EP: 0041 - NAR Settlement & Real Estate Changes in the PNW w/Nathan Butcher.

The NAR (National Association of Realtor) settlement was enacted into law, and Realtors are now working with new rules regarding fees and disclosures. What is not in the news is that in the PNW, Realtors are members of the Northwest MLS, a private MLS that had already adapted to many of the settlement requirements over the last few years. In this episode, Nathan Butcher and Paul Balzotti break down the changes and what they mean to the consumer and the industry in the Pacific Northwest. 

1:00 Breaking down the 3 major changes to Real Estate related to the NAR settlement. 
7:40 One major change that has not changed in the Pacific Northwest.
8:43 Benefits of the changes.
14:00 Services and communication around a buyer service agreement. 
23:30 Frequently asked questions around the news, and how Nathan and Paul are responding. 

Nathan Butcher can be reached at nathanbutcher@johnlscott.com or 360-389-3002.

Transcript

Hello, and welcome to the Bellingham Real Estate Podcast. I'm Paul Balzotti, I'm here with Nathan Butcher. Welcome, Nathan. Your second. visit on to the podcast. And today we are talking about the National Association of Realtor Settlement that has now been enacted into law. As of about a week ago. So we thought it'd be a good time to discuss the realtor settlement, and how that's affected everything on the podcast today to kind of break it down for people that are, you know, reading about this, hearing about this, and then also you and I just to kind of have a casual conversation about how it's been enacted and then also how it's

how it's kind of affected business, especially since now it's been a week since it, since it's been live. So let's get right into it. So, Nathan, why don't you, you know, share with everybody the three big, aspects of the realtor settlement.

Yeah. So, it was the Department of Justice chose this for the NAR, and then they settled and came up with three things. And so the three things that every MLS around the country that is owned by the National Association of Realtors is required to do is that, number one, they need to decouple all, commission payments to both the buyer broker and the listing broker.

And in the past it has been different than that. So now they just want to say you may pay this person. You may pay this person. And you can talk about each of those fees separately, which is awesome. number two, they have, created a requirement to have every client sign an agreement with a buyer broker prior to actually giving out those real estate services, which the purpose of that is to make sure that people understand what a real estate broker is doing and how they get paid.

And then the third one is that they are restricting the ability for an MLS to publish any amount that a seller is willing to pay a buyer broker who's representing a buyer on a transaction.

Yeah. And so that's the that's perfect. That's exactly the settlement. And then we should explain now what that has meant for where we live in Washington. So going at number one to begin with the first one was the decoupling right. Yeah. So with the decoupling we're members of the Northwest Multiple Listing Service, which is a private MLS, which is a super important thing for people to understand.

We're not a realtor owned MLS, and the settlement was against realtor owned MLS is of course, it affects the entire real estate and national community. But there is a there's a big distinction here. So with the northwest MLS, we've had the commissions decoupled for 2 or 3 years now. So one of the themes of this conversation is, is that we've been very fortunate to basically have these changes been enacted over the last three years instead of just all at once, whereas what you just explained, I don't have the exact numbers here, but probably 75% of the national real real estate community, all three of those things are all happening at once, and we've had

the first two happen over the course of the last 2 to 3 years. And then the last one, the, commission field, that's still there. So let's break each net one down. So number one, I just mentioned the decoupling already there, meaning that before the listing broker would say, you know, here's the fee and then I'm going to split it with the buyer's agent that was broken down.

It's like a. Two step process.

A two step process. And also, a lot of realtor association MLS is required that the seller offer a buyer's broker commission or MLS has had a rule for a couple years now that you did not. There was not a requirement to offer a buyer's agent buyer's broker commission, although almost everybody did still. so that's the first.

And then number two, what do we got was buyer.

Broker services, agreements, buyer.

Broker service. And that became and became.

Law here in the state of Washington on January 1st. So if you're somebody who's anywhere in Washington, that's that's common. There are plenty of people who are using that to to create transparency and, solidifying relationships with people for a long time. But that's new for many people. And the requirement, nationwide was just on on August 17th.

Yeah. So we've yeah. So that we've had them forever. some brokers practice getting a buyer agency agreement forever, and we've now been required to do that since January 1st, whereas other, other parts of the nation now, just now are required that now in the third part is the MLS field. And you can explain the difference there now.

Yeah.

And this is perhaps the the biggest difference in actually in the essence of all of this too, because it's the kind of a number one disrupter nationwide is to make sure that, that the ability to, to publish any amount that a seller is willing to pay a buyer broker has has been something that that the northwest MLS here chose to publish over four years ago out of transparency.

