Hello everyone and welcome to another

episode of Selling Greenville your

favorite real estate podcast here in

Greenville, South Carolina, I'm your host

as always Stan Mccune realtor right here in

the Greenville area you can find all of

my contact information in the show notes

if you need to reach out to me for any

of your real estate needs just a

reminder as always please subscribe to

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you guys to do to support the show get

out to as many people as possible and I

would really appreciate you guys doing

it I have received a lot of messages

the past few days about the death of

the 6% commission which is the headlines

all over the news right now ever

since this past week when a

settlement by the national ass

Association Realtors also known as was

announced and so you may or may not have

heard about this but regardless the

audience has told me that this is what

they want to talk about now we do have

the greater Greenville

Association of Realtors Market stats was

just released yesterday we're going to

have to kick that can another week

here because people want to talk about

realtor commissions this is the first

time people have ever wanted to talk

about this but again it's all over

the media you may or may not have heard

about it like I said news Publications

are calling it The Death of the six%

commission which is a wild

interpretation in my opinion of

a settlement that the National Association

of Realtors announced on Friday, March

the 15th I considered releasing this

podcast as a breaking news Early Edition

but after thinking about it I decided

to let it marinate in my mind give me

some time to read other opinions listen

to other opinions on what happened talk

to some other agents kind of see what

what people are thinking what kind of

what sentiment is out

there and and and it's probably a

good thing to be honest that I let this

marinate in my mind for a few days

because I'm recording this on March 19th

I'm going to release this tomorrow the

20th but I have a bunch of notes

written out here and in my initial notes

I called out some people and

probably would have said some things

that would have gotten me in trouble so

I have reduced my notes to only things

that hopefully will not get me in

trouble some of you probably wanted

me to name names on here but I

would like to keep my job and not get

myself in trouble so I calm down I

refined my content and decided to stick

with my normal schedule of releasing

this podcast every Wednesday so here we

are and I feel like in order for us to

really talk about what's happening with

commissions we really need to discuss

some background information to lay the

stage for people who might not listen to

this show each week now several months

ago I talked on the show about the LW

suits surrounding realtor commissions

and there are several of them but the N

lost a big one called CER Bernett this

lawsuit that they lost stated that

Brokers had committed antitrust and the

N had committed antitrust violations

essentially conspiring to keep realtor

commissions at 6% with home sellers

being on the losing end of that implied

Arrangement now I discussed on the show

at the time how ridiculous that was in

my opinion now I'm not a lawyer I

don't work for the Department of Justice

or any of that but to me it was

ridiculous not only our average

commissions already less than 6% right

if you look at averages they're already

hovering closer to 5% but brokerages are

not generally friendly with each other

and simply don't sit around price-fixing

things okay I discussed that on that

show but I wanted to recap that so to me

it was an outrageous argument that the

plaintiffs made in the sister Bernett

case but the n's defense failed and

after just a couple of hours a jury

ruled in favor of the plaintiffs that

commissions had been price fixed and

that sellers should not have to in their

minds subsidize Buyer Agents okay now

this brings us to Friday, March the 15th

when we got a bombshell announcement I

don't know anyone that was prepared for

this announcement including people on

leadership here in Greenville perhaps

people on leadership in the state of

South Carolina and by the way I should

mention I'm I'm going to give some

thoughts and opinions on the show that

are specific to Greenville and specific

to South Carolina if you listening in

from another state what I'm saying may

not apply to you I just want to make

that clear but we got this bombshell

announcement on Friday from the N they

agreed to a settlement that still has to

be approved okay so it has to be

approved by the court so we don't know

exactly if it's going to remain in

it's current form or if it's going to

hit the mid July deadline that they

that they said would be happening

we'll get to that in a second but

but it still has to be approved and

so I'm about to get into the details of

the settlement but I have to cover my

you know what in this podcast so

before I get into the high points of the

settlement I just want to make a few

things very clear anything I say here on

this show both on this episode and all

episodes

on the show if you're listening to the

200 plus episodes I've recorded this is

true for all of them anything I'll say

on here is my opinion and not reflective

of the opinions of the Morgan group

Berkshire Hathaway Home Services Home

Services of America sedan Jord Realtors

or any Realtor Association including the

National Association of Realtors the

South Carolina Association of Realtors

the greater Greenville Association of

Realtors the realtor political action

committee or other groups that I may or

may not be affiliated with all right

