Navigating the National Association of Realtors’ Changes Together: How This Impacts Your Home-Buying Journey (Featuring Our Agents, Sydney & Jenn)
CREDITS
Hosted by: Kristina Modares and Steph Douglass
Produced and Edited by: Megan Pue
Music by: Lemonmusicstudio
Photo by: Chelsea Francis
SEASON 6, EPISODE 10 SUMMARY
The real estate landscape is buzzing with discussions about the National Association of Realtors' (NAR) recent adjustments. We're here to cut through the noise for you! ⚔️ In today's episode of our podcast, experienced Realtors Sydney and Jenn speak on these timely changes that will take place in July 2024 and how this may impact your home-buying journey.
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Transcript (Auto-Generated)
Welcome to the open house podcast for women talk real estate. I'm Steph Douglass and I'm here with our expert agents, Jenn and Syd. We are missing two of our agents, but just due to scheduling issues. Um, but Jenn and Syd know so much about the topic we're talking about today. Um, so I'm excited to get into it with them. We're really wanting to dive in and keep everyone up to date on this NAR settlement. And so we want to first get into like what it is.
why we're even talking about it, and if you have never heard of this, kind of give you some background. Jenn, do you want to talk about what NAR is and what's happening? Yeah, so NAR stands for the National Association of Realtors. If you are an agent and you have the realtor designation, then you are a member of this group. You may also be a member of a state association and a local association. But essentially, they help...
realtors, agents, you know, navigate ethics and rules about how to do our jobs well and represent our clients well. What was the second question? So yeah, perfect. That's what NAR is. Like all of us have had, all of us agents have a lot of knowledge of NAR. There's not really a reason for clients to know about them until recently when they were sued by a group of sellers, actually don't even know where.
but a group of sellers that felt like they were wronged in the process. And so this is a settlement that has been made. And honestly, we're talking about this a little bit prematurely, like nothing is set in stone yet and nothing has even gone into effect. So this is all like potential, but we just wanted to make sure that everyone knew that we were on top of it and that we're, and we want to make sure that you're in the know as well. So what about this lawsuit and like what's happening now that's.
relevant and why we're talking about this, Syd, wanna talk through it? Yeah, essentially there's been a lot of headlines in mainstream news outlets talking about this settlement and we've been questioned by current clients, past clients, clients' moms. It's something that we're seeing a lot in the news and essentially I think what it is causing is confusion and people just thinking,
Steph (02:28.462)
initially like, oh, sellers might not have to pay a buyer's realtor when a buyer comes to purchase their house. I would say that's the main question that we're getting right now. Right. And if you aren't aware, that has been sort of the norm in the past that buyer's agents are not typically compensated by the buyer when you go to purchase a home.
the seller has negotiated with their broker to pay a fee to their agent, as well as the agent that brings the buyer that ultimately closes on the home. Yeah. So traditionally it's been 6%, 3 % for the seller's agent, 3 % for the buyer's agent. And that's just like how it's been. And it's always been negotiable too, but that has been generally what people can expect. Yes. And that amount is advertised currently on the
MLS, the multiple listing services, as, okay, we're going to pay as a listing agent, we write that we're going to pay the buyer's agent X amount. We've done deals where it's, most of our deals are 3%, but sometimes it says one and a half, sometimes it says two. So that it's not a set in stone. Sometimes it's four. Yeah. Yeah. And even builders, builders are paying these buyer's agents as well. Right. So this lawsuit basically was like, why should sellers be...
be paying this fee out of their proceeds. They didn't get to choose the agent that represents the buyers. That's a big piece of this. So the settlement means that there's a small change in how this is advertised. What Syd was saying is it's producing a lot of confusion when it's not that large of a change actually. We do think there will be a shift in how things are done. Do we think there will be a big shift in,
price point, which is like a lot of what the headlines are saying. What do y 'all think? Yeah. And really quick, just to touch on like how things are done. Like a lot of it, I think is going to be documentation and just how we're going to be finding out what a seller is paying and then also communicating that very clearly to our buyers upfront. So there's no surprises. I think when it comes to how is this going to affect prices or
Steph (04:49.614)
what a seller is going to contribute maybe to buyers closing costs. I think that currently right now, I mean, in Austin, our average days on market is around 65 days. People typically want to sell as fast as they can. And so with that being said, right now, you know, even running through comps and looking at this data, I mean, right now, business is as usual. Sellers are for the most part,
contributing around 3 % to a buyer's agent. And then even sometimes on top of that, they're wanting to have a competitive edge and offering to pay closing costs. So buyers can do a temporary buy down for their interest rate, things like that. So I think I would say no for now. And also we can touch on the inventory. We are still seeing less inventory than we want to see. And traditionally, the reason that it was sort of
set up this way and the reason that sellers are able to pay their agent and the buyer's agent and contribute towards closing costs is because they have equity in their home. So all of these fees are coming at the closing table. They're not paid ahead of time. They're paid when the house closes, it transfers ownership, when the seller's mortgage is paid off and the proceeds are transferred to them. So all of that is taken out at that time.