So any buyer knows what their person, their buyer broker might be getting paid. So it was a it was a high transparency choice for the northwest MLS that has has done wonders. Honestly. And if anything, it was a part of buyers understanding that they have more control than they realized over how much they pay their own broker through the the listing.

And so nationwide now what's happening is that whether that was a thing that was published or not, it wasn't everywhere nationwide. Now an MLS is restrict from any buyer broker. If I was in one of those MLS is I would not be able to log on to 1234 Main Street within my MLS. I would not be able to see if that seller was offering any compensation to me if I brought a buyer to buy that house.

Yeah, and that's what's that's what's convoluted and kind of messy about the whole thing is the northwest MLS took the stance a few years ago that okay, there's not enough transparency they’re agreeing that there wasn't enough transparency because there was. These lawsuits have been going on for a long time. and some of the lawsuits kind of stemmed from buyers brokers saying, oh, it's free to work with me.

You know, it's free when you write an offer with me, the seller pays me. Don't worry about it. It's free to work with me when in essence, of course, the buyer is paying for the buyer's broker, but just built in kind of to the terms of the agreement. And so the northwest MLS took that step. And it like you said, when you'd go online, if you looked on Redfin or JohnLScott.com you could see what the buyer's agent was getting paid that percent right there on the website.

That's been the case here for a couple of years. Most of the country that wasn't the case. What the realtor. And so the northwest MLS is saying, okay, the realtor association, now can no longer publishes. Well, we're still going to publish these because we want to keep that transparent. And we don't agree that it shouldn't be transparent what the seller is offering.

The buyer's broker. now you have all these realtor associations, realtor MLS is all over the country that are scrambling to figure out how they're going to communicate, whether the buyer's broker gets paid or not. And, you know, there's not, one way that that's happening. It's it's like calling the agent on some of them are doing different things that they're doing.

Fortunately, we're not dealing with that here. So I guess there's not probably any good reason to to go too far into that other than to know that it's it's not happening here. Like we are still publishing, what, what the seller is offering or whether they're offering something at all.

It's one of the most distinct things that if you're watching or listening to this and you live in a place that's not the northwest MLS, your area is. If we call this fighting battles is just fighting a different battle, and they're trying to accomplish different things. And I think it does take different things in those different areas. But what we have here in this, this element of transparency that it's already been.

So if the goal is just so that people who are paying a lot of money to professionals know how much money that they're paying to those professionals and where it comes from, like we've already made so many steps here in that battle. it feels great. And so to take away a step of that transparency would not have made sense.

So I'm very happy that the northwest MLS chose to to keep that there so that buyers can actually see if a seller is offering to pay a buyer broker any amount of money.

I agree. And so okay, so I'm going to give you a couple of things about it that I about all these changes that I actually like. Yeah. And you know and then what I don't like and then I want to hear your opinion too. And then I have other questions for you. So what I like about the changes is and the conversation is, you know, it does.

It does. I think that there's an element of when you meet with a buyer or seller, them really understanding the fees really well, and understanding the options really well. And, and part of the started, part of this started with transparency. But the reason why they took away the commission field and some and what the realtor MLS says is because the DOJ is really trying to break up the entire, the entire kind of, what they believe, what they see, what they perceive as kind of a what would be the term.

I look, I think.

That what they're doing is they're trying to they're identifying why they think things are happening in a certain way. Right. And they're going after the thing that they think is making things happen.

Right? Right. Which, which they and basicly. They're trying to drive down commission rates transparently. So yes. Exactly. Exactly. And so and, and you know, the.

Are Transaction Commission rates. Yes.

Exactly, exactly. And the argument on the flip side of that has been is there's always been discount brokers always. And so that has always, you know, been around. And so to say that okay. No, everybody's charged the same thing. It's just not true. but I do agree and think it's good that it's creating more conversations around those, more around those things, and especially for buyers, for buyers and sellers, quite frankly, to both understand how buyers brokers get paid and how the client has has the right to have those conversations and have those negotiations with the realtor.

There's definitely more tools and more disclosures around that, which is great for the business. That's great for the consumer. And so I agree with that. And I also think that it being in the news to some regard is is good also because it allows those conversations to go on. and I also think it's good because it allows and we'll talk about this more, you know, the, the brokers who are really understand their value and know how to communicate it for them to, be able to showcase that.

And then the brokers that have been, you know, quite frankly, their skill sets not there, they're not putting in the work, they're not putting in the effort, they're not putting in that. They don't they don't have their services lined up, in a way that provides the right kind of value. Then I think the consumer provides more shines more light on that, too.

so all of that's good. The only negative, I would say would just be that so much of the press is around the realtor, MLS is that even though our area is different, it's, that's why we're doing this podcast, in part is to try to explain that, that's been difficult because it's like, oh, I don't have to pay a broker anymore or I don't, I don't have to not pay him anymore.