that was fun wasn't it I feel like

one of those people reading a Sports

gambling ad then they have to read

like 2,000 disclosures at the end and

tell people to get counseling if

they have an addiction I'm not doing

that but I do kind of feel like

sometimes I have to do that to protect

myself

okay let's get back to the

core of what we're talking about here

there is much that we don't know about

how this is going to play out before I

get into the details nothing I say on

here is Gospel truth okay and there

could be changes to this settlement in

the upcoming months as I already said

additionally as I'm not a lawyer

nothing in this episode or on my show at

all constitutes legal advice if you need

legal counsel call an attorney if you're

an agent consider talking to your broker

if you have questions heck this is a

legal case and there's a good chance I

mess up some of the legal details since

I'm not a lawyer so just know that I'm

not a professional legal analyst and I'm

not giving any legal advice here okay if

we all know that then then this will

go very smoothly and by the way

attorneys are the ones making all the

money from these lawsuits anyway so they

will be more than happy to talk to you

if you need clarification from them

so now that that's all out there here

are the high points of the settlement

I'm just going to read you exactly the

summary from the n what they sent

out so here's a summary of three of the

points that they sent out settlement

payment and will pay $418 million over

approximately 4 years okay so n is going

to pay 418 million over four years a lot

of money people think that

The National Association of Realtors has

tons of money no no no that's a lot of

money for the N they don't have as

much money as people think Point

number two written agreements for MLS

participants acting for buyers while n

has been advocating for the use of

written agreements for years in this

settlement we have agreed to require MLS

participants working with Buyers to

enter into written representation

agreements with their buyers this change

will go into effect in mid-July 2024 now

this part of the settlement is not what

the news media latched on to but I

actually think that this is way more

significant Than People realize and I'll

explain that in a bit but it it could

really change some things in a big

way third point and third and final

Point compensation offers moved off MLS

n has agreed to put in place a new rule

prohibiting offers of compensation on

the multiple listing service offers of

compensation could continue to be an

option consumers can pursue off MLS

through negotiation and consultation

with real estate professionals and

sellers can offer buyer concessions on an

MLs for example concessions for buyer

closing costs this change will go into

effect in mid-July

2024 okay so I'm going to be doing a lot

of talking so excuse me as I clear my

throat there

we're going to start with some Basics

we've gone over this before but for

those who don't know how commissions

have worked or for those who haven't

listened to the show very much we need

to again give a little background

information this will be a repeat for

some but it will be new for others

and so we really need to start here and

by the way I'm just going to be honest

this is kind of an oral history as I

don't have time to chase down all the

exact dates and specific lawsuits and

case law and all of that but this will

get you the big picture information

that you need to know in order to

understand the context of realtor

commissions and how we got to where we

are today all right here we go

residential real estate has evolved

greatly in the past hundred years okay

you guys know that obviously real estate

started in Wall Street obviously has has

ballooned well beyond that but it's

changed a lot and for decades only

sellers were represented, buyers

approached listing brokerages who had

homes for sale that they wanted and

those brokers just helped facilitate the

sale albeit only representing the seller

commercial real estate by the way

operates kind of in a similar way today

not exactly the same but in in a similar

way however a few decades ago in

residential real estate it became

apparent that real estate transactions

were much more complex than they had

been right I've spoken to agents who

have been in the business for 30 40

years and they've told me crazy stories

about how their first contract was a

handshake agreement no inspections

no financing Etc it was just a simpler

time things have gotten much much more

complex contracts that went from

handwritten agreements on the back of

envelopes morphed into lengthy documents

with legales to prevent criminal and

unethical real estate practices sellers

started to be obligated to disclose

material facts and not doing so meant

potential lawsuits inspections became

all important because buyers couldn't

trust that sellers had disclosed

everything properly financing real

estate versus Buy cash became the norm

whereas it wasn't in the past and with

that financing and Appraisal

complications came and a big one of

course listing brokerages only

representing sellers would discriminate

against buyers on the basis of sex race

gender identity etc

etc buyers needed help is where I'm

going with this and as the oral history

goes buyers started hiring agents to

assist them but it didn't make sense for

the sellers to pay the full commission

to 6 to 7% to the listing agent when a

different agent brought the buyer right

that that doesn't make sense even as

I'm talking through it it's like yeah

one agent brought the buyer that agent

should get paid at least half the

commission and so after a period of

