#424- Mail-Right Show: NAR Lawsuit Settlement And How it’s Going To Affect All Real Estate Agents

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NAR Lawsuit Settlement And How it’s Going To Affect All Real Estate Agents

Are you curious how the NAR lawsuit settlement will influence your role as a real estate agent? Our comprehensive podcast discusses all aspects of this game-changing development and its implications for professionals like you. Arm yourself with knowledge, stay informed, and be prepared for what’s to come in real estate.

Episode Full Show Notes

[00:00:06.350] – Robert Newman

Welcome back, ladies and gentlemen. It’s episode number 424. And John just gasped in incredibleness when I just said this will be one of the most important shows that we do this year. And I don’t know that he agreed. But today’s show is going to be about the NARS settlement and specifically how you can insulate your business and giving you some ideas early on to protect yourself from some of the changes that won’t be coming until July or August of this year at the very earliest, but they are coming. Before we dive into the meat and potatoes of this, because we’re just going to rip on it, we’re going to go back and forth. I’m going to give my thoughts. John is going to give his thoughts. We’re going to talk about one of his favorite in the entire world as one of the leaders in having a voice on this, the CEO of Redfin, who I’ve seen four different times and four different media channels so far talking about this exact subject. Before we get into this, my English pugilistic friend, why don’t you go and introduce yourself to the audience?

[00:01:20.660] – Jonathan Denwood

I don’t know what that word means.

[00:01:23.130] – Robert Newman

That’s in not your days as a boxer.

[00:01:26.050] – Jonathan Denwood

All right. Thank you so much, Rob. I’m the joint founder of Mel-right. Com. We’re a marketing platform, CRM, landing page, email and text messaging drip campaigns, and a couple of other things in one great affordable package. Back over to you, Robert.

[00:01:49.370] – Robert Newman

Beautiful. My name is Robert Newman. I’m the founder of InboundREM, the 16-year veteran of the real estate industry, a real estate consultant, a real estate SEO expert, a founder of a couple of tech companies, but the one that I get on this show and talk about is Inbound Real Estate Marketing, otherwise known as InboundREM. Com. Go ahead and check us out. We have lots of great information. If you like this show, you’ll be able to get a little bit of education for free by me on all sorts of great subjects. All right. Without any further ado, let’s dive right into it. Over the span of the weekend, it was announced that NAR, after 10 years of had basically settled a lawsuit with the federal government that says effectively, finally, that consumers will be able to actually negotiate their commissions with both the buyer’s agent and the seller’s agent. That’s effectively what the lawsuit said. It’s not going to affect whether or not a buyer’s agent and seller’s agent get commission. That’s not what’s at stake. What’s at stake is that for the very first time ever, a buyer’s agent will have to negotiate their commission rate with their buyer as opposed to having that commission come out of the seller site, which is automatic and connected into the MLSs, which was what the lawsuit was all about.

[00:03:18.760] – Robert Newman

Before I dive into it, because I asked John to interrupt our normal content flow so that we can discuss this in as real time as possible. This is the very next show that John and I did together after the lawsuit settlement was announced over the span of the weekend. So, John, what are you… And of course, John graciously agreed. And then redid, tossed out the old show. Well, it didn’t toss it out, but saved the old show and then jumped into this one. But you’re looking incredulous. So let’s start off with something that surprises me. You do not think that this is going to be one of the important conversations we have all year? Let’s start there.

[00:04:04.140] – Jonathan Denwood

I wouldn’t quite say that. No, I think it’s an important subject. How it pans out, I think anybody… I suppose because I’ve been living in America for almost 18 years now, it’s gone so quick, Rob. It’s unbelievable. And in the UK, seller’s agents are slightly under 2 %. The industry is still quite healthy in the UK. It’s a nightmare-ish system. What the UK system doesn’t do is the legal side, the contract, and you have to hire a lawyer to do that. And that is extremely expensive. So you combine the 2% on average in the UK with the legal fees. And the nightmarish, you don’t actually know if you bought a property until the morning of the transfer of the contract. Anything could happen at the last minute and does. It’s a nightmarish system, which has been very difficult to change because lawyers, it’s one of the main financial profit centers for the legal profession in the UK. And so most of the politicians are ex-lawyers. So it’s been totally impossible to change it. So I did some basic math. So let’s say the three %, being a buyer’s agent is a painful experience anyway. So there’s a lot of cost in showing people around and being there 24/7 for them and showing loads of properties.