And, and, and creating some sort of, narrative that by, by like by having these rules in place that the seller saves and money, which we could discuss is not necessarily true. you've got.

A I mean, you've got a lot of great stats on that as well. Yeah.

For sure. Yeah.

Study is like what actually happens in different scenarios. And yeah, of course quite the opposite.

Yeah. Yeah. So it's so that's kind of the negative positive. What is your input on how what do you think about all this. Is it pretty much the same thing. Is there anything you want to add to that.

Yeah. I think ultimately I mean, we've got a couple other things that you and I want to talk about in here. Yeah, I think each of those things will probably uncover any of the other stuff that I want to talk about with that, because you've you've touched on each of those themes there. And I think it's super important to understand, like people are often interested, what is it going to do to individual people?

That's one thing. What is it going to do to like the infrastructure of the industry? there's always those common questions of like, oh, does this mean I don't have to pay such and such anymore? There's always a version of that. And so it's funny how that would work, like, because then I have to explain the background of like you, you never had to you always could negotiate.

Yeah. But we totally understand that. There's some seller out there who walks up to a real estate broker and say, what's the what's the rate? As if there is just a rate and they'll say, such and such dollars, such and such percent, is that just the rate these days? And like that should go away. Yeah. Like that. That should genuinely die off.

There never should have been an infrastructure in such a way that that could have been the case. Yes. And that definitively is a good thing, that people can take ownership of the large amount of money that they're paying to professionals here.

That's exactly right. And so let's so there's the listing side of that. But let's start with the buyer side of that. All right. So so as a buyer's broker what I one of the reasons I wanted to have you on is we've had discussions for many years. Every broker has at our office, everybody at channel, Scott, has a similar set of, you know, education on this and has their own buyer guide to explain to a buyer and have a consultation on the on what what their services and values are.

But I know that you even before your with John L Scott and since you've been at John L Scott, you've been very proactive about. I want to write out a list of everything I do and everything how I add value to you and you're constantly working on that. So talk a little bit about maybe not necessarily all the details of all the services of a buyer's broker, but like how you put together your list.

And has that list changed? Yeah. How you, how you, how you present to a buyer. Like here's what I'm because it's like other than I'm letting you in a house, right.

Putting together the list in the first place actually was catalyzed by a similar mindset, I think, to how this is all happening and what the purpose of it is. You just look down and you're like, you've got this list of all these things you do for a seller, and you show that, show it to them when you go over their house and tell them what you can do for them.

So why do you not have the same thing for a buyer? Here's a list of all the things that I do for you. Let's sit down and talk about this and have a consultation. And would you like to hire me and then that for about five years now that's been my practice, to actually sit down and have a contract that was always in our forms, the database, just like a listing agreement to sign with a buyer after you present what you actually are going to do for that buyer.

So having that list is one thing. Having the understanding here is another thing. If you've if you've heard before like you can you can never actually convince somebody of something unless you're at yes with yourself. Yes, I do believe I'm worth it and these are the reasons why I know it. Therefore, I can now communicate that to you.

And so that is only just become more important. I'd say I'm very fortunate that the way that this is all kind of working out is the way that I kind of, I guess, hoped it would work out and have been planning on for many years. And so the value proposition of walking into, like a buyer consultation meeting that I just came from is like, okay, cool, like sit down.

I'm telling you all the things I'm going to do for you. And this is exactly the amount that I'm going to charge you my fee for my services. Here's maybe where that money is going to get paid. Here's how it could get paid if it doesn't come from that. And here are all the things that I'm going to do.

Like it's it's, moving in that direction pretty harshly. And I think you, as the like, watcher listener, will probably be talking to a real estate broker who has been doing this less than I have been. Like, my guess is just just percentile wise. So that conversation may come across a little differently.

Yeah. And I think that one of the big things on the buyer side is obviously everybody understands there's like expertise, there's negotiation. There's then there's the obvious things of helping with the home shine. But what was the quote from 1000 watt, or whatever that talked about. do you remember what this was? It was talking about? It's not just it was it was like a kind of a joke where it was showing, like, here's the list of the things.

Yeah. And I still put this in, like a folder if it comes up to like a buyer services menu basically of like, would you like me to take you through this process in such a way where you don't end up broke or divorced, right. Like, right. Things like that, that I think support the idea of having a genuine professional who's doing this for a career, who really wants to help you.

