. You're're going to get charged every transact, every offer they write for you.

Speaker 1: 49:02

So let's stop on that for a second yeah.

Speaker 2: 49:05

Yeah, let's stop on that for a second. Your lawyer will be paid to write the contract. Your realtor is paid when the house closes.

Speaker 1: 49:12

Right.

Speaker 2: 49:12

So, especially in a market that we've been in for the past four years, where buyers have had like, not it's. It's more common to have more than one offer put in before one is accepted than it is to just have your first offer accepted. So you're paying for offer after offer, after offer after offer, as opposed to only paying at the end, once the once, the, the service that aaron morrow promised to you for compensation, which was to, uh, ensure that you close on a house and have possession of that house that you're a homeowner.

Speaker 1: 49:43

That's when Aaron gets paid.

Speaker 2: 49:45

The lawyer gets paid to write the contract, whether or not it ends up being accepted or fully executed through closing.

Speaker 1: 49:51

Yeah, exactly. Big deal could in a competitive market, especially if you're not the type of buyer that wants to give away your firstborn or you're in situations I mean some days. I want to yeah, well, brian, you got like six of them. You can't like, yeah, miss all of them all the time, right? No?

Speaker 1: 50:15

right yeah, anyways, um, you could loan one. No, um, anyways, uh, if you're the type of situation where you're not in a that might work for some markets, if you're in a market where you're, like, closer to a neutral or, dare I say, buyer's market, which would be, um, I mean, that would be amazing if there was a huge shift like that.

Speaker 1: 50:38

But but here reality in the Seattle area it's just not that Like. It's been hard seller's market forever and after COVID really hard Last year. Let up a little bit but not still not neutral. Like you, if a house is priced right still I tell you what.

Speaker 2: 50:55

The only way we get to a buyer's market is if rates continue to stay high, higher, for longer, and if that happens, we're going to have seen an increase in inventory, but we're coming from really, really low levels. So don't be fooled, that's the only way. And so that still then means that you know houses are expensive.

Speaker 1: 51:12

Yes.

Speaker 2: 51:13

Yeah.

Speaker 1: 51:14

So I think this is going to. So my main thing about this is, guys, nothing's really changed. The only thing that they're like there's a lot of misinformation about it and all they're doing is actually just rolling back some cool things that Washington State has been doing.

Speaker 2: 51:33

Can you go back to those headlines that you had at the very beginning? Yeah, I want to make one point twice, one point in two ways. You talked about it could cost upwards of $1,000 per lead through Zillow, or 40% of your compensation at closing. You guys, zillow is free to you because you are the product. They're selling your information to people so that those people can then serve you.

Speaker 1: 52:00

You're the product. They're selling your information to people so that those people can then serve you.

Speaker 2: 52:03

Well, you're the product, like they're like. Agents are the customer. Yeah, agents are the customer who are paying Zillow.

Speaker 1: 52:07

Yeah. Like you're the product.

Speaker 2: 52:09

Yeah, you're the product. You're being sold now. So you're being sold now. That same way on um, on these uh headlines, powerful realtor group agrees to slash commissions and settle lawsuits. That is patently false. Aaron has gone over that. It's patently untrue. But you are the product. They need your eyes. They need you to make money. They sell advertising space and the only way they sell that is if you, the product, are there to click on it. 6% commission fees for real estate agents are going away. Want to know about? Well, what to know about the new rule. 6% commission fee for real estate agents was never a thing to go away. There's been a ban, like Aaron talked about, about between four and 6%. Some are more, some are low. I rarely see 6%.

Speaker 1: 52:53

And the other thing I was going to point out here. This is good too. The MLS look at this data here, so in their statement. So MLS data refutes this. Its commission offers have been gradually decreasing since the year 2000 at a rate of 0.4% per year. However, since the rule changes were implemented, the rate of decline increased to an average of 1.5% per year, as reported by Inman.