[00:06:16.770] – Jonathan Denwood

How that’s going to be paid for is up for debate. When it comes to the sellers, so let’s say a seller agent, they get three %. If they sell one house per month, and if you’re in your third year, you should be doing more than one house per month, in my opinion. If you’re looking at your first two years and you can get up to more than one house per month, I think that’s a great position to aim for. But let’s say you’re doing one house per week, per month, the average mean price in the US, the average price And obviously this varies enormously by city, region, area, is 400,000. 3% of 400,000 is around 12,000. That’s 180,000 gross per year, roughly. Expenses, take that out. Marketing expenses, having a VA, having somebody help you. Let’s say if you’re doing 180, your net might be 100,000, 110, 120,000. I think what it will affect, in my opinion, is the part-time. There’s 1 million licensed real estate agents in the US. That is unsustainable. That cannot keep-One million, two million, sir. I I heard 1 million, but I take you if it’s 2 million, it’s bonkers, right?

[00:08:08.360] – Jonathan Denwood

At 1 million, it’s bonkers, in my opinion. This situation has benefited the National franchise brokerages and also the associations. Basically, there they are. There’s a lot of agents out there that are selling three, four houses a year. They have no money to invest. They have no money to really build a real business. They totally rely on the brokerages, and the brokerages like it because they’re highly profitable, those transactions. I don’t think somebody that’s not selling one house per month can be an effective professional and really understanding the market and really represent their clients in a semi-professional way. Can you see where I’m going from? Where I’m going at is from-I can.

[00:09:09.210] – Robert Newman

So in 2024, the US had 1,554,064 604 realtors. That was members of NAR. Okay, there’s a 2 million licensed real estate agents, so a total of 400,000 realtors aren’t even members of NAR. The number that you probably heard was 1 million realtors were going to be members of NAR. The numbers that I’m hearing thrown around is that this lawsuit will probably shake out and have about 25% to 50% of the people that have licenses surrender their licenses, which is why it’s such a big subject and why it is a subject of the show. For a very long time, people like me and other people in the industry, and I say this with the greatest amount of respect, it is fairly easy to get a real estate license, which means that a lot of people have gotten real estate licenses, gotten into the industry with a very low experiential background, not only for real estate, but oftentimes people that have no background in business or anything else at all, full stop, get licenses, people who’ve been raising kids and things like this. That’s fine. But considering the fact I think that this is one of the largest transactions, one of the most important decisions that the people that are making it will ever make in their entire lifetime.

[00:10:37.110] – Robert Newman

My opinion has always been the bar should be higher to get into the profession, to stay in the profession. The idea that you can come into this with no experience and do a transaction with your family because they love you, who knows what that could end up meaning, an interest rate that’s too high on a loan, contract details. There’s so many different things, inspections that may not be caught or done the right way, somebody buying a property that ends up not being healthy for them, somebody buys a property that puts them into bankruptcy. All of these things have happened and can happen and might happen again. Meaning that amateurs or people, well, maybe amateurs is not the right word, but people with low experience thresholds, this is at a minimum, I would think, because John and I have talked about this before, I’ve said, John, I think we may have said this off camera, and John may or may not have agreed with me, I don’t remember anymore, but I did say, I think the apprentice model would work well in real estate. Basically, you have to be an assistant to somebody that knows what they’re doing for 3-5 years before you can then go out and do transactions yourself.

