Volume Down, Facts Up: What the Proposed NAR Settlement Really Means for Buyers, Sellers, and Agents

In a real estate world buzzing with speculation and sensational headlines, "Volume Down, Facts Up" offers clarity and truth. Join Kevin Johnson, CEO of CENTURY 21 Edge, and Andrew Doyle, managing attorney at Seibane Doyle PLLC, as they dive deep into the proposed National Association of Realtors (NAR) settlement. This pivotal episode cuts through the cacophony of misinformation, delivering a grounded and insightful analysis that buyers, sellers, and agents have been seeking.

The NAR settlement has ignited debates and confusion across the real estate industry, with pundits and social media influencers casting a cloud of uncertainty over what the future holds. Kevin and Andrew, armed with facts and expert analysis, unpack the settlement's implications, separating fear from reality. Whether you're a first-time homebuyer, a seasoned seller, or a real estate professional navigating these turbulent waters, this episode sheds light on how the proposed settlement could reshape the landscape of real estate transactions.

Listeners will gain a comprehensive understanding of:

• The core elements of the proposed NAR settlement and the litigation that led to it
• The impact on commission structures and what it means for negotiating real estate deals
• The truth behind the headlines suggesting changes in commission rates and real estate pricing
• Practical advice for navigating the real estate market post-settlement

"Volume Down, Facts Up" is more than just a podcast episode; it's a crucial resource for anyone looking to make informed decisions in a market filled with speculation. Tune in to cut through the noise and elevate your understanding of the proposed NAR settlement's real impact on buyers, sellers, and agents alike.

LEGAL DISCLAIMER: The views, opinions, and content expressed in The 121% Podcast are solely those of the individual speakers and do not reflect the opinions, beliefs, or policies of the show's sponsors, Century 21 Real Estate LLC, CENTURY 21® Edge, OneBlue Real Estate School, or their affiliates. Each CENTURY 21® office is independently owned and operated. CENTURY 21 Edge and OneBlue Real Estate School fully support the principles of the Fair Housing Act.

The information provided in this podcast is for educational and entertainment purposes only. While we strive to provide accurate and up-to-date information, we do not guarantee the content's veracity, reliability, or completeness. The 121% Podcast and its creators are not responsible for errors, omissions, or results obtained from using this information. Listeners are encouraged to conduct their own research and due diligence and seek professional advice before making legal, financial, or real estate decisions.

Transcript

Kevin Johnson: 0:03

That is recording and you can hear fine in your your headphones.

Andrew Doyle: 0:07

Mic check, check one, two.

Kevin Johnson: 0:08

You can hear yourself fine. Yeah. All right. I can turn your volume if I need to. All right, that's recording so we should be freaking good. Yes, yes. Okay. Hello and welcome to the 121% podcast. My name is Kevin Johnson here from Century 21 edge in Orlando. Today we are welcoming back to the show for I think it's the third or the fourth time, the legendary Andrew Doyle from sea bass. That introduction right legendary legendary from C bein Doyle right here in Orlando, Florida. They are a business real estate law firm if it involves dirt, paper or money. I love that. You've got a TM TM TM trademark. Excellent. So welcome, Andrew. How are things going for you today?

Andrew Doyle: 0:53

For me, it's a fantastic day for the rest of the real estate industry. I don't know I think everything is kind of up in the air right now a lot of people are confused. They don't know what what's happening next. But Mighty is going great Friday. I'm psyched, you know, as I told

Kevin Johnson: 1:06

everyone, my my family to pick a headline for our agents. And today we're gonna be talking about the NAR settlement. The headline would be, everything's gonna be okay. Right? There's, I actually thought the results of this and of course DOJ is not done, but I thought it was going to be far more impact to our business rather than how it should be anyway. What

Andrew Doyle: 1:29

was that that show? Keep Calm and chive on are on

Kevin Johnson: 1:33

and carry on? Yeah, what

Andrew Doyle: 1:34

was that show? Doctor?

Kevin Johnson: 1:35

I thought it was just there was a saying from the British during World War Two. Oh, maybe or one one of them. Maybe

Andrew Doyle: 1:41

it was it was on a show. But I think that's the mantra here is just keep calm and carry on. Because the industry will survive. Things will continue. Commission's will still be paid. But you know, I maybe that's a spoiler alert.

Kevin Johnson: 1:52

You know, yeah, that's the thing is it drives me crazy. So let's go ahead. And, you know, reason why I wanted to do this show with Andrew and reached out to him was that I've been looking over the media, looking on YouTube, you know, watching Social Media, and we have agents that are going, they're losing their minds. They're going crazy. We have the media, the mainstream media, and they're all guilty from both sides of the spectrum, right of just completely false headlines, headlines not based in any element of fact, as it relates to the settlement that we're gonna talk about today. So I thought it was important. We came in addressed the fact versus the fiction and, like, take the sensationalism out of it. It's just it's, it's, like I said, I think it's much better than I was expecting it to be, I think, okay, and it was my, my first reaction was, this is what everybody's freaking out about, because I actually read the settlement, which was, you know,

Andrew Doyle: 2:50

bless your heart. It was 108 pages long. Yeah, I skimmed. But, you know, it's literally been fake news. Yep. literally been fake news from when the settlement was announced. I think it was like Friday morning, last Friday morning, about a week ago. We go today, all throughout the weekend. It was headline after headline, the Commission's are going away. Nora walks back 6% Commission requirements. And I mean, I'm sure we're going to cover that. Oh, yeah. But just so everyone knows, there was never a 6% standard requirements set by NAR or anyone else. Right, right. That Commission's total Commission's on a residential transaction across the United States be 6%, not $1. More, not dollar less. That was never a commission. In fact, that would literally be price fixing. And these Gnar suits would have not taken 50 years to be brought, they would have been brought a long time ago.