That's what anybody paying attention to this should get out of it. Is that you, your friends, your aunt should have a better understanding of choosing the professional that you're going out to pay whatever money you're paying them to do the job, and not relying on an infrastructure that maybe shouldn't have been there in the first place to say, hey, I'll just, I got to buy a house and I got to have a broker anyway, so I might as well, like, just call aunt such and such so she gets the money, right?

Like that sort of a thing is what we need to flip on its head. Yeah.

Because ultimately. And to just dig a little further into that, it's it's you don't know what you don't know. And and so, you know, and when you're in this business long enough and it, you see it with new brokers all the time where they have like some deer in the headlights moments, sometimes at first where they're like, wow, there is a lot more to this than I thought there would be.

And and then, you know, they really dig in here to their education and their training because it's all fine and dandy. You know what? Have somebody let you into a house until there's something that comes up in the contract, there's something that comes up in the negotiation. There's something that comes up in a multiple offer situation. That's going to be the difference.

Now, the broker you hire is the difference between whether you get the house of your dreams or you don't, or whether you lose your earnest money or you don't, or just things like that. It's such a consequential, massive endeavor that part of that fee is this intangible that, that you may not be able to measure until you're in that situation.

And that's why there's something like 80 or 90% of buyers do end up very happy with their, with their broker and happy that they paid for their, you know, to have the services. ultimately, right after the experience. But then a year or two later, oftentimes they forget their name and they don't care, you know, that kind of thing.

But that's a whole nother conversation. But but okay, so moving from there. I do want to touch on the seller side, briefly too. you mentioned that I had pulled up some stats. one thing on the seller side of this that is really fascinating is, there there's a big push on whether the seller should offer a commission to their buyer's broker, and you have not been required to offer a commission to the buyer's broker.

And we don't require you to offer, a commission to the buyer's broker. But I do want to share that, I'm not going to get into the direct numbers or percentages, but, that what when these articles come out and they say, well, you know, on average, you know, if commissions drop this percent, the seller will save this much money.

And what we found in our research over and over and over again, every time I run the numbers, there's a certain brake on certain numbers in certain price ranges and markets where basically the rates are essentially part of the marketing of the property, because you're the seller is marketing the property, not just the buyer, but also to the brokers that are out there trying to sell the house to.

Yeah, this is a big piece. I think when you explain that term as a marketing piece, I think that's something that people don't understand enough. And I mean rightly so. How would you? But the reason why that's the case, if you don't mind me saying, is that like the marketing piece simply allows for a high quality broker that somebody wants to hire who might charge such and such rate, and hopefully all of them are different all over the place.

But if if a seller is willing to say, hey, all of you who've gone out there and chosen the right real estate broker who probably isn't charging whatever some other discount thing is, if all of you are able to purchase my house and not just the ones who have done this, or can pay their broker on their own, you just have access to infinitely more people.

It's like when you go through and remodel your house so that more people will like it, and then be interested in your home. It's just another way to do that. And then what? Of course, you're saying that we spoiled earlier is like, it works like you have access to more buyers, and it does not mean because you chose to pay another professional more money, that you spent that money and didn't make it back.

You spend that money, access more people, and literally make more.

Yeah, and there's definitely situations where you not every situation you need to pay a full fee to a broker. And that was already the case. And it's going to be even easier to, to define those cases now. but in most general marketplace conditions, when you just go to list your home on the open market and you're in a great neighborhood and all those kind of things, and you hire a broker, we can show you the math.

We have the math where basically there's break at certain price ranges in different neighborhoods. There's just times where, offering certain fees on, on average will net you more and the home will sell faster on average. Now, you could still choose to offer a different amount, and we would go along with that. And support you. Yeah. And, and so, and certain, you know, certain brokers are going to say, well, I only work for this amount or whatever, but as a, as a firm, we're absolutely you know, we have people doing all sorts of rates, all sorts of different levels of service.

And we, are influenced by our client. Right, who is a part of the negotiation for each of these things, which is probably the biggest takeaway from all of this, like the next time you buy, the next time you sell, do your research with the person that you're talking to and hire. And like I, I don't know, I guess I could be scared of that.

Like, but if somebody asks if I'm scared for somebody to ask me to justify the amount of money that they're going to be paying me, then there's a problem there.

Yeah. And that's and that's and that's and that's the problem for a lot of brokers is they just aren't comfortable having the conversations.

It takes a lot of work to get there and a lot of practice. And and sometimes it does mean and I'm I'm in a position of privilege now after having done this for a long time. But I but sometimes it just takes experience of doing it longer. And I wonder we're kind of maybe jumping ahead of you, but like, I wonder if one of the things is like the experience of the business actually causes clients to influence how much they're willing to pay a broker.