[00:11:50.450] – Robert Newman

In the hyper luxury markets, strangely enough, it still works that way. Oftentimes, very successful agents with big business backgrounds get into premium marketplaces like Beverly Hills, and they basically mentor under somebody that already has a very big name for themselves in the luxury market, and they do so for years before they finally either have a book of business or enough referrals or whatever the case is to compete for a single transaction, a single property in Beverly Hills, probably has 5 or 10 qualified choices at a minimum that you could use to sell or buy that property. The commission that we’re talking about, even at 2% to 3%, it’s huge. The latter half of the show, John, I’m going to spend explaining how you can protect your business. For the next three to four minutes, though, what I’m going to explain is how did we get here, in my opinion. Well, I looked up some statistics. This is the first show of the year and maybe the only show of the year where I walked in probably more prepared than John. One of the things that I researched was because I’ve been getting a lot of numbers that said over and over again, Things have changed for people buying homes.

[00:13:10.840] – Robert Newman

There’s been a lot of pressure on the housing industry because effectively, things have changed a lot. Now, I’m going to show you what things have changed. A report that Zillow did said that the average American household needs to make $106,000. This is average across all 52 states. Needs to make 106,536 dollars a year to comfortably afford the typically priced US home, which, by the way, that is not us here in California, folks. They produced a list. If I wanted to buy a home in Los Angeles, California, the range that I would have to have from my household is $157,000 to $300,000. That’s a staggering number. San Diego is slightly behind us, and San Francisco and San Jose is more like $2,75,000 to $500,000. That’s to buy a home, any home. That’s a tough, tough, tough ask. This is why not only is there pressure right now happening inside the real estate industry, and NAR surrendered this suit after 10 years. Why? Because most people can’t even afford a home. If there’s any hope, psychological or otherwise, to lower the price of homeownership, that is where the entire country needs to line up and be. Nar knows that.

[00:14:40.680] – Robert Newman

They know that we’re looking at a winter. They pushed it as far as they could possibly push it. But when most people, and I mean most people, John, can’t afford a home in any state, anywhere, that is very bad for the housing market, including the people that already own the homes. Yes, it’s great to be sitting on top of a cash pile. According to most of the things I’ve read, home prices have increased by over 50 to 60% in the last four years. That’s great if you’re sitting on a home that you’ve owned for that long. But imagine you’re like, I’m not buying that home. I can’t afford it, and I make a very good living, at least I think I do. But according to being able to buy a home, I actually don’t, which is crazy to me because I make more than almost anybody that I know. When you start looking Looking at that and going, I can’t buy a home, it’s like, holy cow, do you have to be a millionaire just to even consider buying a home right now in Los Angeles? The answer is almost yes. That’s the framework that is going to create a lot of changes in the real estate industry.

[00:15:50.560] – Robert Newman

We’re just starting to see the first ones roll out. We’re starting to see a whole bunch of, this is the lawsuit settlement now, negotiate. Nara is I’m trying to pitch this as the 6 or 7% that you can negotiate on is going to make a difference in the home price. Truthfully, it’s probably only going to make a 1% difference.

[00:16:09.220] – Jonathan Denwood

It’s going to make no difference because none of the sellers, if they can pocket 12,000 on the average purchase prices. The mean average, which is 400,000, which is bonkers, absolutely bonkers. The sellers, they’re just going to pocket it unless there’s For some reason why they can’t. Where I don’t have our friend at Redfin, the man with the smile, as I call him, he’s always very cheerful, isn’t he? But he’s sold, like you pointed out last time we brought him up, he consistently sells the shares in his own company, is how it’s going to affect buyer, buyer’s agents, because How the model is going to work out. Because as you know, most more established agents, either they have juniors that represent buyers, or they just don’t want to do it because it’s the only type of work when you’re trying to get yourself established because it’s such a painful experience and such a time killer showing around possible buyers. And And it’s very stressful. But if you’re trying to establish yourself, you have to do it. Who’s going to pay? Is it going to be paid hourly? Is it, are they going to be a fixed package?