Kevin Johnson: 3:45

That's my favorite most of the headlines if true, Nora would be admitting in an agreement with a court to do to break the law in the future. Right. Right. Right. Yeah, nothing happening. So the settlements, the basics of it not agree to a financial sum of$418 million over four years, over four years, right? They gotta make sure they collect those dues to get that. And then they also agreed to some other items we're talking about today. But the big thing is, the court has not approved this yet. Right? They're not expecting it to what may? I'm

Andrew Doyle: 4:17

not sure when they're expecting it, but it's pending court approval. So when you have a case of this magnitude, you can't just say, Okay, we reached an agreement were settled. It requires the judge's approval. And this kind of goes back to the type of things that the plaintiffs the sellers, in this case were looking for. Not only were they looking for monetary damages, but they were looking for structural relief. And these type of antitrust cases when they're brought, right, they're brought for two reasons one money to structural changes. So we see these cases commonly with banks, right, and it results in banks reforming the way that they do business. So here we're seeing nor settling and agreeing to reframe the way that they do business.

Kevin Johnson: 5:01

Yeah. And, and again, it was, I don't think it's that earth shattering. It's it's really, it's, if I'm being honest, it's how it should have been, it's actually how it was done in the past. And then we got away from it in the digital age, right, we used to do as an industry, formal buyer consults have them signed by our broker agreements, right. That's how we did it back in the day, we just got lazy as an industry, right. But as an industry, we got lazy, and that laziness and that lowering of standards of membership, in my opinion has led to where we are today.

Andrew Doyle: 5:36

So, I mean, I don't want to speak for all agents. But I do think, as of late, and by as of late, maybe the last 1015 years, it's a little uncomfortable for them to have conversations with buyers about signing buyer broker agreements. But if I recall correctly, in NARS settlement statement, they're kind of press release, so to speak, they even said, we've always kind of encouraged this. Yeah. And I know that in my practice, I generally recommend to the brokerages that I represent, you should have your agents train them on the forms here in Florida, they're called the EBAs. And then they have different forms, depending on the single single agent or transaction broker relationship. But there's a form for that, there. And it's not that hard, it's not that complicated. It should just be kind of part of the overall agent training, because at the core, that's the agents job is to close transactions, and you need to know how you're gonna get paid.

Kevin Johnson: 6:31

As a brokerage, we've always strongly like in the most strongest of terms, you know, encourage them, starting last year, we required them, it was no, you're gonna work with a buyer, you have to have it before showing the property full stop. Otherwise, you're not working with a buyer. So for our agents, that one that one change, or the two big ones, if you will, that's an that's a nothing burger for our agents, because we've been doing that. Right. So that's what so let's talk about the first one like you kind of have already brought it up that kind of the fact versus fiction one of the big headlines we keep seeing over and over again in various forms is NAR agrees to cut commissions now agrees that 6% Commission models gone. Let's talk about some of the misconceptions like, to my knowledge, and you know, there's never been a fixed rate Inaros formula in 1913. And since its inception, there has never been a fixed rate. In fact, if you look at the statistics, the average if you just take the average of the total commission charged by both sides, right now, obviously, it averages the average hasn't been above or at or above 6% for 27 years, according to Nar really 27 years. So if so it's actually come down. Yeah, the average is closer to 5%. Okay, if you add both sides together, but that headline is also misleading, because it makes it feel like every agent was making an average of 6%. And then let's just say if you're using an average, and we were going to use the fake headlines, that's not the case. It's both agents involved in the transaction. That's half of that. So the actual average agent commission is below two and a half percent. Did

Andrew Doyle: 8:03

you see the video I posted on our Instagram page about this? Yep. So if you haven't already, please give us a follow at Orlando lawyers. Know I did a video on this on Monday. And the and I specifically addressed these things. But the point, I think the most salient point in that video was these are headlines in the middle of an election year. And we're seeing regardless of what aisle the source is on CNN, Fox, they're all saying the same thing. Right? And that's because they need to have the attention. So the call to action, so to speak from that video was sellers, buyers, agents, brokers, whoever you are, take this information with a grain of salt because it is verifiably false. But beyond that, consider the source. And I really can honestly say that since the settlement terms were announced, I've spoken to a lot of my clients about this. And everyone is coming to me and saying basically exactly that is it fact or fiction. And I'm like this is a complete fiction. There was one instance. And in fact, I think Housing Wire had posted a story on this. There was one instance and I want to say in the 1980s or so where NAR was involved with an FTC issue that resulted in some form of fixed compensation, but it had absolutely nothing to do with the issue that we're dealing with. Now there was a Supreme Court decision. It's a nonfactor now, right. So at the very least is verifiably false that that it's verifiably false to say that in the past 25 years, they have not required any any sort of fixed percentage commission at all

Kevin Johnson: 9:56

right. And the other thing is commissions have always been negotiable, that's the key, right? And I can tell you, you know, out of the hundreds and hundreds of deals that we have been a part of as a brokerage, there has never been a seller who didn't negotiate. And there's a huge difference, though I tolerate is between it's, it is negotiable. But for each of us as a professional based on our skill set in our history, we're going to have a minimum we're going to charge to do our services like anybody would any profession, an attorney, a surgeon, whatever, you have your minimum, what is it gonna take for you to go to bed and go to work that day? Sure. Right. But commissions have always been negotiable, and that nothing is changing before or after. And I hear that sellers and buyers look at now and get to negotiate their Commission's Yeah, you sure can, as you always have.

