In this episode, we will give you a realtor’s perspective on the NAR settlement and how it is impacting the real estate business.
We will cover:
- Realtor practices back in the day
- What changes were required
- How this affects buyers and sellers
- What impacts we’re seeing – and it’s not what the media headlines say, imagine that!
READ BELOW FOR THE FULL TRANSCRIPT
Amy Nakos 0:23
Candice, we have this conversation in the office weekly, sometimes more than once a week. And there’s also misconceptions out there about what what it actually means. So we decided that we were going to sit here, and we were going to talk it out and tell the full 100% truth. You guys are getting unedited. Exactly what we’re seeing. Exactly what we’re doing, and hopefully it’ll help answer some of your questions. So well, let’s just start at the beginning, right?
What is the NAR Settlement?
So you know, when we first started talking about doing this, I felt like we probably need to explain even what the NAR settlement is. Right? And why we had to change our practices. So I’m going to do my best to explain it, but if you’re a listener or a watcher and you want to know the exact specifics of what happened. Don’t rely on what I’m saying, like go look it up somewhere else. But generally speaking, here’s what happened: We had a couple class action lawsuits in the industry. and they were antitrust lawsuits against local realtor associations, and they brought in the National Association of Realtors in these lawsuits.
Alleged price fixing antitrust price fixing in the way that realtor compensation was paid. The way that we do business.
And while I don’t know the specifics of the exact verdict, what I do know is that there was a settlement reach, so prior to even making it all the way through the trial, a settlement was reached on one of these lawsuits. The other combined with it also my understanding. Again, Google it if you really want to know. But what it resulted in is a settlement agreement, and that’s why we call this the NAR settlement.
So the National Association of Realtors as the defendant in these lawsuits, settled with the attorneys and came up with new practice rules where every realtor in a realtor is somebody who is a member of the National Association of Realtors. We all must abide by these rules now, and that came into effect August, I believe, 17th. We’re recording this podcast in October, so we’ve had, you know, two months, two months of dealing with these practice rules.
So we’re going to tell you what it what it actually means and what’s actually happening in the last two months with these practice rules. So you know, instead of me talking all the time, I’ll have Candice jump in on what the changes are and and what we have to do now?
Candice De 3:05
Yeah. And I think to your point, Amy, we talk about a lot.
There’s so many media headlines that are like Realtors aren’t going to get paid anymore, and prices are going to go down. And there’s a lot of misleading headlines. And so I think it’s good to just be transparent. Like Amy said, she’s the lawyer. So she’s covering all the bases – make sure you go look it up yourself, but there’s a lot out there that is actually written about the settlement by NAR, and there’s a lot of media headlines. So there’s a need to interpret between those and that’s what we’re going to try to do here today. Here is what we’re actually seeing in the field, in the trenches. So yeah, I’ll talk about the two changes that we have to make as a result of the NAR settlement as Realtors.
MLS No Longer Has a Co-Op
So the first one is the MLS no longer has a Co-op and I’m going to explain Co-op very briefly. I think this is part of our problem and that it was confusing before. So we, typically sellers, collected a lot of money when they sold, so they were the ones paying their seller Agent, and then the seller agent offered a Co-op to the buyer’s agent.
So the money funneled from seller to seller’s agent or brokerage firm to the agent, to the buyer’s brokerage firm. And that’s how our contracts were kind of set up. So it made sense in the MLS to, for a seller’s agent to offer that Co-op in the MLS.
But one of the issues was that that was not transparent to the consumers. So that is no longer allowed. Now we make phone calls a lot and we’ll talk more about how that is happening. So there’s no longer a Co-op percentage or offering in our MLS that has to be broker to broker.
Amy Nakos 5:01
Something quick though, it doesn’t mean that there’s not a Co-op. It just means that it’s not in our MLS anymore. It’s not published, so yeah, yeah.
Candice De 5:11
Good clarification there. Yeah, it’s not published in our MLS where our listing information is.
Buyer Agreement Is Needed Before We Can Show Property
And then the second thing is that we have to have a buyer agreement before we show property, which sounds good on paper and in theory and in practice, we’re seeing some pros and cons to that. I think it was intended to be transparent about how buyer brokers get paid up front, and I think we’re seeing some ways to do that, but there are also some challenges with it.
So those are the two big things that the NAR settlement said.