Speaker 2: 53:23

So I'm going to tell you why that is. It's pretty simple, pretty simple economics in a capitalist system. Prices have gone up for houses, so, because of that, compensation has gone up, because it's based off of percentage. So, in order to compensate for that, commissions or compensation has come down to a lower percentage. That's what the market has told realtors will happen, because realtors go in an interview to list these houses and then a seller chooses that realtor that they're going to have represent them. So the market talks.

Speaker 2: 53:53

Secondly, housing selling houses has become, you know, 2020, 2021, a part of 2022, a little bit easier than it was before in this really hot buyers market. So you had less, you had less qualified competition, and so the market came down to meet that. Now, as realtors leave the industry, as less qualified realtors continue to leave the industry, competition will almost certainly increase, because now you're working with a higher quality person, you're shopping at Nordstrom, you're not shopping at Ross, and you can still go shop at Ross If you want. Both will sell you clothes. There is a big difference on what clothes you get and how you're treated when you're there and the value you get from it. So the market already spoke. Mls has the data. It's just data, it just is. And MLS has the data that says actually we were already going, the market was already speaking to us and this is what the market was saying. How in the world is that not transparent? The market's doing it. So I think that's what frustrates me the most. It already was happening.

Speaker 1: 55:00

And we were already transparent, because this lawsuit has kind of done like, since it's class action, it's done a blanket where, like hundreds of or like thousands of agents, their clients, over the last couple years they've been receiving these mailers that like are basically like stating your you might have overpaid, whether you were on the buyer or seller side. It's damaging relationships to agents that actually know.

Speaker 2: 55:28

Can I make a point about that? You were harmed, mr Buyer, mrs Seller. You were harmed. You deserve compensation. Your realtor was a snake oil salesperson and wasn't clear about that what they got paid, so we should sue them. Oh, that sounds great, so I'm gonna get all my money back. Well, you're gonna get like 10 bucks, because a lot of people are suing them it's like between 10 or 21 dollars, but then the lawyers wait okay, lawyers, how much are you getting? You know?

Speaker 1: 55:56

like 33 percent of it.

Speaker 2: 55:59

It's like $80 million, yeah, and you're telling, and you lawyers are telling us that agents are making too much. It's an obvious money grab. Now, I don't want to come off as flippant about this. A lot of places can be much better at being transparent about the value you're getting and what you're paying for it, of course, because there's a cost and a benefit to everything.

Speaker 2: 56:25

Washington was just already there and that's the most frustrating thing, and we did it better. You knew, when you looked on whatever website you were looking on, what the what your agent was getting paid. You signed an agreement and the seller signed an agreement to though this is what I'm paying and this is where the money is going Like that already happened when you signed a contract to make an offer and when a seller reviewed a contract for that offer on page one was where the compensation was going to the buyers. How much compensation is going to the buyers? Over and over and over and over again, buyers were told this in an effort and a really good effort to be transparent and, I think, a really well executed, and this sets us back. That is what's most frustrating and that's why maybe we might come off as flippant sometimes about this. It's not that it wasn't a real problem. It's just that we had solved it way better. And now our hands are being tied and we're being taken back and you are being harmed as a consumer in Washington now.

Speaker 1: 57:19

And we're going to do the best we can with the laws that come through and what they make us do. I think now more than ever, especially whether you're working on the seller side or the buyer side, everything's negotiable. But really interview who you're working with.

Speaker 2: 57:33

Every time yeah.

Speaker 1: 57:34

Yeah, don't, like, I don't. So when I tell my clients I'm like, especially if they weren't referred to me, but like, even if they were, like I treat every client the same where it's hey, I don't. I don't expect you to just go on blind face trusting me. So, like, I've worked very hard to build up what I call social proof, to put it out there, to be as transparent as possible. So you know what I'm about. You can see my videos, my personality, how I can help you. But then here's a playlist of what 20 other clients have said about working with me, what the process has been like.

Speaker 2: 58:19

Well, I'll tell you why that's so powerful too, because you are so.