figuring out where Buyer Agents would

fit in it became the norm for listing

Brokers to cooperate with buyer Brokers

on a real estate transaction and to

split the commissions between them

and and so in other words the listing

agent has their 6 7% whatever 5%

whatever commission and it became

the norm for them to essentially split

that commission with a buyer agent who

brought the buyer for the for the

listing and so that system has

remained in place for decades until

potentially this year the system that

the seller pays the listing agent and

the listing agent then shares a portion

of their commission with the buyer's

agent if there is one now if there isn't

a buyer's agent then of course the

entire commission just goes to the

listing agent just like the old days

well a person once said that time is a

flat circle and we may be dialing back

the clock almost entirely to the time

when the Earth was still Cooling and

Buyer Agents were a novelty if this

settlement holds listing brokerages will

no longer be allowed to publicly

advertise that they are compensating

Buyer Agents

it doesn't mean that they can't

compensate them it's just that they

can't publicly advertise it sellers on

the other hand will be allowed to

advertise that they are offering a

closing cost credit or something similar

to pay for a buyer agent but for the

time being this appears like it will

only be allowed to be entered into

the private notes of a listing the notes

that only an agent can look at we'll

have to see there's going to be a lot of

of training and a lot of figuring

this out in the upcoming month months

but for the moment it looks like that

that some of that stuff is going to have

to be in the private notes but that

may

change if a seller doesn't offer that

doesn't offer to compensate a buyer

agent one way or another then the only

way for a buyer agent to get paid by

someone other than the buyers themselves

is to negotiate their commission with

the listing brokerage and or seller

directly before an offer is even made or

perhaps at the time an offer is made

otherwise paying the buyer agent will

fall squarely on the shoulders of the

buyers themselves now here's something

really important to understand the

multiple listing service didn't always

exist right we're we're dialing back the

clock even further and as I

understand prior to it existing

different brokerages so for instance

like a local Kell Williams office and a

Local Berkshire Hathaway Home Services

office they would have written

agreements between each other that

stated that they would compensate

compensate each other a certain amount

if they worked together I'm hearing

rumors

that that could be the way compensation

Agreements are in fact moved off MLS

that they just become broker-to-broker

agreements and again as I said

earlier we're basically dialing back the

clock potentially back decades but I

do wonder if if we have a system with

broker to broker agreements does this

run into more antitrust issues I mean

The genesis of all these lawsuits that

we have right now over realtor

commissions is the myth that Brokers

conspired to price fixed commissions so

if brokerages actually agreed on

compensation together I don't know I

don't know how the Department of Justice

would look at that but these are

questions for the attorneys who are

making all the money right now in

this situation and it's way above my pay

grade but I do think we're going to see

the industry find Creative Solutions to

this problem that perhaps aren't obvious

right now it only appears right now that

there might be some some cryptic things

in the in the me what we call the

member remarks which are the hidden

notes in MLS but I suspect that that

won't be the case when it's all said

and done but let's go back to the

settlement for a

second the question has to be asked why

did n do this they had originally said

that they were appealing the original

cister Bernett lawsuit and that the

appeal could take years that was what

we've been told for several months now

now what I understand and you can

look this up and see this true two

of the largest brokerages in the US have

already settled from this lawsuit and

what I understand is that those

settlements in particular left the n as

a lame duck in terms of appealing this

case n's legal council determined that

an appeal to the case would simply

bleed more money to attorneys without

likely helping the Realtors the N is

supposed to help and so a settlement was

really the only the only path forward

the N also stated that appealing would

have only in the best case addressed

this one lawsuit and there are a bunch

of CopyCat la lawsuits that the appeal

wouldn't have impacted so basically once

since CER Bernett was lost settlement

was really the only path forward so here

we are if you're if you're wondering why

they settled that is my understanding

additionally, I just want to address I've

heard a ton of Agents talking about

leaving the n in light of this

development and if you're an agent

listening to this I just want to ask you

where are you going to go I imagine a

company like Co-star perhaps which

operates in the commercial real

estate world will likely see an

opportunity here to undermine n and the

multiple listing services throughout the

country they and others will likely

pounce to try to create competition for

the n and competition is usually a good

thing but with the Sitzer Burnett case

precedent has been set and the

Department of Justice is 100% behind

this they've been saying for years that

they have real estate Commissions in

their crosshairs like I said for

years now and so I really

don't see a path forward where this is