All Realtors, and this is not just in Summit County here or Colorado, this is nationally, all Realtors have to abide by these two rules. And one other thing I want to just mention is that in Colorado, our contract language is actually set up kind of favorable for this. Other states have different contract language where they didn’t have some of this established in their contracts. We’re all using new contracts now, but I think it’s not a big departure from how we were doing this before.
How Are Things Different Now For Buyer and Sellers
Amy Nakos 6:18
So to as a consumer listening to this, I want to tell you how it used to be and how it is now.
And so the way it used to be was we would have buyers contact us, and they would ask some information on properties, and we would be able to go into our multiple listing service and find the properties.
We could see what the Co-op was being paid. That would be our compensation, what we would get paid if we were to be the buyer’s agent on that transaction. And so the conversation about compensation didn’t come up at that point in time.
It was certainly prudent and a good idea to get an agreement with your buyer so they understood what your duties were to to them, right?
But it just wasn’t. Some people did it, other people didn’t. So a lot of buyers were comfortable or were used to just going out with an agent with no contractual agreement at all.
We’re going to go look at properties. You’re going to show me some things. If I like you. If I like it, we might write a contract, and you know we might get a deal done together, and maybe there was an agreement put together at some point during that time for the agents, for us, our compensation was protected because it was in our multiple listing service and that multiple listing service created a contract for.
Us as a buyer’s agent between our brokerage and the brokerage, offering that compensation.
So that that was contractual.
That is now gone, right? There’s no more of this contractual offering of compensation in the MLS, so that contractual agreement for the buyer’s agent for us to get paid is now done differently within our purchase contract. But it also means that buyers coming to us need to sign an agreement with us that says what we’re going to get paid.
So one of the things we’re going to really try hard to avoid in this in this podcast is we’re going to try to avoid saying numbers, right? Because the numbers is what is was part of the quote. UN quote allegations of collusion allegations of price fixing. So we’re not going to talk about numbers and if we do, it’s a mistake, but. So that’s the way it was and that’s why, you know buyers right now had to shift into a whole new paradigm of saying, well, I want to go look at property. I want to pick up a the phone and call a realtor. I want to go see a property.
Well, now they’re faced with before I can go into a door with you, before I can walk into a a property with you, you gotta sign an agreement with me.
And that’s where the rub is happening in our business. This is where the rubber meets the road. It’s where we have to have a lot of conversations. It’s where people are getting super antsy because we’re basically asking them to marry us before we’ve even met in person. Yeah, that’s what’s happening. Yeah, Candice, I mean, what, what do you want to add on to that?
Candice De 9:42
I think in general in life like it’s really scary to sign contracts, especially as part of a real estate transaction. And it’s a lot to take in, and we try to walk our clients through all of the pieces, especially the payment piece.
But yeah, it like we get an e-mail from someone who’s wants to see a property, we try to get on the phone with them, but they just want to see a property and we’re saying Nope, you got to sign an agreement that says you only love us.
It’s really hard when you have a it’s a blind date and then you’re asking for marriage. And so I think we, we have seen clients and we have ways to work around it. But we’ve seen clients say, no, I don’t want to sign this agreement and then. We’re kind of in this pickle of, well, how do we accomplish this? And so we’ve come up with a couple different ways.
Amy Nakos 10:34
Yeah. And we are lovable, right? I mean, you will learn to love us, we believe, but it’s that moment of literally signing a contract, and that contract also to be incredibly clear. That contract says that we are getting paid a certain percentage, that the seller might pay us, but if the seller doesn’t pay us, the buyer has to pay us.
So not only are they signing a contract that says they can work only with us ’cause, it’s an exclusive contract. They’re signing a contract that says, well, if the seller doesn’t pay, I have to pay. And you know what? We don’t know if the seller’s going to pay because it’s no longer published, we don’t know.
So it you know, I think that this was intended. These practice rules were created and negotiated by people who don’t do this every day clearly, right?
And didn’t know what it would be like to to be in the trenches. As we say, you know, we’ve said that twice already, but feet on the ground meeting with the people and trying to make these practice changes work. So that’s I hope you understand, and I hope this is helpful where you can see where where it comes together and where the the conflict or the uneasiness is happening. And what we’re trying to do so.
If we go back a couple steps just in, how do you even find a real estate professional, right? So we mostly get found on the Internet or through word of mouth. So I’ve been doing this for a long time. I have a lot of people that come to me, so I have these warm introductions.
People already trust me. They said Amy’s done a great job.
Then we also have a lot of information out on the Internet our website – Realtor.com, Yelp, Zillow. All those places?