[00:17:49.300] – Jonathan Denwood

I’ll show you five hours. I don’t know how that’s going to work out. That’s the bit that I don’t think anybody knows, because You can say Australia, Canada, UK, but as I pointed out with the UK, it’s a very different setup. Here you’ve got title companies, the agent with the brokerage does the contract. That’s totally different to the UK. My understanding is the Australian and Canadian is very different as well. I don’t know on the buyer, that buyer’s agent is going to want to be compensated in some way. How that works out, I don’t know, really. Have you got any thoughts?

[00:18:46.490] – Robert Newman

You need to go for a break. A lot of them, but we’re going to come to the break and I’m going to share those thoughts. Ladies and gentlemen, we’re going to be right back wherever you found us. We’re so glad that you’re with us today. Thank you so much. I hope you’re having a fantastic day. John and I are both We’re so grateful for the ears and the time that you give us. We’ll be right back. Three, two, one. Welcome back, ladies and gentlemen, to the MailRight podcast. Today, we’re talking about the NAR settlement. Now, we just spent the set up and shared our individual opinions about what happened with Nara in the first part of the show. If you didn’t already catch it, go back and do a quick listen. But this part of the show, we’re now going to… John just ended the show by saying, Hey, what are you going to do about that? I have a lot of ideas about… It has always frustrated me that commissions were set for real estate agents because it became a matter of morality and ethics about whether or not you offered a bigger service package than somebody else.

[00:19:44.740] – Robert Newman

And in the luxury space, in certain real estate spaces, every single time you start talking about something that’s commoditized, search or other things, like cell phones is what I used to sell that was super commoditized and long distance plans, which is super commoditized. And you know what? Always, I had to differentiate myself with the personal service package. Always. It’s a mystery to me that it just goes to say that a lot of real estate agents haven’t necessarily been a multi-focused salesperson over the span of their career, because if you had been, you’d know that no matter what, you’re going to have to to come up with a service package in order to get your clients to not only pay you what you’d like to be paid, but also create resilience within your business. Now, here’s some of my ideas for creating a service plan that will, in turn, allow you to negotiate the highest or best buyer’s commission, which is what all of you are going to have to do. You’re going to have an agreement, you’re going to have your customer sign it, it’s not coming out of the seller’s package. Just a few ideas that I’ve had is that I’ve always found it to be ridiculous that on a commission-only basis, a buyer of a home can call you up and say, I would like you to take me out to see homes.

[00:21:11.070] – Robert Newman

Never made much sense to me, not in the digital age. Why? Because inventory is mostly online. Just do a Zoom call, look at some pictures together, and hash things out. Start focusing on making sure as part of the qualification process that it all happens over Zoom. What I would do personally, John, is if I was a realtor, and number one, John and I have said this forever, it does not make sense. It’s never made sense unless you’re dealing with a referral or a family member, and they say, I’m just going to give you the deal, and now you’re… Let’s say you live in Santa Monica here in LA, but they want a home in the valley, so you sell them a home in the valley. In terms of your marketing, though, that’s a referral. Your actual marketing needs to focus you as a specialist in a certain area. Always has been that way, always will be that way, and very few people even listen to that. Because for some reason, all real estate agents think it’s better to be a wandering generality instead of a meaningful specific, and I will never, ever understand that. You want to know your inventory really well.

[00:22:20.150] – Robert Newman

What do I mean by that? Right now, there’s like 157 listings in Vanuys. I’d set aside a month, and I’d go out, and probably once a month, every month, I’d pick my top 20 or 30 homes, and I’d walk out there with a camera, have an assistant do the same, and I’d film it because I’m a licensed drillter. I can get into the home anytime I want. As a buyer’s agent, you can see the home on the days that the seller has the home open to be seen, and you can walk through the camera and film it and do whatever you want. I then would keep those video repositories, and I would offer them up as things that my clients and I can look at via Zoom, so I’m not driving all over the place. Now, John, if I wanted to do full commission and I wanted to offer a series of services to somebody, one of the services I’d offer is, Listen, if you want that old-school experience, John, you want to ride around in a car with me and look at things, no problem. But I have a I can ask for that in my agreement.