going to be changed if people leave the

N the president has been set this was

about commissions, this wasn't about n

and so if you're a real estate

professional making commissions in

the residential real estate world this I

believe is going to impact you

regardless of who you're affiliated with

now again that's not legal advice that's

just what seems to make sense to me now

I also can't emphasize enough that the

jury for Sitzer Burnett only deliberated

for a few hours, it wasn't even a hard

decision in their mind and no surprise

there because they essentially blocked

anyone with real estate connections from

serving on the jury which I understand

to a certain extent but man that

that's tough a huge portion of the

country millions of people are realtors

so to completely cut them and any

connections to them out of the jury

how were we going to get a fair

lawsuit how are we going to get a fair

trial with that happening I just don't

think it was possible so guess what

happens in an environment where housing

affordability is at an all-time low and

people are looking for someone to blame

for housing affordability well someone

gets blamed and the easy target was the

National Association of Realtors and big

real estate brokerages who most people

think make a lot more money than they do

so like it or not it appears from my

perspective that no case the N made was

really going to work with this jury and

even if you're unhappy with the N over

what happened and I'm certainly not

happy that they lost the case but

leaving the N doesn't fix the problem

because it was really as I already said

commissions that were in the crosshair of

the prosecutors and the DOJ more so than

the defendants in the

lawsuit but there's a lot more to unpack

here so let me start by saying the

settlement isn't inherently good or bad

okay there are I could see outcomes

where it could be good for the industry

in the long run I could also see

outcomes where it isn't in the short

term however I do think that there are

some clear winners and losers at least

based on the information information

that we have today for experienced

agents for instance I definitely think

that this could be a good thing likely a

large portion of inexperienced agents

who can't articulate their value will be

dropping out in the next few years as a

direct result of this and the

experienced agents like cream will rise

to the top as a result and yes I do

consider myself an experienced agent and

I do think that I serve to benefit from

this if I handle it right with my

clients it also could be a win for

experienced home Buy buyers and sellers

like investors Mega corporations Etc in

fact immediately after the settlement

was announced several Mega corporations

in real estate chimed in that they

were very excited about this settlement

anyone surprised that the Department of

Justice is behind something that clearly

benefits corporations and could

potentially hurt small businesses

self-employed people and

entrepreneurs I'm not surprised if

you've been following the Department

of Justice at all you know that it's not

exactly without its issues in

that branch of government or in that

wing of government remember the

brokerages who were sued only make as

much money as their agents bring them

this is what I'm alluding to when I say

that they don't make as much money as

people think they don't make any money

except for the money that their agents

bring to them right and most of those

agents across the country are

self-employed realtor so they're not

even employees of these companies and

so brokerages are just companies that

have house predominantly self-employed

Realtors and so again at the

end of the day this is even though the

lawsuit was about brokerages it's agents

like myself that make up the brokerages

and agents like myself that pay those

brokerages and so the idea that these

big bad brokerages needed to be you know

needed to be penalized is in my opinion

ridiculous but I digress this is

obviously going to be bad for some

people I just mentioned some that it

might be good for it it is obviously

going to be bad for some people so let's

start with the obvious the N the

National Association National

Association of Realtors sorry I had a

Joe Biden moment there indirectly

oversees state and local realtor

associations throughout the country okay

in Greenville we have the greater

Greenville Association which is a part

of the South Carolina Association which

is a part of the National Association of

Realtors and these state and local

associations

like the ones I just mentioned they

answer to

n and those local associations despite

being predominantly a nonprofit trade

associations usually own local multiple

listing services which are for-profit

businesses okay not going to get too In

The Weeds on that just know that's the

way it's structured generally speaking

there are some exceptions and that is

an odd structure I will admit it it's an

odd structure but it's the one we've had

for decades now this is not a new

structure we've had it for decades

and long story short where I'm going

with this is that the N membership is

likely to suffer as a result of this and

with that local associations and local

MLS's now can we be confident that the n

and these state and local associations

will survive I think that the Nar and

state associations

will but I suspect that a lot of

small associations could end up folding

entirely or just folding into some of

the larger associations so for instance

in the State we have the Greater

Greenville Association we have the Spartanburg

Association we have Western

Upstate we have Greenwood and we have

others now I don't know how financially