Andrew Doyle: 10:48

The last time we talked about this issue was I think November, right, right after the announcement of the Burnett Setzer verdict, the blockbuster $1.7 billion. Right. Where does it where's the world going? The sky is falling. In that, in that recording, we address that specific issue as well. Right. And, again, public service announcement. I believe I have to repeat this. Yes, commissions have always been negotiable. listing agents sitting there across the dinner table with sellers, those sellers have always had that right. To say, Look, I get you want 5% Total commission, I'm committed to not giving you a dime more than three. And if you want to take that three and divide that equally with the buy side, that's up to you. But I out of my pocket, I'm not losing more than 3% of this purchase price to total commission. That has always been something The problem is that sellers. I think, partly because of the lack of transparency in the industry, I think sellers have never really felt comfortable exercising that right to negotiate. And I really think that lack of transparency is what brought about all of the all of this litigation. So

Kevin Johnson: 11:58

what do you talk to me about because I couldn't disagree more, I think there has been at least the interact in the transactions we've been involved in, there's always been the transparency like they knew they can negotiate, we'll

Andrew Doyle: 12:09

talk about it's a corporate decision from the top down, that has to trickle down through the training to the agents. But I don't believe that the average real estate agent sits in front of a seller and says, Look, this is 6%. And this is why it's 6%. And more importantly, the 6% doesn't go to mean just me that 6% That you're paying the list side brokerage. In turn, when we advertise your property on the MLS, there's a field there, and we're going to offer to take that 6%. And we're going to divide that with whoever brings a buyer, that conversation doesn't generally happen. And because it doesn't generally happen, we end up with Switzerland, Burnett, moral Batten, Gibson, all of these massive cases that have been filed across the country that really say, well, sellers didn't know that, or they felt compelled to have just agreed to that they weren't given any meaningful choice for lack of a better term. So I do think it's it's a training issue. That's kind of endemic to the industry. That hopefully, we'll see change now. And

Kevin Johnson: 13:18

that's one of the big things I've said that, you know, with respect, this is my personal opinion, that NAR has contributed greatly to our issue in that the standards are light. And then you know, NARS goal is membership, no, membership brings money membership brings power in Washington. But also if you increase standards, if you increase to dues to level it up, you decrease membership, which means you lose power, you lose money. And so there's that battle that is going on within Nara and has been for years of you know, what's the balance of standards versus membership. And it as long as that's the battle, I think we're going to struggle, you're going to have people like this and that are going to file suits and try to level force the industry to level up. And, you know, for us, I mean, we've always done that at our brokerage and our brand, I applaud our brand training I've received from them, since joining them in 2014 has always been the same right there. They're big on the law of file, not just a letter, but the spirit of the law. And if you don't, they will kick a broker owner out faster than your head will spend. They they would rather have integrity over the money. And that's what I love about our brand. The next one the next factor fiction offers of compensation are going away. So it reiterate, as Andrew said, If a seller was property for X percent, we would then as a listing broker offer a portion of that to a another agent that would bring a buyer that was called the offer compensation that money came from the listing brokers commission not directly from the seller. So if I brought the buyer as well, I got to keep the entire length of the commission right. So seeing a lot of news stories that are saying that it's going away and it's just not the case the little field and the MLS is going away.

Andrew Doyle: 15:06

That's it right? Yeah, it's just being moved off of the MLS and my kind of legal instincts lead me to see that as the structural change that the sellers in the plaintiffs in SR were looking for because of the NAR requirement that the field be there and offers of compensation be placed on the MLS. Remember up until I think it was like November 14 here locally, the local MLS had had a rule that said that you had to offer at least $1 A whole dollar a whole dollar a whole dollar. But that was walked back. And I think cool. Don't quote me on actually not quote me, often and it's November 14 2023. I remember the exact date that I think the new the new MLS rule change went in. And now all of a sudden it was it was 00. Right? So now we're saying okay, well, now we're going to delete the whole fields. Nobody got all up in arms with the change from $1 to 00. They did it just not as loud. So but yeah, I mean, the fact remains that commissions can still be paid, they can still be negotiated. It's just not going to be on the field. And I think the reason for that is that was one of the prior requirements, and now to make the sellers happy nor sad, okay.

Kevin Johnson: 16:27

The funny thing I found in the settlement is that it's the specs are explicitly called out that sellers can still offer credits or concessions to buyers. You just can't call it for you know, it's for the commission and you can call whatever you want to so we can still offer there it can be negotiated off MLS. And by the way, the negotiating deal by deal off MLS is how commercial has been done for years. And it's working just fine. Now.

Andrew Doyle: 16:57

I don't see how I mean, NAR can't tell a seller what concessions the seller is choosing to give or not give to a buyer anyway, you want to give a $10,000 roof credit without going through the hassle of reroofing the house, go for it right now. It's just the same thing. Now my question is really questioned for the state of Florida and the Joint Commission between the Florida Association of Realtors in the Florida Bar is what changes, if any will we see to the far bar contract in the crisper contracts that accommodate that in Section nine closing costs?

Kevin Johnson: 17:31

Well, there was an email that came out about an hour and a half to two hours ago. I'm missing from Florida realtors, that they are working diligently on new listing agreements. There you go, a new compensation agreement and new purchase contract. That's

Andrew Doyle: 17:43

fantastic. That's great news. I've actually put the feelers out there too. I'm trying to get in contact with some attorneys that sit on the joint committee. So that maybe just maybe fingers crossed, I can be a part of that decision. That'd

Kevin Johnson: 17:56

be awesome. Have some sanity, they're just saying. So the ruling says and I'm quoting, specific buyer's agents must find alternative ways to be compensated potentially directing directly with by their client or their customer through seller concessions or negotiations off MLS. So again, the only change to the offer of comp, the only change is the little bitty field at which most agents in Florida don't know how to fill out properly anyway. is going away now, which I'm more than happy about. So no big change there. The so we can't make those you can also want to make it clear in the settlement. We can't make those offers and realtor marks or anywhere else. They can only be made off MLS, right.

Andrew Doyle: 18:46

I've heard recently. Some people thinking a little bit outside the box and saying okay, well, what is it off? MLS mean? Does it literally mean not in the MLS sheet? What if there was for example, maybe an AI assistant that was keyed into showingtime and the AI assistant was auto generating details about the property and included in that message to the buyer's agent who had just scheduled something seller is committed to X percentage on the buy side does that constitute an an offer of compensation on the MLS which come mid July would be basically a violation of local MLS rules?