So people are looking in having a little bit of a sense of who we are before they come to us, but we as real estate professionals have to prove our value of why somebody should even work with us. And why they should sign an agreement that says they’re going to pay us if the seller doesn’t before we do a single thing. Before we, before we take them into a house. Before we can start to talk to them about the neighborhood before they can see our our knowledge so. That for real estate professionals, especially buyers agents, is is probably going to start to create somewhat of a dichotomy where if you don’t have a lot of exposure, if you don’t have a lot of backing from previous clients, you don’t have a reputation.
You’ve got to work a lot harder to get somebody to sign the marriage contract before you meet.
Candice De 13:41
Yeah, usually we just wow them with our sparkling personalities, and then they’re like, of course I’ll sign. But in the absence of being able to do that, we have to work. We have to work harder, bring reputation, and really a lot of real estate is like that personal connection. It’s a relationship business and we like to show our value, but it’s that value proposition is really hard to do over a zoom meeting before you even meet in purpose in person.
Amy Nakos 14:09
And before you see us in action, before you see what we do and what we know and the value we provide. So I think we’ve beat this horse dead on on.
So we I think what I really want the buyers to know out there is we get it.
We get your feelings of hesitation of fear when when we’re sending this document over and when we’re asking for it and here’s what we’re doing.
You know we have come up with some solutions to help people feel more at ease.
And I’ll let Candice talk about that because Candace is usually on the front end of this. Candice is, you know, we work together as a team, and Candice does handles most of the buyers. So this this ends up being her her expertise. But we all, you know, we have some stories we can tell you about different clients and what they’ve said to us and what we’ve what we’ve had to do so. I’ll let you start and I’ll chime in with my stories too.
Candice De 15:10
So at the very beginning of all of this, we had clients saying, well, I don’t know what’s going to happen with all of this. So I don’t want to commit. And so we signed shorter listing agreements.
So I think we had the first one was like a month like we’ll take you out to properties, hopefully like something. We’ll take you out for more. But then, if this whole narrative shakes out that we don’t have to pay anymore, like they didn’t want to be committed to that. And so we did that and at the end of the day. It all worked out and we’ve shown our value to a lot of clients.
You have said OK. I’m fine signing, but at the very beginning almost every client has had questions. We had a few that have been like, Yep, we trust you. We’ll sign, but almost all of them, we get a phone call that says like, so here’s the thing. Like, I don’t know how this is all going to play out, and one of the things I want to go back, Amy, that you you mentioned is we have to check the box that says seller may pay buyer is obligated to pay and this is part of our contract. But it’s scary it sounds scary to be like, oh, so I might have to pay this.
And really, we have to check that to be able to negotiate for ourselves. If we don’t check that we can’t negotiate and we just have to do whatever the seller says.
So we don’t want to make you pay, but we want to be able to negotiate and advocate for ourselves. And so when we, when we do check that, it sounds scary to the buyer. And so like I said with one client at the very beginning, we just did a month long with some clients we just get on the phone and I think.
One of the big conversations I have is we think that we’re still providing a value that is worth it to you, whether you have to pay or whether the seller pays or it’s some combination thereof or it’s an adjustment of price. Now it’s all negotiable.
It’s not one set percentage or dollar amount. Everything’s negotiable, and really it might look different on different contracts depending on how the offers look and so. The good news is that there’s more expectation that there’s flexibility.
I think there has always been flexibility, but now there’s more awareness and discussion about it. But we still get a call with almost every client, and so the the two points I make with the clients is one so far, we’re still in kind of a buyer’s market, and we’re seeing a lot of sellers still paying, so it’s not like a total clip of the switch and two, we. think that we provide that value and we hope that you see that value. And really what we’ve seen is that when we help negotiate on behalf of our clients versus deals that we’ve done with unrepresented buyers or unrepresented parties.
We think that that value is returned to the buyer at the end of the day and so a lot of people are trying to do for Sale by owner and I’ve worked with some that have tried for Sale by owner that have said, “Oh my gosh, I can’t believe I tried to do this by myself.”
And so I think there’s, it’s scary and it’s early in the process now, but it’s doesn’t change the value that you receive at the end and the overall like benefit in just like the title work. Do you understand title work and do you have inspection contacts and do you have radon mitigation contacts?
Some of those relationships and some of that like professionalism, ’cause we do this all day, every day, every day. We understand some of those hiccups, and that’s the value that we’re bringing to our clients on top of like the negotiation and the dollars.
Amy Nakos 18:56
Sure, absolutely.
