NAR Settlement Update: “Steering” Fears Grow, Agents Are Trapped

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The NAR settlement was supposed to bring lower fees for sellers and a healthier housing market for all. So, how’s the agent commission lawsuit turning out? Well, it’s not quite what most buyers and sellers hoped for. Months after this historic settlement, we’re beginning to see side effects from this massive industry change—side effects hurting buyers, sellers, and agents all at once.

With the growing fear of “steering,” agents now have a tough choice to make: show buyers houses that come with no commission or show buyers only houses with the promise of an agent commission. This creates a lose-lose situation for real estate agents and realtors. Either work for free or get paid for doing your job and get accused of "steering." Since most first-time homebuyers barely have enough money to close, let alone pay another five-figure fee in commissions, isn’t everyone losing on this deal?

Christian and David dive into the aftermath of the NAR settlement and describe how this affects all parts of the deal, plus what investors MUST discuss with their agent BEFORE moving forward.

00:00 NAR Lawsuit Update
03:11 The "Steering" Problem
07:09 A HUGE Extra Fee
09:28 Do This BEFORE Hiring an Agent
11:30 Say This to Your Agent
15:31 Meet Christian and David!

[dyingbatroad]

If was to sell my property, I'd pay the buyer's agent's commission. The way I think about the math is if the buyer doesn't have to pay their agent, that money could instead go to the down payment. Say they put 20% down; i.e. they're leveraging 5 to 1. Therefore in a sellers market, more $ available for down payment could lead to an offer that might be 5X the commission more than if they paid their agent (assuming the downpayment controls how much mortgage they can afford). For the buyer that increased purchase price get's spread over the 30 year mortgage, and basically becomes negligible. It also alleviates a short turn liquidity crunch when they buy. Sure maybe there's an unrepresented buyer who might match the offer, like an investor, but if there's more than one investor and they have their RE license, they will factor this into their bid price. If I'm selling my property, I want the most number of buyers to bid on it, so I want both agent represented and un-represented buyers. There was nothing wrong with the system where the seller pays the buyers commission, in most cases it helps make the deal a win-win.

[RoyalRiverRefinishedFurnitureb]

As an investor i always listed my own properties - one time a buyers agent made me sign a 3% agreement before she handed me the offer from the buyer. I did but luckily the buyer dropped out and i sold it a couple weeks later at a much higher price to a feeding frenzy situation - it sometimes just takes patience timing the season and being selective over the buyer - especially make sure that they are enthusiastic about the property and they have the means.

[RichFlemingRealtor]

When I act as a buyer agent, I'm not sure I get what the steering concern is. Why do I, as the buyer's agent, who has a fiduciary duty to the buyer via our contractual agreement, have to worry about showing a seller's home if that home doesn't meet my clients financial needs? Sellers pushed for these changes and they got them. If my client has minimal or no funds beyond their down payment and closing cost, then it doesn't make sense to show them homes where the seller isn't willing to compensate the buyer's agent. Should I work for free to help the principles (especially the seller) out? If a seller chooses not to offer compensation to the buyer's agent, that's their choice and it's fine ... but they need to live with the consequences of that choice. Steering based on economic/business factors is fine. Steering based on protected classes is not.

[amandastewart]

Or the buyers will just to directly to the listing agent and not worry about paying a buyers agent.

[InvestingwithBishop]

Find and use a great agent. We exist. Referrals are how I thrive in this business.

[nevadawest]

I take it one step further, why do we need a buyers agent .. I have a real estate attorney who will, represent a buyer
on any transaction for any sell price for a flat fee of $3000.00 that includes the completing the purchase agreement, and all the appurtenant disclosures.. there is zero need for a buyers agent, ever .. as a seller I prefer to reduce the selling price by 3% which will make it more affordable for the buyer, there is absolutely no need for a buyers agent, they can only complicate the transaction..

[scientificapproach]

Everything is negotiable when a buyer makes an offer.

If the buyer wants the seller to cover their agent, they can ask the seller when they make their offer. No reason for the seller to offer this upfront.

[RealEstateEntrepreneur]

The Buyer is on the loosing side because the commisions are paid to the Broker of the where the listing agent is working for. So when the buyer pays the commission to the Buyer Broker, the listing broker gets a part of the commission paid by the buyer a well.