Kevin Johnson: 19:37

My my my creative solving is right now we include attachments with the listing. What if we have a Dropbox file? You know, and we put the watermarks, here's your dropbox link for this listing with disclosures and all that and in there is a commission agreement. I think

Andrew Doyle: 19:53

we need to wait until July and see what the rule change is as a result of this settlement. And I, you know, I should I'm gonna call a proposed settlement because it hasn't been confirmed yet as proposed settlement. I think we need to wait to see what the court make sure that the court approves the 108 page verbatim settlement agreement, and then see what that rule changes and then see how the local MLS has adopted incorporate that rule change. Before we can say this is good, this is not. But between now and then there shouldn't be any significant change. It should be business as usual. That's

Kevin Johnson: 20:30

why I keep telling people I've had questions from agents already like, well, what if there's like right now don't worry about anything. A the court has to approve it. I've heard May is when the judge is supposed to review it. If he if if he approves it as this as you said, it's not going to go into effect until mid July earliest. So there's time and everybody's working behind the scenes to make sure that we're ready. That's it like for our brokerage, we're ready already. I mean, we've already been doing BVA is done right we that's standard practice for us. And they've already been so it shouldn't be an issue. I do

Andrew Doyle: 21:03

think brokers brokerages that have not yet incorporated the ABA practice or the BBA practice into their training programs. They're going to be at a disadvantage. Yep. And it's really incumbent upon the brokers the supervising the managing brokers to say, okay, look, I avoided this issue for long enough, but this is a threat to my financial existence now. So I need to start incorporating this into the training programs we

Kevin Johnson: 21:30

are I'm in the process of writing a class for the school that wonderfully you know, not just how to fill it out, but also how to pitch it and know if some scripts with that. Our next one, I love this one. And I've seen a lot of this reading the comments in these videos and new stories out there. Well, NAR settled, clearly that means they were guilty as charged. Right? They knew what they were doing wrong. And of course, to be clear, as a part of the settlement agreement NAR has said that they're admitting no wrongdoing. But talk to me about that. I mean, from from not maybe specifically this case, but you've been involved in cases where there has been settlements and why would NAR settle a 1.7 $8,000,000,000.25 on

Andrew Doyle: 22:15

the dollar that had treble damages? 700 plus million reasons.

Kevin Johnson: 22:19

treble damages, right? That because we took it with the 5.5 point 8 billion points

Andrew Doyle: 22:26

seven. Yeah, it would have been way up there. Right. I believe that verdict alone would have been sufficient to bankrupt nor as an industry and probably a couple more of the CO defendants. Well,

Kevin Johnson: 22:36

keep in mind, too. There's there's 87. Now, additional brokerages out there that are not included as part of the settlement because only brokerages that had less than $2 billion in revenue last year were included. So there's a lot of big independents out there like exp Fathom some big ones, right that are not included some local companies as well, that they still have to figure out their settlement today, compass did announce that they have settled. So they were the largest of the not included voice.

Andrew Doyle: 23:06

You know, I spend an afternoon working and I miss everything. Well, that's why I'm here. I'm here to help you. Thank you. Thank you for keeping me on track. That's why I'm here for you make a note of that. Yeah. So

Kevin Johnson: 23:17

and then of course, the big ones, the big big ones anywhere, which includes century 21 Coldwell Banker, Better Homes and several others, and REMAX Keller Williams all settled prior to well, at various points during this right before the verdict was anywhere in REMAX Keller settled after verdict, leaving just not home services. And now it's just Home Services left of the original plaintiff. So yesterday, the plaintiffs also demanded the sum of the money or the final judgment and to get the money from home services for the entire thing. Yeah,

Andrew Doyle: 23:50

probably because it's considered joint and several Yes, it's rough. Yep. Okay, so to your point, your question about nor must have been guilty as a headline, right? So one, I take issue nitpicky, legal, geeky reason here, but I take issue with the use of the word guilt. This is not a criminal case. There's no right criminal element here. So in civil, there is no guilt. It's liable or not liable. You're paying or you're not paid. Right. So strictly speaking, Nora has not been guilty of anything. I don't think that they ever were in a position to possibly be found guilty of doing anything. Now. To my knowledge, there are some DOJ investigations going on, which may result in criminal liability, but strictly speaking in terms of Switzer Burnett, and the North's settlement here, there's no guilt. Beyond that, right. There are a number of compelling reasons why a corporate defendant or an individual defendant would settle a lawsuit. And we could talk about settlements for cases that are $5,000 all the way up to 5.7. billion dollars. There are a number of compelling reasons why someone or something or one party would enter into a settlement agreement usually has something to do with what I call in practice the law of diminishing returns, you may fight for so long to win or shifts, I should say your lawyers will fight for so long to win. And victory may be on the horizon. But because of the procedural rules and the nature of litigation, it may take so long to get there, that the cost of achieving that victory is less than or is greater than it would be if you had just cut your losses and agreed to settle right now. Put another way, where was never ever going to go with this. Right? There was a jury verdict, finding liability to the tune of $1.7 billion if there was no settlement agreement. And NAR just said, Okay, we're gonna let it we're gonna we're gonna see how this plays out. They have I think they had a pending appeal. Right? So

Kevin Johnson: 26:01

they did announce yesterday, they do not have the ability to put the bond. Okay, so that was one of the factors that went into settlement.

Andrew Doyle: 26:08

So that's what's called a financial constraint on litigation. Right, they didn't have the money to fund the litigation to fight to fund to fund the fight any longer. So it made sense, then, for them to settle at 25 cents on the dollar, which $480 million is a lot of money. But it's a drop in the bucket compared to 5.7 billion, which is what may have happened had the judge exercised his potential discretion here, and trebled or tripled the damages, which is a possibility, it was a possibility under the Antitrust Act that they were sued on. So there was a jury verdict, that was it, right? Liability was found. The prob the, the, I guess the question posed, then XR was okay, where do we go from here? Do we appeal at X dollars? Or do we just reach an agreement here and make some changes and pay 25 cents on the dollar? I don't disagree with that decision for years to Yeah, yeah. I don't disagree with that decision. In a vacuum. Obviously, I don't represent nor I don't know what the inner workings of their legal strategy was. But from the 10,000 foot view, sounds like a deal of the century to me.