[00:23:17.790] – Robert Newman

That is basically a full-service writer that says, Listen, I don’t know how long that’s going to take. You don’t know how long that’s going to take. At a minimum, John, you now need to commit to me that you’re going to give me my full possible commission, 3%, and I will drive everywhere with you. Now, there is this thought that a lot of people are going to race to the bottom with price. Some people have already been racing to the bottom with price, such as Redfin, which is one of the least successful brokerages that’s out there.

[00:23:48.390] – Jonathan Denwood

You’ve so clearly pointed out, but the only thing I would point out to your model, I totally agree with you, but the thing is the buyer’s agent is probably going to require that you pay a certain amount up front because you might get somebody to sign a contract, but you know and I know a contract is fine. But if you’re going to enforce it, you’re going to have to sue that person. That person is going to have money to be worthwhile suing, unless there’s some indemnity, some insurance, but that’s going to be so expensive. So you are going to ask a sizable deposit, depending on what package the client chooses, you’re going to ask for a sizable 50 % or whatever deposit or the full amount up front, aren’t you?

[00:24:44.790] – Robert Newman

That would be another way to go. It’s all going to depend on your local marketplace, ladies and gentlemen. You’re going to have to see what other people are offering and decide whether or not you’re in the commodity business or you’re in the specialized service business. By the way, for everybody listening to the show, I’ve got no opinions. I’ve always been a specialized person. I’ve always been a person that aims at the higher part of my tiers and my service packages. I naturally gravitate in the way of overdelivering and underselling. Because I do, it makes sense for me to get compensated for that natural character personality trait of mine. Everybody’s different. Sometimes you don’t feel like you’ve got it, sometimes you just don’t want to. There’s nothing wrong with that. Sometimes you’re going to be a broker who’s going to be dealing with homes that are very commoditized, subdivisions that are all the same, blah, blah, blah. It’s going to be very hard for you to separate our sales package. You’re going to have to compete on price. There’s a thousand different reasons. If you end up having to compete on price, if it’s all about price, then absolutely at that point, you have to start relying on other things that John and I have said.

[00:25:53.110] – Robert Newman

Fine, it’s all about price. You can move the conversation, though, to not only about price, but quality of service, which is what Redfin tries to do. They try to do that. They just don’t do it very well, in my opinion. You want to move the conversation to your Google business profile and the place that it has your reviews and start to make sure that you have lots and lots of five-star reviews there. Because if price is going to be the same between you and somebody else, and there’s no way to get around that conversation, then the quality of your service… Because if I’m… John, if you’re dealing… And the only thing that you get suck at, total suckage, is that if John and I both have 500 five-star reviews and we’re completely equal across the board, and then probably what it comes down to is, do they like you? Would you agree, John?

[00:26:43.450] – Jonathan Denwood

Well, it’s a mixture, isn’t it? I personally would never hire a family member or a friend to represent me in a property transaction, because if you ever lent any money to a relative or a friend, we think, I’ve been lucky. Some friends have lent me some money and I’ve always paid it and I’ve been lucky. But there’s been one or two occasions where a relative hasn’t paid me back and never will, and you just let it go. But really, it’s not a great idea. I think you want competence and you want somebody… It’s a bit like hiring a lawyer or any professional. You got to get You got to have a good feeling about the person, but it’s a professional relationship, isn’t it? They’re not your friends. But on the other hand, you don’t want them to be a shyester, do you? You just want them to do their job and be professional about it, don’t you?

[00:27:49.440] – Robert Newman

You absolutely do. And so, ladies and gentlemen, this idea of… I don’t disagree with John, but I do think that there’s a lot of conversations that need to happen about around where you are. Here in the United States, we have one or two states where the average home price is still very low. They’re not very common anymore. There, I do know a single state which still sells houses for about 150,000. Single state out of 52. Their idea there might be that price is more commoditized. People won’t be taking the time and the energy that John is suggesting. I mean, somebody making $30,000 a year can definitely still afford that home. So somebody working at Walmart, that’s still a great job that’s going to pay all the bills and get them a home and allow them homeownership and the same opportunities that everybody else wants. In California, you basically got to be an entrepreneur in tech or have a pedigree profession like doctor, dentist, lawyer, that thing.