And generally, if you've been in your home five, 10, sometimes 20 or 40 years, you have tens to hundreds of thousands of dollars in equity in your home. So it's sort of like that money isn't being paid out of your bank account, right? It's being paid out of the equity that you've been building over the time that you've lived in the home. And it's sort of always been calculated in as the cost to sell. Right. And this, the way that things are right now, meaning the sellers pay this both agents.
came out of necessity. Whereas in the early days of real estate, there were only listing agents. And then it became a necessity that buyers needed to be represented as well. And so the sellers were willing to pay the buyer's agents. Well, they do the lawsuits. Yeah, they do the lawsuits. Yeah, buying that wear. Exactly. And so buyers were getting screwed because they were being represented by the seller's agent, the seller's agent who has the seller's interest at heart. Having someone represent you as a buyer is so...
Steph (07:11.47)
incredibly important, someone who knows the market, who knows what is the norm on that day in that time of buying real estate, someone who can speak on your behalf and to make sure that you are getting the best deal possible for the largest purchase of your life. So this became a norm that the seller paid the buyer's agent because the buyer's agent was bringing them through, doing all the work on that end. So it's funny that this is kind of coming up.
But because it was a necessity, I do believe it will stay a necessity. And we think that for the most part, it won't really change that much. And it will just be a difference in documentation and transparency. Yeah, the other sort of piece to the settlement is that buyers will, buyers agents are required to have their clients sign a buyer representation agreement. If you have never gone to buy a house before, you probably will have never seen this, but.
It has always been a part of our company's rules and our methodology that we have this conversation and present this document to our buyers before they offer on a home. And it clearly dictates what our fiduciary duties are to our client and that we represent them and their interests and not the sellers. So that won't be a change necessarily for us, but could definitely be a change for other agents, other brokerages out there that haven't been...
you know, using, utilizing this piece. Okay. And a lot of agents who don't provide as many services as we do and don't have the experience that we do. And so really, I mean, this is kind of a Sydebar. We didn't talk about this beforehand, but I do think that we'll see a lot of agents exiting the market because they're part -time. They don't have the system set up that we have. It might shift to just like the highest quality of buyer's agents are able to survive. And that is totally fine for us. Right.
It's what value they're bringing to the table. Right. And that even goes, um, I think in hand with, we have clients often who maybe want to buy the home that they're renting in, or they want to buy a, it's a bit more rare now, but a for sale by owner home. And a lot of people think this is the biggest purchase of my life. I want to hire a realtor to represent me. They typically have never seen these contracts before.
Steph (09:36.622)
You know, and it's very complicated, just like you would hire an accountant, an attorney, anything else like that. Honestly, a consultant. Yeah. Right? Consultancy is a huge business because you want expertise advice on something that you don't know very much about. And not knowing about the ins and outs of the real estate world and process is the norm. Like, why should your average person know that much about it? They're not doing it every day. We are, you know?
So it does make sense to have that. And I like that you said that. They're not, they're not needing help opening doors, the people that are buying their rental. They're needing help with like everything else, the negotiating, the what, the contingencies, the legalities. There's a huge, like complicated, um, I mean, process behind this. I think about how many inspection reports we've seen and negotiated through. Just thinking about all the systems of the house and how much.
these things could cost to repair and then us going to the seller to ask for, I mean, sometimes 20K plus. So, you know, that's kind of a tangent, but. Yeah, it's very similar to the reason that we suggest and always recommend hiring an inspector, right? You don't know what you don't know. You're not an expert necessarily unless, you know, you happen to be a general contractor or something. But, you know, you need someone there to tell you what you need to know, what you don't know, and use that information in the best way possible.
And so not only are we negotiating those, you know, price or credits based on the inspection, but based on everything else that we have knowledge about, which is the market. Right, right. It's usually when you're hiring a consultant, it's because you're paying that money to then get even more money in return or to save that amount of money or more. And it just it does. Or to make a better investment. Exactly. Or to make a better investment to then get a higher return on investment and or to have to save yourself a headache in the future.
And so these fees aren't just arbitrary for realtors to let you into homes. It's definitely more than that. And in fact, that part of it, letting people into homes and finding listings is so small a part of our job these days because the internet exists and remote locks exist. That's not a huge part of it, but it's more about the presence of your knowledge and walking through a house with someone who...
Steph (11:59.918)
has the expertise in walking through houses every single day in the city. So, oh, Charles, or a guard dog. Yes, okay, so what else do we want to kind of convey in this? Really the biggest piece of this that sticks out to me is that it's causing confusion to all parties, to brokers, to agents, to consumers, to sellers. It's just a huge mess of headlines.
making people think one thing when really it's something different. What else do we want to touch on?