Kevin Johnson: 27:21

The one thing that Kevin Sears the head of nor released yesterday's video was that one of the reasons they chose to settle was the the only other path really was going to be bankruptcy. And had they done that it would have left all the brokerages under 2 billion and expose, so this solves it protects them. We were you know, century 21 was our protected by the anywhere settlements, we were gonna go there. But you know, unfortunately, couldn't get those above 2 billion included, but there is a my understanding a formula involved and they want to pay they can pay to get out of this church. So we I mean, it's, you know, it's a business decision, not so much any other

Andrew Doyle: 27:59

type of decision. I mean, I represent businesses, and I represent parties and litigation all the time, and all of these conversations that attorneys have. And, you know, don't let, don't ever let anyone fool you, right, you file a lawsuit, your goal is never to take that thing to trial. Your goal is to is to extract as much as you possibly can, whether it be this sort of structural relief in a non antitrust case, usually called equitable relief, you're looking for conduct or you're looking for money. But the law of diminishing returns to an experienced lawyer, to an honest lawyer that's not looking just to build a file and is looking to get the job done in the clients best interest is always cognizant of the cost to the client, juxtaposed against the most likely settlement terms, and how quickly we can get to the point where we can settle that I in my practice, I call that balancing practical versus principle, in principle, sure, this guy may have wronged you sue them, but keep the practical in mind, how much is it going to cost for you to get that day in court? And is it really worth it when you win? Right, because who knows what's going to happen? And settlement you have control in trial? Look what happened in Missouri?

Kevin Johnson: 29:12

And how long would it have taken say they could appeal? How long would that have taken two, probably years and left the uncertainty in the industry. And then also, this stops some of the other cases from moving forward. My understanding is it absolves all the seller focus cases, but there's still a buyer focus side that's still out there. So that's not included in any of this. And that's still ongoing. So who knows where that's going to be? Yeah, I don't understand the buyers claim at to this at all. You know, it's from the buy side.

Andrew Doyle: 29:44

Was it baton one, I think was baton one that was initially filed and the was met with a pretty stiff motion to dismiss at the early pleading stage. And if I recall correctly, the judge said had, what are you complaining about the sellers paid your Commission's which I took issue with, right? Because they're not because they're not technically but that was the the analysis was while the sellers are paying the commission, where's your claim here? And now that I'm reaching back to it, I think it was the way that the plaintiffs the buyers analyzed, it was well, indirectly, it was an indirect loss. So they had to amend their complaint, their

Kevin Johnson: 30:27

their argument, my understanding was also the elevated home prices, which, again, that's my read X Factor fiction is, you know, home prices will fall as a result of this.

Andrew Doyle: 30:35

I have some opinions on why they're not going to fall.

Kevin Johnson: 30:38

I would love to hear them. That's why it's on the list here.

Andrew Doyle: 30:41

So let's imagine, right, let's imagine a scenario where you're a listing agent, and you take a listing, and you take it for 3%, because that's half of the fictitious standard, right? Like, that's where you start. Anyway. So you take 3%, right? And the buyer comes to you unrepresented. That buyer doesn't have the Bluetooth app on the MO on the phone to open up the super lockbox right, doesn't have MLS access to get the key code, you need to do the showing. Right? So I truly believe that unrepresented buyers will actually secure the 6% total commission more quickly than any direct rule would because I think it's going to cause listing agents to work more.

Kevin Johnson: 31:42

Yep, it oh, it definitely will, like one of our agents asked yesterday, we did a internal Townhall. It's like, so does this mean, when this goes into place? If I list a property, I'm going to have a bunch of phone calls from agents who are just asking how much money we're offering, like?

Andrew Doyle: 31:56

Yep. Yeah. But I mean, in my example, right? We have an unrepresented buyer. Yeah. And because they can't afford to pay out of pocket, their buyer's agent, and in our hypothetical, we have a seller that's not offering any sort of compensation, okay?

Kevin Johnson: 32:13

Who's gonna write the contract? Who's exactly listing

Andrew Doyle: 32:16

agent has to open the door listening agent has to do the showing, listing agent has to prepare the contract or run the risk of the buyer submitting a form from New Hampshire on a Florida property, right, and then get what the seller sign that so it has to be redone, you know, the communication, all of the things that keep residential and commercial, but we'll talk about residential, primarily residential transactions going forward this professionalism, that may end up actually securing that 6%. Why? Because where, what is the listing agent going to do? After they get burned a couple times on transactions, they're going to say, I can no longer take a listing at 3%, because the amount of work is so much more than it used to be. But the difference is, at that time, that's the market. That's the market dictating prices.

Kevin Johnson: 33:07

Well, my thought was, you know, you have your right now we have a here's the total commission, I'm charging you, Mr. Seller, and of that, we're agreeing that I'm disclosing to you, I'm going to offer this percentage, you know, half of x or 40% of x or whatever to a buyer's agent, I see a point where you get to this is what I charge you if there is a represented buyer, and if there's an unrepresented buyer, here's what I charge you because now I'm going to have to do.

Andrew Doyle: 33:30

So attorneys, some attorneys in certain specific practice areas, they have a certain fee that they charge based on filing a lawsuit, if there is a response from the defendant. In other words, they'll file a lawsuit. And if the defendant does not respond, and they get a default judgment, that's it, you don't respond within 20 days, you get a default judgment case closed, there's a few additional pieces of paper you have to submit but by and large when no opposition, so that fee is necessarily less in the practice of law than it would be if it's an opposed form of litigation. There's an there's the analog right there in the practice of law, I see no reason why wouldn't also show up in residential real estate.