And I also one and maybe we’ve said this and maybe we haven’t quite said this yet, but from before the settlement until after the settlement.
So prior to the settlement, as Candice was saying before, the money went from seller seller’s agent, seller’s agent, shared the seller’s agent money.
We still have some of those contracts under the listing contracts, OK, so there are still many of the properties on the market right now.
Where the seller has specified I will pay my broker this and that and part of that is going to the buyer’s agent, right?
So I have some of those in my listings right now where we’re still offering that Co-op.
Many, though many sellers have changed their agreement, though to say you know what seller I will pay or seller’s agent, I’m going to pay you. So as a listing agent, I’m going to pay you X percent.
But I’m not going to specify the amount.
That I’m paying the buyer. I’m not saying I’m going to give the listing agent a percentage and that listing agent has to share it.
I’m only going to pay the listing agent and I want to see what comes in with the offer.
Doesn’t mean I’m not gonna pay. It just means that I haven’t specified a number.
So I think what you’re going to find as we start to move through this.
So we’re two months in early on, early on, everybody had that split.
Everybody still had those contracts where it was.
Here’s your chunk of money.
You can split it.
Now we’re getting into more listing contracts where it’s listing agent.
Here’s your chunk of money.
I don’t know what I’m going to pay.
Show me what you got so and the show me what you got.
Ends up being whatever percentage is on the buyer’s agent contract. They’re bringing that percentage in with the offer that they’re writing.
To ask the seller for that right.
So I I I hope that that’s clear.
And I’ll say, how many, Candice?
How many deals do you think we’ve closed since the settlement 567 somewhere in there?
Candice De 21:07
Yeah.
Amy Nakos 21:11
The sellers paid every single transaction.
We haven’t had any buyer have to pay so.
Have to pay our our fees now.
I was at a wedding couple weeks ago and a cousin of mine was like, so are you getting paid anymore?
So that’s one of the narratives out there that we just aren’t getting paid, but we are.
But that’s that’s how the flow is happening right now.
So those buyer contracts that you’re going to sign gives us the buyer’s agent, the permission and the ability to be a third party beneficiary and ask for the seller to pay that.
So I think.
I think we’ve clarified that Candice, is it clear as mud?
Candice De 21:49
Yeah. So so before it, it was seller seller’s agent or brokerage firm, buyer’s agent, brokerage firm.
And now it’s seller seller’s agent.
And seller to buyer’s agent.
And if that seller to buyer is part of the big picture offers typically now.
So yeah, I think I think we’ve clarified that.
Amy Nakos 22:13
I think so.
Candice De 22:15
One thing I want to just add is that this is confusing and it’s been confusing. I think the goal of all of this is to make it more transparent.
And part of our job is to make those contracts understandable to the public and more transparent.
But we are just not really a trusted industry as a whole.
So this has been a tricky challenge, especially with the media headlines. Amy and I think we’re like good people and we do good work and we try to like bring value to our clients. But we’re kind of fighting like an overarching reputation.
“These people got paid too much and they just are selling me something and they’re like one step above a used car salesman.”
And so it it’s hard to build that trust until you get to know people and work with people and see that value.
Amy Nakos 23:10
Yeah, yeah, we’ve talked about this too.
And I think you touched on it, one of the other things that are happening and this is for all you DIY buyers, the do it yourselfers is people who are saying well I can save the money like I don’t have to pay an agent if I go direct.
To the listing agent, and I’m gonna say that.
Candice De 23:34
We’ve seen this.
Amy Nakos 23:36
May or may not be true, right? So.
On the one hand, if that listing agent has the listing contract where they’ve got the whole chunk and they’re splitting the chunk and you come directly to them, they keep the whole chunk pretty much.
That’s how it works. If they’ve got a contract where they’re getting paid a certain amount and the and a buyer’s agent is undetermined, the.
The seller gets to determine it, and you’re coming in as an unrepresented buyer, and you’re going to represent yourself.
In theory that Co-op or the what the seller was going to have to pay is off the table.
And so a lot of people think, well, I’m going to be saving that money by doing it on my own.
Here’s where some pitfalls are going to lie #1.
The seller’s agent represents the seller.
They do not represent you if you’re coming in on your own.
It’s kind of like I think Candace used the example.
I’m gonna go to the my dentist and I’m gonna not use them.
I’m just gonna clean my own teeth with their stuff, right?
Did I even say that right?
Candice De 24:56
Yeah, yeah.
Amy Nakos 24:57
You, as an unrepresented buyer, have to go find all of the contracts we use.