I think along with that listeners, I'm sure that after this you're going to do a Google search and a deep dive and think that you understand it, but just know that talking to a realtor in your area or us, if you're in Austin, that we are happy to have this conversation and explain at least as far as we know what's going on. Again, none of these changes are set to affect until July. There's still the possibility of appeals. And a lot of this will just depend on...
how our market adapts to it. And all realtors in our area will have to navigate that as that comes. Yeah. Another thing I wanted to sort of, I mean, we said this a little bit, but for the most part, sellers want a fair deal and they want buyers coming through the door. So not offering to pay someone to represent the buyer is limiting their...
market share essentially. It's limiting who's gonna see the house. The more people that see the house, the higher price you're gonna get. So it does make sense for buyers, sorry, it does make sense for sellers to continue to offer this fee. And we think that for the most part, sellers will. Yeah, I just had this conversation two days ago with sellers who are about to list in around a week. And of course, they saw the headlines, they're educated and...
Steph (14:01.934)
You know, they asked like, what do you think? Like we're open to feedback. And I said, well, let's look at what's on the market right now. And also like what they're offering for commissions to a buyer's agent. And you know, we look and they're all offering 3 % currently. And so they want to sell quick. They want to be competitive. And so sure, in theory, could they not offer, you know, that 3 % commission to a buyer's agent? Sure, they could, but.
they want to be competitive and they said, okay, you know, that let's do it. That makes sense. Similar to how builders are still offering commissions to buyer's agents because they want, you know, all these buyer's agents, they're taking time. They're not only showing the home, they're running market analysis on how it's priced. They're, you know, doing a lot of work to essentially help their buyer go from inSyde the door to at the closing table. And so,
currently now sellers that we're working with still want to offer. And again, not every agency will obviously will be like this, but for our case, those fees go towards producing this podcast along with the blogs, the newsletters, the content that we are constantly putting out, really educating y 'all on how to buy a home in the creative way, in a smart way, in a way that
gives you the most opportunity later on. And so for us to be able to continue to create that content and get that information out to you, we really rely on this. Yeah, it's a job. You know, we're spending over. Yeah, like that's that's what it's. And I think that before potentially buyer's agents were advertising like this is free. And I'm sure we've said that to people because it was covered by the seller traditionally. But like if we're being really honest and transparent, which is a huge value of ours.
Like that fee comes around at the end of your seller's journey when you're selling that you then have to pay. So it's really not free because working for free doesn't work. So it does make sense for buyer's agents to be paid. And for people to really get this, I think there's a lot of resentment in this industry of like, well, they don't do anything. They're just like looking pretty. And that's definitely not what we do. It's not that we do that. We do that. But I think that like,
Steph (16:30.638)
with everything that we do specifically, like our brokerage, it's so much more than that. So it's like, all of this confusion is real, but it does come with the understanding that like, we're doing a job here. We're consultants and we wanna make sure that you get the best deal, that your sellers are getting the best deal. Like everybody involved has a fair transaction. And I think...
it's easy for people to be like, well, you have the internet, just like click buy on Amazon and you buy a house. And like, it's so different from that. How many times have you returned things on Amazon? It didn't come what you expected. Exactly. So like this process, like every time someone has said like, well, your job's going to become obsolete. I guarantee you it isn't because we work with these buyers every day. This is more than just like buy sell. It's a mindset shift. It's a coaching, it's therapy, like all of these things to help these buyers get in the mindset of like,
this is a huge investment and I want to make sure I'm doing the best I can. Yeah. And I will say too, like we have worked with buyers over the years where these situations come up where maybe the seller is not offering, you know, a standard quote unquote fee. And I will tell you that again, buyers do want to be represented and we have had buyers pay out of their closing costs.
for a realtor as well. So like, it's not going to be, you know, every transaction looks the exact same. We really are anticipating what a lot of this is going to look like. And we're like really keeping a pulse on what's happening in the Austin market, what's happening nationally, and then what's happening, you know, with our clients specifically. So, yeah. I agree. I think it might come to the fact that buyers are covering a portion of this or all of it.
And we still think that that is fair because of the money we're saving you, the negotiations happening behind the scenes. Syd mentioned $20 ,000 in repairs is not uncommon, and that's because we're advising on what is possible and what needs to happen in this transaction. And so we believe that even if you, as the buyer, have to pay this fee, you will get that money back in spades. And...
Steph (18:51.118)
Again, us specifically, you're our clients for life when you close with us. So there are continued services and events and advice that we provide even after we've gone past the closing table and our fee has been paid. We continue to work for you. So we're working before and after. And we do that for hundreds of our past clients. Hundreds, literally. Man.
That was better than I thought it was going to be. Should we say like, we'll continue to update you? Yeah, yeah. I think, I think we'll... That was it. Talk to you in the next one. We will keep you up to date on this for sure. We're talking about this every week. I mean, more than every week. We're in Slack talking about it constantly, staying up to date. And like, this is a huge deal in our industry and we are not...
worried. We're worried about the confusion it's causing, but ideally this is all figured out and come July we have our systems in place for this to not cause a huge thing. And just know it could look different in every market, so stay up to date with what's going on in your city. We will definitely be keeping our clients surprised of how our particular market takes into effect, but just good to know the facts. Yeah. Awesome.
Amazing. Good job. I'll see you next week. Bye. Bye.