Kevin Johnson: 34:15

So they were gonna start seeing all the carts. You know, here's my fee for my services, Mr. Seller, but if an unrepresented buyer comes in, there's additional this, I have dealt them, here's these additional fees that I will be charging you. And then also making sure for all these poor buyers that they're gonna be signing no broker agreements, right that says, I don't have a duty of confidentiality. You tell me anything. I'm going straight to the other side. Right? There's no loyalty there's no obedience. Right? I keep using the analogy. If you were charged with murder, and you didn't do it, you are completely innocent. You show up for court judge in front of your prosecutor to your side. Judge says where's your attorney? You know what, I don't have one but I've been talking with Mr. Prosecutor, he or she seems like a really good person. I'm just going to have them represent me. That's not a good solution. Right? Right and buyers going to a builder or going to a listing agent directly. Those people represent the best interest of their either the seller or the builder. They don't represent the best interests of that buyer.

Andrew Doyle: 35:15

I take issue only with the use of the word best interest because that implies a fiduciary duty. So if a listing agents working as a transaction broker, then they're not necessarily they don't have that fiduciary duty.

Kevin Johnson: 35:26

I think I see a lot more single agency to prove value now.

Andrew Doyle: 35:29

Now then, which was where I was going with that, which is another thing that I think is a pivot point for brokerages. Right? brokerage, plenty of brokers out there. And I don't even really fault them for this because it's so archaic. But I think a lot of brokers out there don't even recognize that there are two distinct right three, it's arguably three distinct duties. And then there's the opportunity to jump from one and change the hat. Right? What do I do? Yeah. And I think everyone is just so comfortable working as this kind of transaction broker, but under the mistaken mindset, that for whatever side you represent, you have to act in their best interests, per se. And you don't, at least not strictly speaking best interest, because that implies the fiduciary duty that only exists in at least in Florida, right? As a single agent. Yep. But I do think that we're probably going to see more single agents, because now someone is paying conceivably paying someone directly for those services the same way they hire a lawyer. So in your murder example, right? If the criminal defendant is paying the defense attorney, then the criminal defendant would expect that the defense attorney is acting as the person who's paying them their best interest. All right,

Kevin Johnson: 36:41

so we got two more I think we can talk more about Commission's on this one, I don't think commissions are going to fall either. Jump back to home prices just a second. Because, you know, at the end of the day, you know, if the seller is not offering, buyers agents are going to charge maybe on the buy side, we might see a little drop because a brand new agent going out might not feel as comfortable if you don't have great training and great support, you know, to negotiate that commission to make sure they get it if there's nothing being offered by the other side. But I think on the listing side, you know, if we split it, I think you're talking about we're actually going to see an increase in the cost on the list side commission. When it comes to home prices. That's the other cracks me up is like these pundits and these experts saying home prices will fall because of this, that this is artificially help home prices up. If I'm a seller, and I'm a I'm gonna say I'm being cheap and I don't want to offer any comp to buy side. I'm not doing that to then discount the home price. I'm doing it to put the extra money in my pocket so I can pay my my agent on the next purchase that they're helping me with. I look back up just to make sure I was wrong. The definition of market value yesterday, like I looked over it from you from USPAP. Right. Like I don't see anywhere that this is a national standard, where market value is determined based on Commission's being paid or not being paid. Yeah, I

Andrew Doyle: 38:06

mean, it's it's just a bastardization of the term. That's what it is. I don't see a direct correlation there. I think maybe what they're getting at is the cost of buying or selling a home. Right. So closing costs may go down. And again, that's only if the market reacts exactly the way that I think the sellers in the in the sellers in the Switzer Burnett case are hoping it would, which is each side pays their own commission. But the last time we talked about this, I made some predictions that really, I think go right to the heart of this issue of whether the home prices are going to fall or grow. And I think buyers, first time homebuyers may be priced out of the market. Yeah. And if you just think back to FHA buyers that are getting approved by the skin of their teeth, they don't have an extra 3%, they already have to put what three to 5% down percent.

Kevin Johnson: 39:15

They gifted, if they have some close relatives, they can do that. But then they're struggling with the closing costs, or three to three and a half percent.

Andrew Doyle: 39:22

There's always a struggle there. So finding the extra 30 504,000 $5,000 to pay a broker, a buyer broker out of pocket, that's going to be a problem. And when you extrapolate that out over the entire real estate industry, you have inventory, but no buyers, so maybe, maybe maybe they're right. That's what will help out a total cause the home prices to fall is a crash.

Kevin Johnson: 39:49

Right? The other thing too, nobody wants that as a as a buyer, right? If I only have the money I need for my down payment and closing costs. What I want that representation of Agent, I may have to instruct my my agent to, don't show me houses where the seller is not willing to, you know, cover your commission. And now we have a direct a direct from our customers telling this or client of being in a relationship that says no, don't show me these houses. So from a seller's perspective, you know, something they need to consider as well, because that that homeless on the market longer and then price will fall price will fall price reduction, but it's going to fall because of not because of this decision is going to be fall because and if enough people don't offer that cop

Andrew Doyle: 40:35

Yeah, and you know what comes to mind, the saying that my grandmother always tells me Pennywise pound foolish, right? You don't want to pay that commission, that's fine. You want to put some additional dollars in your pocket fine. But if you're trying to save 6000 And you end up losing time off market, the market shift occurs comps, you get a bad comp in the neighborhood that could cost you more than just $6,000 interest rates right? Or just simply loss of love, right? Loss of love on the MLS loss of attention.

Kevin Johnson: 41:06

Become a stigmatized property because you've been there too long. Exactly. You know. So where do you think big picture if we had to look at the future of real estate? You know, I kind of opened up with my headline where it's going to be okay, everybody deep breath like, you know, enjoy whatever libation you enjoy to calm your calm your nerves, but it's going to be okay. What's, what do you think the future I mean, short term long term.