solvent all of these are besides

Greenville which I believe Greenville

will be fine but might some of these

smaller associations merge now or

just shut down altogether time will tell

I don't know like I said I don't know

how financially solvent they are if but

if they see huge membership drops or are

unable to reach settlements themselves

because the N had to leave the door open

for additional settlements then they may

have no choice and a recent study came

out showing that 49% of Realtors have

one or zero closings per year you have

to think that a huge portion of those

agents will be dropping out in the next

few years and that will have a viral

effect on various local

associations also obvious is that this

is bad for a lot of buyers

particularly inexperienced buyers who

really rely on their agents and maybe

can't afford to pay one when this goes

into place, buyers are going to have to

assume that they will be paying their

buyer agent Commission in full at

closing what does that mean well there's

that means it means a lot and not just

for buyers okay well we'll start with

Buyers probably a lot of buyers will

choose to wing it without an agent I

don't think the majority will but I

suspect more so than what we've seen in

the past they they'll decide to wing it

without an agent you know I don't want

to have to commit to paying one don't

want to have to commit to working with

one and this will again dial back the

clock to what it was like decades ago

this is going to be a massive issue for

buyers who don't know what they're doing

in a real estate transaction and sellers

will also have to really think twice

about whether they truly want to offer

0% 0% commission to Buyer Agents

basically not offering any any

commission to Buyer Agents trust me when

I say this a good buyer agent provides a

ton of value

and really helps to Shield both the

listing agent and the seller from a lot

of hassle, they would otherwise have to

deal with if they were negotiating

directly with the buyer agents

don't just benefit their buyer clients

they benefit the entire transaction

including the sellers don't forget as

well that fair housing laws are in place

to protect predominantly buyers when a

listing agent and a seller are dealing

with a buyer directly they are much more

likely to discriminate against that

buyer and I can tell you I have had

multiple times in my career when sellers

have asked me to commit usually

innocently but they've asked me to

commit a fair housing violation wanting

to know you know marital status

you know different things about

different things about the people

potentially buying their house you know

a lot of a lot of sellers have

emotional investment into a house that

they're selling and they want to know

that the people buying their homes are

going to treat it well and you know

they might want those buyers to have a

certain religious

affiliation you know different things

like that those are fair housing

violations and guess what if the buyer

is going directly to the seller or

listing agent it is much more likely for

that to

happen if I'm representing a buyer or

seller I don't let it happen if there's

a potential fair housing violation that

I'm being asked to participate in I

simply say I'm sorry that that's not a

question that I can answer if you as

a if you want to do some research and

look into this yourself feel free to but

I have agreed to not give that

type of commentary in a real estate

transaction but this is likely to

start increasing tremendously if you

have a lot more buyers that are

unrepresented but let's go back to the

sellers for a minute I don't think we

can overstate how bad this could turn

out if a bunch of buyers start being

unrepresented sellers have benefited

for decades now with Buyer Agents

bringing their experience to bear on

their buyer clients now I hear

complaints all the time about

inexperienced Buyer Agents making a

transaction difficult imagine how much

worse that would be if an unrepresented

buyer who doesn't know what they're

doing freaks out at inspection reports

gets confused by contract language Etc

if there's a ton more of these types of

buyers in the market without an agent

guiding them the Fallout would really be

tremendous now some of you know

that I flip houses on the side not a not

a big thing that I do in comparison to

my business as a realtor but it's

something I do on the side and so I

usually have several listings per year

where I am the listing agent and the

seller, now I still intend even after

this goes into place in July or whenever

it goes into place I still intend to

compensate Buyer Agents because I

genuinely see the value and I don't want

to limit myself to only buyers who can

afford their agents so I'm not just

saying that to try to prop up the

real estate industry you think this

little podcast is going to prop up the

real estate industry anyway no I

genuinely believe it to the point where

I directly myself compensate Buyer

Agents already tens of thousands of

dollars per year when they bring a buyer

for my flip properties so I'm speaking

from conviction not just saying what I

what I want to say because my career

could be impacted by these decisions

additionally without question sellers

are going to ask listing agents to price

their homes the same way regardless of

whether they are offering a buyer agent

commission or not and that is not how

this is going to work if you're looking

to sell your home but don't want to pay

a buyer agent commission you should

assume that you won't get the same price

for your home as you would if you were

offering to pay a buyer agent why well

you're not going to be availing yourself

