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It’s like we’re in a time warp ever since Sitzer | The Barnett decision was handed down on October 31, 2023, and we have spent much of this year learning new ways of doing business, including new formats, procedures, and protocols.
The period leading up to the August 17 transition was filled with much uncertainty about what was to come. Will consumers be willing to sign a buyer agency agreement? Will they compensate us if the seller doesn’t pay, or at least pay the difference? What happens if you ultimately can’t afford to pay or decide not to pay?
The final approval date of November 26, 2024 seemed a long way off, but the long-awaited day has finally arrived. The case went largely as planned, but the real estate industry can’t breathe a sigh of relief as the appeal is still underway.
There were many opponents. Not everyone could attend in person, and there were limits on when they could speak.
I listened to the final settlement hearing, and between the beeps of phones from people joining the calls and listeners forgetting to mute their cell phones, one of the lead attorneys representing the National Bar Association , Ethan Glass’s words stuck with me. Real estate agents say, “Being a real estate agent is already a responsibility.” oh.
You might think we’re performing surgeries that save people’s lives. While our work – guiding people through one of the biggest transactions of their lifetimes – is extremely important, our focus remains on helping people from all walks of life achieve the American Dream. Who would have imagined that it would be a profession that has given so much to people? Is home ownership a risky business?
And that risk is entirely with the real estate professional, who typically does not receive compensation for their time and effort or reimbursement for the costs they spend on their clients until the transaction is completed. The closing fee is often not enough to cover the time and expenses spent on the deal, or the incubation time it took to get there.
4x settlement results
I am in favor of establishing some conditions for working with buyers and making sure they understand that our services are not free. That’s a positive outcome of the settlement, but what about the millions of dollars paid to lawyers?
There are four outcomes of this settlement.
Lawyers are running to the bank. The Department of Justice (DOJ) is leaving the door open to go after our industry. Litigation will continue in various shapes and forms (currently, an appeal of the settlement has been filed). As an industry, we are questioning our own practices, including the “tripartite” agreements that tie mandatory NAR membership requirements to state and local governments and rules around clear cooperation policies.
In a way, this felt like stepping out of a cult where people just went along with the masses and didn’t question what they were told they had to do. Now, our industry is stepping outside of itself and looking from the outside in. Everything is being questioned, scrutinized, and reevaluated.
This settlement leaves us with more questions than answers and no clear path forward. It is a reminder of the many unresolved issues and the incredible frustration and resentment of many people towards organizations to which they (in most cases) have no option of belonging. Even one of the lawyers who appeared to oppose the hearing made a comment referring to NAR’s recently reported lavish spending.
This settlement, practice change, and the Department of Justice’s challenge to it are a challenge, even to the people with the best legal knowledge and the real estate brokers and real estate brokers who paid amazing amounts of money to settle these claims. , the mess proved too much to contain. There is no surefire clear path other than to follow the practice change until the next lawsuit tells you not to. Again, you are the victim.
Can this be done easily?
Perhaps a simpler solution would be to include disclosures that explain how buyer representatives and seller representatives are compensated, as well as disclosures that explain what buyer representatives are and what the various options are. It would have been necessary to provide the buyer with the same. The buyer signs the contract once an offer is made.
As an industry, we’ve been kept in the dark about a lot of things. Over the summer, NAR President Kevin Sears informed us that our industry association had several discussions with the Department of Justice and felt the conversations were productive. I don’t know exactly what was discussed.
Plaintiffs’ attorney Michael Ketchmark said he also consulted with the Department of Justice, as well as the Consumer Federation of America. Certainly, the concept of a buyer agreement would have to have been come up, and the Department of Justice would probably have given feedback.
Before a seller signs a listing agreement to engage an agent, sellers meet with an agent to discuss the sales process, provide market information and insight, discuss marketing strategies and pricing recommendations, and access resources. You don’t have to sign anything just to give it away. Please help them prepare.
Buyers want to view properties with an agent and engage with them to make a purchase, whether virtual or in-person (even if they have attended an open house and viewed the property). We need to do that again. The difference is that buyers now have to sign a contract before viewing a home. If there is zero trust built up with an agent before we start working, we will not be able to build a relationship through the required documentation.
We can be as well-prepared as possible in our buyer presentations, but buyers can risk costly financial penalties for working with someone when they don’t know how everything will go. They can be reluctant to commit to anything for fear of paying more.
Of course there are tour contracts and limited agency contracts available where there is no compensation, but it is a risk for us and this should not be a game we have to play. This settlement has pushed us into a box with no exit.
We are an unpredictable business as every transaction and buyer is different. A requirement to put a round peg in a square hole with coverage that cannot be changed except to reduce charges does not work well in an unsettled industry where many factors come into play.
If your contract with a buyer has too high a fee, it can scare off the buyer. If you start too low to satisfy the buyer, the time spent could exceed your paycheck, potentially cheating you out of your hard-earned rewards. So instead of charging a flat fee, lawyers bill for their time, and their fees always go up, never down.
Laws and legal rulings often have unintended consequences, but the people involved in these decisions are usually not involved in the industry they affect. Building a policy is much easier than being involved in its implementation and execution.
unintended consequences
To justify the outcome of these lawsuits, there appears to be a false sense of hope or narrative that will significantly reduce costs for buyers and sellers. I don’t know how. Consumers understand that our services are not free.
Home equity values are not eroding (and if they were, we would be faced with the same serious problems of 2007 and 2008 again). There’s no question that significant price increases due to the pandemic and rising interest rates have made buying and financing a home much more expensive. Even though buyers don’t like it, they don’t want to see their home value plummet every time they choose to buy.
No one wants to lose money on one of their largest trades. Mortgages have closing costs, and buyers must secure and pay one year’s worth of homeowner’s insurance before closing, in addition to prepaid taxes and insurance premiums. Last time I checked, lenders aren’t reducing or eliminating closing costs for buyers, and their services aren’t free either.
Many states, cities, and counties impose fees when buying and selling real estate. For example, Florida imposes two taxes on mortgages called a note stamp and an intangible tax, along with a deed stamp on the sale price of a home. This adds thousands of dollars to a consumer’s transaction.
Many cities have POS requirements, require inspection, and impose transfer taxes. These must be collected upon termination or termination will not occur. Who pays may be negotiable, but this is money coming out of the consumer’s pocket.
Title and escrow companies perform services related to the transaction, such as title searches, testing, insurance, and closing fees. Fees are paid per transaction, but I don’t think they will eliminate them or cut them by more than half. So where are the savings?
Although we are only a few months into the new normal, preliminary reports indicate that compensation has not decreased. I’ve said it before and I’ll say it again. If the lawyers involved in this case really wanted to reduce costs for consumers, a significant portion of the settlement should have been set aside for a housing trust fund that consumers could apply for. To receive funds to assist in the purchase or sale of a primary residence.
How all this will play out over the next two or five years is anyone’s guess. In the future, countless lawsuits and the involvement of the Justice Department could change everything again. Our industry is used to constant change and we can never be too comfortable.
Cara Ameer is a licensed Coastal Agent with Coldwell Banker in California and Florida. You can follow her on Facebook or X (previously known as ). Twitter.