Andrew Doyle: 41:31

So I definitely think things are going to be okay. I firmly believe that in one way or another, particularly here in Florida, we have the Florida realtors, they're going to spit out these forms, and they're largely going to address this issue. So agents here in the state of Florida brokers in the state of Florida, there's just like, there always has been there's gonna be a forum for that. So that's the first thing, right. Secondly, I do think we're going to see some changes, primarily on the buy side, I think that we're going to see a lot of confusion. I've already begun to hear murmurs and echoes from people, about sellers already saying, Well, I don't have to pay a commission anymore, right. We've had one already. So you know, the real world, the market participants, the buyers and sellers, they're seeing these CNN headlines, but they don't have the benefit of hopping on an industry podcast and getting the truth. Right. So this is what it is. So I do think in the short to mid term, we're probably going to see a lot of difficult conversations that buyers, buyer agents, selling agents and listing agents have to have with their prospective customers about this. And I think that brokers are well informed to have good training sessions about how to address that in compliance with the particular brokerages policies and procedures, like how do we respond to this? Right?

Kevin Johnson: 42:56

I think we're gonna see a ramp up to on the brokerage side of more mergers and acquisitions happening, I think you're gonna see some more tenured brokers that have been in this for a while, they were already getting closer to the end, I don't want to deal with it, you know, yeah, I don't wanna deal with it. I was gonna say, and we, you know, within the century, 21 brand, I know, they had a record banner year of mergers and acquisitions last year. And so I think we're gonna see a lot of those smaller companies fold into bigger companies, or even to medium size, fold into a bigger company to have those resources, I think we're going to see, I think there's gonna be just a native drop in agent count, I think you're gonna have a lot of the more tenured agents, they're like, Yeah, I'm out, I'm retiring. This is a good, this is the perfect curtain call. And they have some of the newer agents that joined the industry, you know, during the, we won't say the word so we don't get you know, demonetised. But like, the big 2020 Fun health issues we had, yeah. You know, that joined because it was much like order taking at McDonald's, right? You know, you want a home, you want to pull with that. Okay, great, here it is. Let's go. You know, and now, you see agents gravitate more towards the buyer side, because it's been easier. You know, on the sell side, I have to prove my worth, I have to go in and have a conversation and, you know, try to defend my value and prove my value and defended. I haven't had to do that on a buy side because the buyer wasn't directly paying me. Now, if that's the that's a potential you're gonna have to prepare for on every buyer. right that there isn't. So you have to be able to say, hey, you know, if there's no comp, this is what you're paying me. And that's a different conversation then like, yeah.

Andrew Doyle: 44:33

So that leads me to question. You know, if we're talking about where this is going, right, are brokers in a position? Are they committed to enforcing the terms of the buyer broker agreements? Put another way. If you're a broker, and you're training your agents to sign these to make sure that these buyer broker agreements are signed, are you prepared to put teeth to the paper. Are you ready to set to sue? A buyer? That bails on that obligation? Right? What do you do?

Kevin Johnson: 45:11

Excuse me, what are we doing wrong to? That? That's a question I've been myself, you know, struggling with, because no broker wants to be seen as the broker that sues consumers. That's a public relations nightmare, right. But at the end of the day, if, you know, a segment of the population, whether it be you know, consumers or agents or whatever, know that, you know, I from the, from the agent side, my broker won't have my back to get my comp and their agent side, well, this this brokerage is very litigious. You know, one side wants you to see one side doesn't like you to sue, right? How do you deal with that? How do you address the cost of that with agents? Take Well, there's, there's a big conversation that's gonna have to happen to see because you don't want also be seen as buyers? Yeah. I'm not worried about it. They're not going to come after me.

Andrew Doyle: 46:03

Right? Yeah, fine, I'll sign whatever you want me to sign I'm never gonna pay, and there's nothing they can do about it. They can't keep me from buying my house. Right. And I think right now, status of Florida law is that yeah, I don't, I don't see a scenario where a buyer's broker can interfere with the real estate contract, when the buyer has refused to pay the commission at closing, by either bringing that additional sum to closing or something like that. I can't see a scenario where a seller would not close because the buyer didn't pay the buyer's agent commission, I can see a scenario with sellers like, I don't care, you want to take $6,000 off the off the total go for it doesn't affect my net proceeds. I'm signing right.

Kevin Johnson: 46:49

Lot of questions in like the lien laws and how they work in Florida in various states. I mean, state by state, right is, you know, how can you securitize that buyer broker agreement, because there's nothing you can attach it to, right, they buy one don't pay anything with a law change, we can go after them after

Andrew Doyle: 47:05

that was that was the thought a couple months ago was okay, well, no big deal, we can just roll that into the mortgage. But you can't because that's not part of the collateral that banks securitize with the mortgage. So you can't just tack on 3% of the purchase price and add that to your loan the property has to appraise at or above the value of the mortgage that's being borrowed. So unless you have that wiggle room, which in some cases, maybe you do, right. But I have had some conversations with a lot of lenders, and they said this is this is a nightmare, if this is the route that that it's going and we have to work away to add in the buyside. Commission to mortgage Congress, literally Congress has to change the law.

Kevin Johnson: 47:47

And the other thing is, is that the right thing to do for buyers, because now you're taking a commission, and you're financing it at six 7% for 30 years.