of all the buyers who can't afford to

pay their agent which is a lot of buyers

right now and or you're going to get

people making offers but still asking

for you to pay their agent's commission

and if you just won't do that under any

circumstances then we'll have to do a

much closer look at the comps prior to

setting your listing price to see what

Buyer Agents were paid in the comps and

how that may have impacted the sale its

not as simple as just okay I can now

save commissions and still get full

price full price for my house those

commissions are a part of the full price

that you're seeing when you're looking

at comps so you have to think

about things a little bit differently

than just having that scarcity mindset

of trying to Chisel out chisel away

as many commissions as possible but now

let's go back to buyers for a moment

specifically, vets who are trying to

purchase a home with a VA loan the VA

loan program is really a great

program I'm VA certified I love the

program but it doesn't allow for buyers

to pay for their buyer agent commissions

so vets literally can't agree to

compensate a buyer agent and so

depending on how some of these things

resolve themselves a buyer agent taking

on a client who is getting a VA loan may

find themselves in a spot where they

have to assume they are working for that

buyer client for free again that is

not good for VA for VA buyers and not

good for Buyer Agents who represent a

lot of a lot of vets now we do have a

compensation agreement in the state of

South Carolina that allows for sellers

to agree to compensate a buyer agent

directly I.E without having to be in

the form of a closing cost concession

which would be illegal for the VA

I believe that this compensation

agreement probably would be a suitable

worker I'm not I'm not a broker and I'm

not an attorney but just based on

what I know about the VA I think that

that compensation agreement would work

for the VA because it would be a

separate agreement tied to a VA buyer

contract but not involving the VA buyer

having to compensate their agent but

this is still a very clunky system

having to do the compensation agreement

and at Le Le agents representing VA

buyers in a really tricky spot not to

mention the VA buyers themselves who

ultimately get hurt the most by all of

this so time will tell whether the VA

updates their guidelines and or whether

the system a system emerges that

allows for work around so that VA's

purchasers don't end up kind of kind of

on an island really taking the brunt

of the

settlement needless to say I told you

there was I was going to be doing a lot

of talking I've got a lot more content

here to to come we are not done yet

needless to say we can very easily

see a system coming about organically

where buyers have two implied tiers of

agents to choose from perhaps

experienced agents who set the prices

that their buyers have to pay them if a

seller or listing brokerage won't and

perhaps a second tier of inexperienced

agents who are willing to take anything

that they can get in terms of

commissions we already have something

similar with listings where there are

some flat Fe listing services that only

list a home on MLS and then the seller

has to do the rest of the work well

guess what happens with those listings

some do them well I'm not I'm not saying

that every flat fee service does a poor

job but the reality is many of them take

crooked photos do bad listing

descriptions Etc I mean these are agents

listing agents that have to do

tremendous volume right they're only

getting a few hundred per listing maybe

maybe $1,000 maybe 1,500 and so

you can't make a whole lot of money just

getting a thousand bucks a pop right

and so it can be difficult for them to

allocate enough time to each listing

that they have although obviously

again there are good ones out there I'm

not saying that they're all bad good

ones find away but often times if

you're if you're looking online you're

seeing a listing that just has awful

photos no listing description etc etc I

can almost guarantee you it is a flat

fee list listing service that second

tier of listings is something similar

about to happen with low-cost Buyer

Agents very possible are we are we

moving towards a structure where some

Buyer Agents don't offer a One-Stop shop

as I do but are simply opening doors for

you know maybe $100 a pop every listing

or every showing you want to do

have to pay 100 bucks every offer

that that I write you have to pay 500

bucks Etc again I don't know it's too

early to say but these outcomes are very

much in the cards and not all of these

are bad things some people would would

potentially really benefit from just

having an agent that isn't

A one-stop shop that they're just

kind of paying all cart and having

multiple tiers of service could actually

be a benefit to the industry as a whole

as long as it doesn't result in a lot

more inexperienced agents messing up

transactions because they don't have the

time to put into it since they're only

making a few hundred from it and this

brings back to the part of this

settlement that to me is maybe the most

interesting part okay the settlement

states that a buyer receiving a tour

from a realtor must have a written

agreement in place specifying the

compensation the buyer may have to pay

the buyer agent as a result of working

with them this may come as a surprise to

some of you okay but many people asking

for realtors to show them homes do so

before they have signed a realtor

representation agreement if I have a

listing for instance I'll give get calls

from people without agents wanting me to

give them a tour of the home in fact I

just got one of those today just a