Oh, you've done this a lot. There's such and such thing. I mean, if you if you if you're going to go out and sign LeBron James, maybe if he wasn't 40 to a new contract, you're probably going to pay him more money than his son. Bronny. Yeah. It they just have different levels of experience and they're going to get you different results.

Yeah I wonder if that will happen. I don't really know, but at least it's now in the hands of clients a little bit more ttotake ownership of that.

That's true. That's true. So a couple more things. so like more elevator speech level. somebody what is in the last few weeks, what is 1 or 2 super common? And we generally covered it, but super comment just questions you're getting asked or statements somebody is asking you and then you're you're like 1 or 2 minute response just to kind of summarize like, hey, this is the big news.

What's going on? What question are you going to ask? How are you responding?

The biggest question from clients is this is and it's the best thing that has come out of this is that they're literally asking the question, how do you get paid? The number of times I've had a buyer ask me how I get paid in the last you know, since news has come out mainly in the last six months, is probably the same amount of times as in the nine years previous to that.

So people are just asking that question and we've already answered it, so I won't answer that. But I love that that's happening on a general scale of like, all right, I saw the news. What does this mean? The question is typically like, I'm curious what you get asked to, but like it's just citing the news and then saying, what is that?


What's that about? Which often goes into a longer discussion about the difference between like other MLS and ours. But I think the thing that I funnel down into saying the most often when somebody says, hey, do I not have to pay such and such anymore? That's a super common one. Yeah. hey, what does this mean for the future of real estate?

I think in both cases, my most common answer is just it reminds people that they should be paying a lot of attention to who and how, who they're paying and how much they're paying. And in any case, that can be kind of the answer for a lot of this. But I wonder what you get asking what you what your answers are for that stuff too.

Well, the most common thing I get asked is what's the you know, how are you guys responding to all these big changes? And then. Right. And then I.

Recognize you as like an office leader who to tell others about this.

Like I had somebody say, wow, you know, you you must this must be such a big deal this week. And then my response was what we just deliberated on, which is most of these changes we've already adapted over the last 2 or 3 years in our market. And some of the changes that you're reading about are not being adopted here because we're private.

When I'm part of a private MLS and not part of a realtor MLS. So basically that's probably the most common one. 

But okay. Future of real estate. Now what the new are you generally optimistic? Kind of. Do you feel like it's a better world now? in real estate, what's your what's your kind of, you know, world view on real estate for the next two, three, five years for realtors?

Yeah, yeah, yeah. this is coming from like, I, I mean, you of course know this, but like, I, this is like such a career for, like, career style. Right. Like, this is a job. And yes, there's a lot of like interesting things to and flexibility and all that. But like this is a job that I want to take seriously and like further the industry.

And so as a person who's saying all of that, I look at this and I'm like, okay, I think that the lights just got really, really bright.

And they got really bright. And one of the greatest things that's going to happen is that they got really bright. And you're gonna be able to see the great work that people are doing a lot more, because people are gonna have the eyes open to it if they're not paying attention to how much they're spending on something. They're also not going to pay attention to whether the job was done that great or not, which I think contributes to why 90 some percent of people say that their broker did a great job.

But that also means, in turn, that if the lights got really bright, that it's gonna shine the light on some things that aren't so great, and that'll be maybe just a broker as a whole who isn't doing a great job. But I think more than that, because that's kind of like throwing shade at this, like theoretical bad broker.

It's going to shine a light on things that aren't going so great, even with great brokers or whatever.

So I agree with all that. And I love the analogy of shining light on, you know, what's what's what's what brokers are doing as far as their services in a positive way. But then also in some cases, if they're not running their business in a way that's providing value to the consumer. And so I think that it is going to be a positive for the consumer.

And I think that for brokers and brokerages that are doing things the right way, I think that it's a better it's a better world. And, and I think that, there probably will be some maybe less brokers, but maybe the industry as a whole over the long term becomes something that has a different reputation as a better.

Right.

That's the key. I think a lot of people look at this and the the low hanging fruit is to actually think there's like some grim reaper hanging over the industry. And I just literally think the opposite is going to happen because of that light. I think some of the best things and the best experiences that are given are going to end up being a greater percentage of the whole.

Yeah, and I'm pretty thrilled about that.

Absolutely. Agreed. A great. Well, thank you for joining, Nathan. It was a fun conversation. Thank you for listening. You're watching you guys. I'd love if you could, give it a like on YouTube, subscribe on YouTube or if you're on iTunes, a five star review would mean a lot. But, Anyway, thanks again. Nathan. Cheers, guys.