[jwills]

Last i checked. It's pretty expensive to sell a house. Not a one way street at all like you guys make it seem.

[michaelgallagher]

Great take guys. What’s funny is that those of us who operate in the investment and commercial world have always had these covos with clients so really it’s not that big of a difference for us. The traditional agent may have some challenges though.

[Monica-Elise]

this episode felt like an ad for realtors. If I as a buyer can find houses myself, do my own touring, and can write an offer, i am now able to create value for myself in the transaction. y'all didn't mention unrepresented buyers or buyers represented by lawyers who were not allowed to collect that buyer commission. And that $12, 000 neighbor example is not how the market works. assuming all partys are represented and all other facts stay the same, the seller not offering the commission will have to drop their price by $12, 000 for the property to sell. I get that realtors don't like the lawsuit. But it allows suffisticated buyers to put their own sweat equity in to the transaction should they choose to do that.

[Misticlorraine]

If buyers only have funds for their closing costs, and no extra to pay the buyer broker, then it only makes sense for that buyer to see properties where sellers are paying a concession to cover the buyer broker's fee. This isn't steering, it's simply common sense! And by the way, there's going to be buyers who will only have enough funds for their home inspection, and closing costs. Another thing, so many properties are being sold as-is, if the buyer has a FHA or VA loan, there may be repairs to be completed from the appraisal that the buyer will be required to repair. This is additional funds out of the buyer's pocket. There will be buyers who will have the extra funds to pay the buyer broker if needed, but sad to say, there will definitely be some who just will not be able to pay the buyer broker

[bestofUS_]

I see agent fees will deep dive drastically. Plus all that buyer seller thing will be automated- even the legal parts

[twochinsmma]

Do not offer agents 3% on either the buyer or seller side. Offer them an hourly instead.

[boomer]

Add the commission to the price of the home and then ask for a concession to pay the buyer's agent, but the commission be based off of the list price of the home. This new rule is asinine, the seller was already adjusting in their mind that they would get 6% less at the time of closing. If the lawsuit wanted to truly make an impact they should have gone after the commission percentage. When I was selling real estate, the commission was 7%, but originally the way that came into existence was back when homes were selling for $10, 000 which would have been a $700 commission. Now homes are $500, 000 @6% is $30K for what to fill out some papers. The courts shot themselves in the foot as far as trying to make the playing field "Fairer".

My realtor, when I sell one of my rental's states in the contract that if she sells the property then the commission drops to 5% from 6% for what? The commission should be 3% that would make life fairer for the seller. If I was younger I should get my license and then I could get a piece of the commission.

[BrokeDadProductions]

I am not a realtor….but have a question. If the seller is offering to pay the commission to the buyer’s agent and the purchaser signed an agreement to pay the buyer’s agent, can the buyer’s agent collect payment from both?

[NateJohnson]

It would make more sense from a buyers standpoint to pay a flat monthly fee to get assistance finding and purchasing a home with maybe a bonus when one is found vs a percentage of the purchase price.

[RoyalRiverRefinishedFurnitureb]

I have always thought unfair that the buyers agent should be paid by seller since you hired them to search real estate instead of get on zillow yourself and make the calls - i love getting homebuyers without the agent and one time i sold half acre land for $195k direct to homeowner and i made them pay all closing costs so i walked away with the sale amount (since i had bought with cash $150k) it wax a very amicable deal made over the phone. You just need a closing title company, thats it. All the cash being made on agents is so ridiculous, ive been thinking of becoming an agent just because i love real estate and the payments are so crazy

[nathanvanhuis]

You sold me on the Cancun trip when you said you'd give me a hug.

[DouglasFelts]

Yeah I saw the writing on the wall so much so that when a traditional exp real estate agent sent me to an investment friendly real estate agent to learn how to convert everything into wholesale. I took the ball stayed away from agency gladly in every way legally and vicinity and it was the best thing to ever happen to me.

I really am just not an employable kind of guy and I didn’t wanna be made to just sit at the brokers office everyday begging them to let me go into the field and get a no.

Since then I proved 17th pence my assumed worth immune to broker opinion.

In relation….im glad NAR doesn’t matter to me anymore nor ever will again.