couple of hours before I

started recording this someone called me

about one of my listings they want to go

tour the home tomorrow we set that up

and I'm going to be doing that well it

appears starting in July that that will

no longer be allowed unless they sign an

actual agreement for me to represent

them as their buyer agent and that

they're agreeing to compensate me for

that service now that doesn't mean it

has to be a marriage between the two

parties there are creative ways to

get around this right you could do for

instance a one-day representation

agreement but it appears that the days

are coming to an end where people can

have Realtors show them home without

without rep without having any

agreement with them in writing those

days are coming to an end it's going to

be that if you're looking at homes with

an agent it is your agent it is not

simply a person who you don't have a

commitment to and that's going to be

interesting it's going to be really fun

to police and of course the lawsuits

that follow from this settlement and

and from all of these different you know

this new Wild West that we're entering

into the lawsuits are going to feed

attorney families for decades to come I

can promise you that think about this

okay I've thought through a lot of

different scenarios what happens if I

meet with a potential buyer client and

tell them that my fee as a buyer agent

is 3% and they say they can't afford

that and I tell them that I can't help

them because that's what I charge to

everyone what if that person happens to

also, be part of a protected class of

people that I'm not allowed to

discriminate against and that I don't

want to discriminate against okay but

did I just inadvertently discriminate

against them by telling them I can't

work for them because they can't afford

me even though it had nothing to do with

their protected status well you say

well maybe brokerages could just step in

and say that all of their agents must

charge a 3% commission to their buyer

clients well okay that would certainly

simplify some things but wouldn't that

take us back to the whole price-fixing

antitrust issue I don't know honestly I

think the Department of Justice knows

that this is going to open up a whole

can of legal worms and they want that

they want the chaos because like I said

it's going to feed families for years in

the legal space and of course there will

be buyers who lie and say that

they can afford to pay their agent and

then when it comes to closing they're

going to say hey I don't have the

money to pay you I'm sorry this is I

need to get this house I we found a

bunch of repairs that need to be done I

I need to do those repairs out of

this money that I was going to pay you

out of out of you know for your

commission I'm sorry I just can't pay

you anymore and but they're going to

expect for the agent to not hold up the

the real estate transaction right

they're going to put you on a guilt trip

they're going to say you know hey I'm

a first-time home buyer I can't help it

I need this home me we're a young

family we have to buy this

home it it's going to be really

awkward when these types of things

happen and I'm wondering if we're

entering into an era where a buyer

will have to provide proof of funds just

to work with a buyer agent it it's a

worthwhile consideration but again that

might even be an ethical violation on

some level we don't know yet there's

going to be a lot of training coming

down from brokerages from the National

Association of Realtors to figure all

these things out but needless to say

the second half of this year is going to

be a bit of the

wild west now while we're talking about

the ethical piece of this puzzle it has

been mentioned how eliminating

Cooperative compensation from the MLS

has great potential to increase steering

which is an IL illegal practice of

Realtors directing buyer clients away

from certain listings that might fit the

buyer criteria but that the buyer's

agent doesn't want for them to buy for

one reason or another a few years ago

MLS has took away realtor's ability to

filter homes based on commissions

being offered in order to

specifically, prevent steering well guess

what's about to happen a lot more often

you probably guessed it two homes are

listed in the same area very similar

homes one is offering the seller to pay

closing costs to cover buyer agent

commissions and the other doesn't and

the realtor is working for a and the

buyer agent that is looking at these

two homes potentially on behalf of their

buyer client is working for a cash strap

buyer with a buyer agency agreement that

states that the buyer doesn't have to

pay the buyer agent anything the buyer

agent is essentially working for free

unless the seller pays them something

the buyer agent is obviously going to be

tempted to steer the client towards a

home where they know they will be

getting paid versus a home where they

won't be getting paid usually cash strap

buyers by the way are the ones that

require the most work often looking at

dozens of homes and putting in multiple

offers before they finally get one under

contract imagine doing 40 hours worth of

work for a client and I frequently

do 40-plus hours of work for clients

only to not get paid for it that's the

reality that agents could be facing with

some of their clients in the future

another possibility I could totally see

happening is that businesses in the real

estate world who aren't affiliated with

the National Association of Realtors

could see an opportunity to capture new

business giving guidance to

unrepresented buyers for instance

lenders who right now are the slowest

they've been in a decade and a half