Speaker 1: 58:23

If that's not enough, oh go ahead.

Speaker 2: 58:25

No, no, you finish, you finish.

Speaker 1: 58:27

I was going to say and if that's not enough for you, would you like a list of references from clients that know, like and trust me that have said, Aaron, you have done a fantastic job for me, enough that I would like to be on your reference sheet. If anyone calls me or emails me, I'd be happy to tell them what it was like working with you.

Speaker 2: 58:48

So there's two points about that that I want to make. One is, of course, everybody's going to give out to people that will say good things about them. Yet, however, doing such a good job that people are willing to say good things about you, that reframe is very important, and you are so active online that you are an open target for people who want to say bad things about you. Oh, trolls.

Speaker 1: 59:08

You don't have a whole lot of that.

Speaker 2: 59:10

Yeah, you have trolls, but there's some people like nobody bats a thousand. Sometimes there's. You know, somebody has a poor, despite your best intentions. Someone could not you, but other people could have a poor experience or have a perceived poor experience. They also get to have their voice heard because you're just out there and there's just not a lot of that. So the point of oh, aaron sent me, you know people that know I can trust him. Well, there's a lot of people that know I can trust them, so that makes sense and these people are willing to put their reputation online for you.

Speaker 1: 59:38

Yeah, yeah, exactly. So that makes sense and these people are willing to put their reputation online for you. Yeah, yeah, exactly Same with same with you, Brian.

Speaker 2: 59:44

No no.

Speaker 1: 59:47

Anyways, I guess that's my hot take, or my big takeaway. We will see what the fallout is of this. They're mentioning, like the earliest, that these changes can roll out is like mid-July, but it might be a little bit later, because which?

Speaker 1: 1:00:02

is lightning fast, yeah, stupidly fast. We'll see what happens and we'll see how the market reacts to it. So I mean, at the end of the day, if I'm working with I'm not going to turn down a VA buyer because they want to get in a home, like they're going to know that I've got their back, and if we're in a situation like they're not going to lose the house over this, there's there's a lot of things.

Speaker 2: 1:00:28

I do for no money because it's the right thing to do. Yeah, and and I feel like if you put like yeah, you put enough karma, right things to do. It all comes back to you home. You can negotiate your agents uh be into the pricing uh when you're making your offer and your escalations and stuff.

Speaker 1: 1:00:49

so, like there is a negotiation, there's ways to get the seller to agree to it, even in a multiple offer situation, if you're in one. And I mentioned that just because, more often than not, that's what's going on in this market, you know, yeah, so guys, I mean, that's all we've got for you. I mean, it was good. I thought this was going to be a tight 45 minutes, but I think we were a little lively on it.

Speaker 2: 1:01:10

So thank you, A good tight hour, two minutes.

Speaker 1: 1:01:12

Yeah, exactly, it was better than my one hour 50 minute spiel on how to write a good offer. Thanks again for coming again. Aaron Morrow, local realtor, greater Seattle area. I work with home buyers and sellers King Pierce, snohomish counties but if you're nationwide, I have a really good referral network. I've got over like 3000 agents that I'm connected with in every state, every major city, anywhere you name it. So if you want someone that is already well-trained and puts customer satisfaction first, people first, relationship based first if that's the type of realtor you're looking to work with nationwide, please reach out to me. I'd like to have a consultation or a conversation with you so I can get you connected to the right people.

Speaker 2: 1:02:05

And Brian here awesome mortgage guy.

Speaker 1: 1:02:07

He's, you know again Washington state, oregon and some other place I don't know.

Speaker 2: 1:02:11

But yeah, so it doesn't matter, we'll help you. I don't know.

Speaker 1: 1:02:18

What was it? You know you know, mississippi oh, there you go, not even close, yeah, okay flyovers it was uh, it was good seeing you all. Um, please reach out if you have any questions and until next time, we will. Uh see you on the next one. Uh, real soon.