Andrew Doyle: 47:57

Now enormous interest rates. Yeah, like

Kevin Johnson: 48:00

my is that the right thing for the buyers? No. It's a challenging market for sure. And you know, I think, you know, right now, there are a lot more questions and firm answers, which is how it's designed. Everybody needs to take deep breath, relax, let's get through the quarter approval. There's also that other little entity, you know, the insignificant Department of Justice, quote, unquote, right, that still has to chime in there. They're not done with the industry. What are they gonna do? Is this gonna appease them? Is it not? You know, because their big thing is they want to complete decoupling where the listing, the the seller can't pay the buyer's agent calm. Right? So that's what that's what DOJ wants, right? They're not getting that in this agreement. Are they going to be okay with this, this, and they leave alone back off, who knows. So there's more to come on that front as well. So, you know, everybody just needs relax, let's wait for the courts. And then your your state realtor board will come out with the forms that you need. I'm assuming all the other states work like Florida, where they provide them forms. I know, I was researching different listing forms yesterday or listing contracts. And even though Ontario they have their real estate associations, we're not realtor, but real estate associations, and they provide forms as well. So it's pretty standard. I'm sure. We wait for those to come out. And we'll be fine. You know, make sure if you're a broker, make sure you have a good attorney on your side, you know, to help advise you this is not the time to not talk to your attorneys, make sure you're having an open dialogue with them and knowing what are the impacts of the ruling of the settlement proposed settlement? How will they impact your business and start preparing today? Don't wait until it's time you know, start preparing. If you're not using buyer broker agreements, start today, start mandating that day change your policy and procedure manual. If you're an agent not using them, you should be using them have those formal buyer consultations. You know, I asked the question yesterday, do you have origins? Would you go take a listing without a listing agreement? Absolutely not. I mean, that the resounding no. What are you talking about? That's crazy. That's stupid. But we see agents every day do that with buyers. Why would you take a buyer without a contract? Why

Andrew Doyle: 50:07

would you drive all around town showing 35 houses to someone without having something in writing

Kevin Johnson: 50:13

or showing 35? houses? They need some training? Fair enough. Fair enough. Three to five. Okay, right.

Andrew Doyle: 50:18

That's a 35. I meant three to five. Oh, that's

Kevin Johnson: 50:20

you, man. Okay, that works. Yeah, yeah, that better. So, any final thoughts before we close it off for today? No,

Andrew Doyle: 50:27

I just bring it back to where we started, right? Keep calm and carry on. It's not the end of the world. It's not the end of the industry, the world, the sky is not falling, we'll figure this out. And, you know, we're gonna see some real changes in July. That'll be interesting. I'm sure we'll probably do another podcast on what those real changes are and how they affect local analysis here. But it's not the end of the world, despite what the pundits have been saying this week.

Kevin Johnson: 50:55

And also think my final thoughts is as an agent as broker owners, if you're in this industry, you need to be paying attention to the news. Good or bad. You need to be watching, I was speaking with an agent the other day, it's like I just don't like the news. I tuned it out. I said I get it. But your your customers are your clients are. And if you don't know what they're seeing and what they're consuming out there in the media, you're not going to be prepared to be able to respond, right and make sure take the time, download the settlement facts dot realtor B kit, download the fact sheet, the settlement everything. Paragraph 5858 of the kind of the settlement will go through all the practice changes they're proposing. Oh, one final thing, paragraph 59. First sentence, what hashtag What the

Andrew Doyle: 51:41

I? So I honestly, I don't know. I've reviewed it a couple times. So I'll share with what it is. Yeah. So there are 59. The first sentence of paragraph 59 basically says that all of the settlement terms kind of drop off after seven years, so they expire. God. So in a really strict reading of that, it seems that this the disappearance of the offer of comp fields might result in a reappearance seven years down the road. I really don't understand it. And I mean, it's it kind of boggled my mind. To see that there. There has to be some reason but in I just I can't glean it from the, from the document itself.

Kevin Johnson: 52:26

It's an odd it is when you asked me if I'd read. The first is a 50. How am I going? I'm sure he's referring to the sentence. I was like going, WT H about right. But like, I opened up my yep, that's the one. It's Yeah,

Andrew Doyle: 52:39

it's weird. It's weird. There's probably some if I had to guess there's probably some confidential reason why that specific term had to be in there. I don't know. Maybe it's bankruptcy protection? I don't know. But there has to be some compelling reason for one side or the other for why that needed to be in there. And for why

Kevin Johnson: 53:03

the plane has allowed it. Right. Right.

Andrew Doyle: 53:08

Maybe it's look, this is a temporary stopgap measure until we have a more permanent solution. So we'll so NARS offering to give seven years of this. Let's see how the market reacts after seven years, we'll see if consumer if consumers if the market drives down the average commission, right? Because our position is that no rule that we have ever set out, has actually artificially inflated the cost of commissions,

Kevin Johnson: 53:33

right? Who knows? No, that was a rather interesting one. But anyway, back to my saying is, you know, follow the news. Follow the headlines, read the settlement. Make sure you know what it says so that when a a seller or a buyer has a question, you can answer it with confidence. Remember, you're not an attorney. So don't don't cross that line. But the facts are out there. Like internally, we have an FAQ document we're running and I preface it or I worded it as if are the sellers asking original question how the agent can respond based on the facts of my effect. I use chat, GBT uploaded the settlement agreement to you like you have mastered that thing trained it so it's actually doing how you can now feed it in a news story and ask it to fact check it and it's hilarious. I thought it's it's nailed it every single time. So it's been kind of interesting to watch it fact check stuff but so definitely make sure you know the facts. Make sure you know what's in the media. And don't trust the headlines. Don't trust the stories fact check everything. Be the expert. Be the calm, cool, level person that's going to bring some sanity and talk to your customers. Make sure they know what's going on and know with a timeline of everything. Don't go crazy. Don't panic. Don't be don't be that agent. Right? There's plenty of them out there doing it for us. Don't be that agent. No. So all right, everyone. Thank you so much for tuning in. into the 121% podcast. If you're listening on your favorite podcast app, please do us a great, great big favor. And make sure you follow us there. Make sure you give us a review give us those five stars. It helps the algorithm push our podcasts out to other folks. If you're watching the video on YouTube, make sure you hit that like button. Make sure you subscribe to us and hit the bell so you can be notified the next episode. Next episode should say is released. So remember the 121% podcasts. It's the 50% education it's 50% motivation, but the difference between ordinary and extraordinary is the extra 21% Thank you so much for watching. We'll catch you next time. Awesome