and desperately need more closings could

see a play here if someone comes to them

before they before going to a realtor

and they don't have a lot of money

and are likely unable to afford to pay

for a buyer agent will the lender

discourage them from being represented

and try to assist them

indirectly perhaps lenders will start

to advertise that they even offer some

sort of agent Services perhaps they will

even take agents onto their payroll who

are on salary and don't get a commission

at all or maybe a very small commission

but have to help buyers working with

that lender get to a closing what about

closing attorneys which South Carolina

is an attorney State we have closing

attorneys they're in a really logical

spot to potentially start offering

transaction Services themselves besides

merely the title services they currently

offer these scenarios I admit there

there would be some legal hurdles here

but don't be surprised if some of these

things happen in one form or another now

now the one Saving Grace we have here in

all of this is that South Carolina has

had for years now a buyer agency

agreement that specifies the buyer agent

will try to get the listing agent SL

seller to pay for the buyer's commission

but if they don't if the listing

brokerage or the seller is not paying

the buyer commission outlined in the

buyer agency agreement then it is the

buyer

responsibility now this document this

the buyer agency agreement for years was

just a formality but in more recent

years it's really become more important

as commissions have been eroding away

particularly with certain budget

developers who will not be named but

who feel they can throw their weight

around and sell homes with or without a

buyer agent so they're basically just

throwing a few hundred bucks at a

buyer agent and just telling them you

know that's all you're going to make

believe it or not two-thirds of the

country up to this point haven't been

using a contract between buyers and

their agents and that is insane to me

and I'm glad South Carolina was ahead of

the curve we can thank the South

Carolina Association of Realtors for

doing that needless to say the buyer

agency contract is going to be more

important than ever and I don't think

that there's a big risk of steering for

buyers who have agreed upfront to

compensate their agents but as I said

before the agents working for free or at

a dramatically reduced price are going

to be very tempted to steer that is I'm

just being honest and in the end the

reality is that agents are going

to have to talk about their conversation

with their clients more than ever and

that's probably not going to be a

comfortable conversation for many I mean

it's not a comfortable conversation for

me I'll be completely honest I hate that

part but it has to happen already

there's a perception that agents tend to

push for higher prices in order to get

higher commissions let me address that

for a second I can't speak for all

agents but I know for myself when I'm

getting a commission for whatever amount

whether it's 2% 3% 4% and yes I've

gotten 4% commissions before

that is that that sorry excuse me that

commission doesn't all go to me it goes

to my company and then split of that

then goes to

me I'm not really thinking about oh wow

if I could just get this client to pay

5,000 more then I could get another

$150 before my company split that's

genuinely not on my radar because I

always run my business that I'll make

more money and I'll make the most

amount of money by simply Mak my clients

happy I'm not Fring $150 and to be

honest I've never spoken to an agent

including the bad ones where I got the

impression they were trying to get a

client up on price just to get a higher

commission listen we're just trying to

get people under contract and get those

contracts to closing we're not trying to

get someone up 5,000$ 10,000 $20,000

just so that we can make a very very

small cut of that amount that's not how

this works for a huge portion of the

business maybe there are some that do

that but like I said I don't know I

personally have not communicated with

any agents ever at any point in my life

where I got the impression they were

trying to do that and for listings

Realtors typically want to list a

home as cheaply as possible in order to

get under contract quickly which perhaps

this his own ethical dilemma but

but needless to say, Realtors aren't

trying to list homes for way more than

they're worth because they're not going

to sell and so generally speaking

I don't think that that's a that

specific concern is a major concern

but at the end of the day Realtors

already don't have a great Public Image

and the more we talk about our

commissions and our compensation the

worse our image will be and

unfortunately, we're going to have to

talk about it a lot more than ever so to

put a bow on this all in all a lot is

changing but I don't think the headlines

that came out of this that suddenly

sellers will be saving a ton of money on

commissions without there being

potential NE negative repercussions is

accurate

just like when a house flipper uses

cheap materials to save money they

always always end up selling a home for

less than they could have if they had

spent more money similarly I think it

will be with sellers who take that

scarcity mindset and said we try to save

money on commissions you get what you

pay for buyers and sellers in real

estate are about to learn that that's

true with real estate agents just like

it is with everything else that's all I

have to say for this I'm sure I'll get

some questions so my contact information

is in the show notes if you guys have

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