[00:28:45.810] – Jonathan Denwood

I have no idea what’s going to happen to California. Who is buying these? I can only presume it’s the investor class or foreign individuals. I have no idea how it’s managed to keep on going.

[00:29:06.870] – Robert Newman

Yeah, all of that is true. But being the sixth largest economy in the world and having too many people Okay. I’ve had too many people in the world. There’s too many people. It’s the sixth largest economy, and we have too many people population-wise. So we We have 14 million people in Los Angeles, and I don’t know how many homes we have, but let’s just call it 500,000. So way more people, too few homes, still people that are making reasonably good income that can afford them. Crazy, but true. Ladies and gentlemen, we’re getting close to the part where we wrap this show up, and I’m hoping to start a dialog here. If you’ve got, John, and you know what? Actually, this is a great way to wrap this show up. I want to start a dialog around this. I would like to have some follow-up shows, but part of that’s going to be, can we get some participation from our audience? I’m going to ask the audience a few questions here. Do you have any ideas of your own about how you’re going to protect your buyer side commission? For those of you who are buyer’s agents, which actually is about 80% of the licensed realtors.

[00:30:18.780] – Robert Newman

So some of you listening to this show should do a substantial piece of your business on the buyer side. Come July, this part of your business is going to change. What are your plans to protect your business? If we like the ideas enough, John and I will invite you on to the show, which will help you promote your business and help you promote your website. If you have a single idea that we like, but maybe others that we don’t, we will still mention you by name. I think you’re… Are you comfortable with me saying that we will do that, John? Yeah, we will mention you by name on the show and give you credit for the ideas that you have and say it to our entire audience, which might be 3,000 to 10,000 people, other real estate agents, which, by the way, are great sources of referral business from out of state. John, if somebody wanted to email you and contribute to you directly, some ideas or ask you some questions about the MailRight platform. How are they getting to touch with you?

[00:31:19.890] – Jonathan Denwood

You can just email me at Jonathan, J-O-N-A-T-H-A-N@mail, M-A-I-L-Right, R-I-G-H-R. Com. Robert. Com. Just email me or you can go to the MailRight website. There’s a contact us form or you can book a quick chat with me. Back over to you, Rob.

[00:31:42.370] – Robert Newman

Ladies and gentlemen, if for some reason you’d like to message me directly, I will take this subject personally and deal with it. I oftentimes don’t anymore. I’ve gotten very fortunate in the company it’s growing to the size that I don’t have to do a lot of the… What do you always call it? You have a word for it that I’m forgetting right now. Not the grunt work. You use another word. The donkey work. The donkey.

[00:32:04.780] – Jonathan Denwood

I think that’s what you say. I’m a donkey. You can just read me, Kerr.

[00:32:12.100] – Robert Newman

No, that’s what… Listen, John, you say that. I don’t say that. You say that. All right.

[00:32:17.020] – Jonathan Denwood

I know my place.

[00:32:18.340] – Robert Newman

I’m a donkey. Robert@inboundrem..com. That’s I-N-B-O-U-N-D-R-E-M. Robert@. Com. All right, ladies and gentlemen, John’s laughing at me. Please take us offline. You can laugh at me more in private.

[00:32:37.130] – Jonathan Denwood

Yes. E-oh, e-oh, my beloved listeners. Bye.

[00:32:41.330] – Robert Newman

Bye.

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The Hosts of The Mail-Right Show

Jonathan Denwood

Real Estate CRM and IDX websites. Identify lead behavior and automate follow-up and ad management tools.

https://www.facebook.com/mailrightusa

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Robert Newman

InboundREM

https://inboundrem.com