You can find them on the Department of Real Estate, Colorado.
They’re there. You need to fill them out.
And you need to, you know, present that to the other side.
You can also get an attorney, but that it’s all on you.
And you’re coming into an industry where there are norms, practice procedures.
Customary ways of doing things. Customary timelines.
Do you know whether there’s a transfer tax or not?
Do you know how to put that in the property?
Do you know about capital reserves?
What about the HOA?
Is there a special assessment? All of the things that we deal with prior to even writing an offer, you’re going to be on your own. And so doing that up against a seasoned licensed professional who’s?
The seller is probably going to cost you more than if you had a professional helping you through that, even for the percentage that they’re paid.
So I would just caution against going in and doing it yourself now.
Some people will still do it and Godspeed to you and.
I’m just saying that I’ve I’ve received those contracts before and they’re very, very difficult to work with and people who do not know what they’re doing in the transaction are very difficult to work with. And so it it makes the job for the listing agent a lot hard.
Then if you they’re dealing with a professional who understands just just the process, it’s like it’s like being a race car driver, you know, and you’re on the race car track with all of the race car drivers versus throwing somebody in there who.
Race car driver and you throw him in a race car and they’re, you know, going to cause a bunch of crashes and stuff.
So do you have anything to add to that, Candice?
Candice De 26:44
One example of that which Nick, if you’re listening, I love you very much. But my brother is a very smart person, but he is a dentist, and I don’t go to his dental office and ask for his tools to clean my teeth.
But he did. Try to do a property transaction himself, and it was a small dollar and he had bought and sold multiple properties, and then he called me and he said, hey, what do I do if the seller backed out and I was like, well, you or the buyer backed out.
And I said, well, you keep the earnest money. Like I don’t earnest money. And I was like, well, looks like you’re out of luck then, man.
And so that’s like a very basic example.
And he’s very smart, and I’m he sold his property and did well, but it’s an example of just like when you don’t have a professional kind of walking you through the steps, there are things that could go wrong and maybe everything goes smoothly and you get what you want, but there could be big hiccups with costs, or just like legal issues that run with the land and the properties.
Amy Nakos 27:48
We’re not trying to scare you and say that we’re so great and you have to have an agent.
Candice De 27:50
Yeah, right.
Amy Nakos 27:53
I’m just. We’re just saying that when when it when it does happen and when we do run into that, there’s a lot more mistakes.
A lot. A lot more things that can go wrong. Yeah. OK. So all right, So what does this mean?
Candice De 28:06
All right. Well, go ahead.
Amy Nakos 28:09
What does this mean for the future?
I think we’ve kind of covered what this means for the future, but buyers be prepared. When you’re meeting with an agent that you’re going to have to sign some sort of agreement.
Sellers, you have more options now on how and how much you need to you want to pay for buyer’s agents, but you can expect that in every offer you receive you are going to be asked to compensate that buyer’s agent.
Candice De 28:42
Yeah. And I think in the market we’re currently in where it’s a buyer’s market, we’re seeing probably more similar transactions.
To what we historically did, and I think some of that’s just like taking time to move as if things shift back to like crazy COVID times if we get another pandemic it, it might look different.
And so I think the good news for the consumer is there is more transparency, there’s more conversations about it just because of the settlement. I think it’s not necessarily black and white in how our contracts are written now, but there’s more transparency and and I think it’s good that we’re having the conversation early and that people are discussing it at the end of the day, though, to answer your your nephew’s question of.
If we’re still getting paid, we still think there’s a value we’re gonna stick around this industry and we think that there’s a lot that we offer our clients and this is a a big scary transaction. Often even if you’ve done it multiple times there is something new on every deal, and so we do think that overall transparency is good, but we also whether I’m in the industry or not, I think working with a professional regardless of what you’re doing is is good advice.
Amy Nakos 29:59
Absolutely. Well, I think we’ve covered what’s going on and how we can help. And so I would say if you have any further questions, you can feel you can feel free to reach out to either of us.
You can find us at amynakos.com and we are happy to answer any questions, and we’re happy to put that agreement in front of you. However, it feels good for you. Before we go out and look at properties and truly show you our beautiful, beautiful area where we live and why we love it here.
Candice De 30:20
Yes. Yeah, that’s a good, good way to end that.
Amy Nakos 30:32
Yeah, yeah, all right. Thanks for joining us. If you stuck around, we appreciate you.
Candice De 30:33
We. Yes. Thank you everyone.