The Real Estate REplay
Host Wendy Gilch, and a rotating cast of expert co-hosts, break down the good, the bad, the unethical (and sometimes illegal) things other sellers and buyers experienced while buying or selling a home.
Learn what went right, what went wrong, what they would do differently and how to spot red flags before they become a problem.
The Real Estate REplay is powered by consumer advocate group, Selling Later.
www.sellinglater.com/resources
The Real Estate REplay
Real Estate's Unspoken Rules of Referral Fees and Commission Battles
Ever feel like there's something more to those "free" real estate platforms? We're revealing the truth behind agent referral systems and the hidden costs they bury. In this episode, journey with us as we question the standard commission rates, challenge the lack of transparency in the referral process, and share our own practice of recommending agents without expecting a fee. We also take a critical look at how large platforms track transactions and the resulting squeeze on commission negotiations, inviting you to consider how much of your money really goes into the service you receive.
Charles Boon, a Colorado broker with as much expertise in real estate as he has tattoos of homes sold on his arm, joins us to dissect the impact of referral platforms on your wallet and property negotiations.
As a special bonus, and because there is no way to avoid talking about, we also discuss the NAR proposed settlement and how it might impact these referral platforms, but also how it's currently making everyone lose their mind.
State laws and regulations may vary.
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if somebody wants to be your next client so that their house can be tattooed on your arm.
Speaker 2:Is that an?
Speaker 1:incentive. You're not going to buy them a TV, but you're going to give them a tattoo on your arm. I don't know about this, Mr Boone.
Speaker 1:I don't know, Welcome to season four of the real estate replay. This season we're continuing to share the good, the bad, the unethical and sometimes illegal experiences that sellers and buyers have had to help you not get screwed over. But we're also going to spend time talking about the many lawsuits floating around the industry and how they can impact you, perhaps even sprinkle in a few episodes explaining how all these quote-unquote helpful companies are making a crap ton of money off of you. This one's going to be a little tricky because we originally talked about focusing on referral fees and then Friday hit, which like blew up my whole weekend because NAR decided to settle for a call. I feel bad for realtors because one specifically told me he was on a call At that point. I don't know if it was his association. It was somebody telling him like we're going to fight this, we're going to appeal it, we're going to win. But I found out the timeline of negotiations and when they told him that they were already in negotiations with the plaintiff, I'm like at least you could have. You can't be like, hey, we're negotiating and everyone loses their mind, but don't lie and say you're going to appeal it, because you obviously weren't planning to do that. We're going to wing this because I get off track as it is. We're screwed then because there's so much to talk about, and today I decided to be professional because we're going to talk about lawsuits. I put my blazer on and I had dust on it. All right enough about me.
Speaker 1:I'm going to read one of the things I found and this was from a home buyer and it's a great segue into what we're talking about today Said I need some advice here. I've had a verified pre-approval through a company that sounds like Smokit for a few months now, and the realtor they paired me up with is awful. I did ask to get a new one and they essentially told me no. So now I'm wondering do I need to still work with this realtor and what can I do? You and I both know that this has everything to do with pairing you with an agent who's going to pay a referral fee, but most consumers don't understand what that means when someone finds you their partner agent, which is huge in the companies of Zillow Rocket all of them and so I brought a guest on today. Can I call you broker boon? Is that appropriate?
Speaker 1:It's probably not, I just feel like it sounds better and you are technically related to Daniel Boon, so I feel like it's appropriate to call you that?
Speaker 2:Okay, so I'm going to call you that. My seventh great grandfather was Daniel Boon's uncle. He was also in real estate and he messed up a ton of land deals. Oh no that doesn't.
Speaker 1:It's not genetics, it's not hereditary. Don't worry, you won't do that.
Speaker 1:Okay, so in true fashion, because again, I have no friends outside of TikTok. Apparently I have my friend, charles Boon here, who is a broker out in Colorado, who I have tacked with a few times about these referral fees and the partner agents, and he's one of the few people that will come out and admit that you finding your agent through a referral platform could cost you or could impact how much you end up paying or negotiating for yourself. Not always, but depending on the situation, it can certainly happen. So, charles, before we rip apart all these referral platforms and talk about how everyone's been sued and our whole subject gets off track, why don't you give people just a quick background about you?
Speaker 2:So a little bit about me. So I was an Intel officer in the Army before this and then I got out and I did some more government work and then I jumped into real estate full time about two years ago and I'm over here in Colorado Springs. So, and if you're wondering what these are, they're houses.
Speaker 1:Oh, my God. Okay, hold it up, because now I'm going to have to put this on YouTube. Hold your arms still Like different types of houses or the ones you've sold.
Speaker 2:The ones I've sold. They're just micro portraits, so, but they help to tell stories and there's a story and a lesson behind everyone. One of my friends in the Army moved here and opened up his own tattoo studio, so I had to get tattoos. I just didn't know what I was going to get, so we just got these.
Speaker 1:So are you going to continue to do that? For just in case any buyers are wondering. Yeah, so they get to pick the placement of the tattoo, or are you going to run out of space here?
Speaker 2:The placement took two days of planning and then, and then it was two days of tattooing. So the next batch that I'm going to do, it's just going to be wherever they fit, based off of the contour lines and everything, and then, and then I'm just going to stop.
Speaker 1:So okay, so get, get them now, while you can. There's limited, limited inventory, just like the housing market, right?
Speaker 2:I'm going to end up with them on my face, you know that one.
Speaker 1:At least it would be related to your job and it's not like a teardrop or like a swear word or something around your face. See, we're already off topic. I told you that was going to happen, all right, so let's talk about this. Hey, it's my hill to die on with these things. But also there's hundreds of referral platforms that get in front of home sellers and buyers, offer to find them the best agent for free, but on the back end are pocketing thousands of the commission that you, the consumer, are paying out one way or another. So not only do these platforms kind of assign you with an agent based on who's going to pay and some other prerequisites, but they can also impact your chance to negotiate with your own agent, which is likely going to become a big topic in the next couple months, considering the recent settlement with NAR, which we will get to eventually. We need to get through our original topic first. This whole settlement coming out on Friday kind of blew up my whole, my whole trail of what we were going to talk about. But that's okay, I'll try to stay on track, all right.
Speaker 1:So let's go back into the history of referrals. So for people that don't, you may be, you're a buyer or seller, you don't know what we're talking about. So referral is when you send someone else to a real estate agent and then that real estate agent agrees to give you the person that referred, as long as they have a license a percentage of the commission earned when you close on your sale. And we'll get into how much that is and how the heck they all became the same referral price. We'll get into that in a minute.
Speaker 1:But I want everyone to understand that originally this whole referral system was for agents to refer someone to another agent because they had already started to work with them, right? So there was already some hours put in. There was some time put in and it was to say like the buyer says, hey, you know, I think I want to look over in this city instead, and the agent could say that's okay, let me help you find someone. They find the agent and now they collect a portion of the commission which kind of compensates them for the work they already did. But unfortunately that changed because companies started to figure out that they could get a brokerage license, not have any agents, but use that brokerage license to just collect referral fees. What did I miss in there for the history. What do you think?
Speaker 2:Yeah. So I mean so before the 1975 RESPA it was like the Wild West and everybody was just referring everybody to everybody. And then RESPA came out and said, okay, no, only licensed professionals, you had agents who have clients that say, hey, do you know anybody over in this state? And they, you know, there were people that they really really knew and had a good relationship with and they were really good agents.
Speaker 1:And then you know, that's when the license to license referral fee officially started and was allowed and then it kind of devolved into just random realtors, picking random realtors, and then also on the I buyer side with the websites, like you said, people figuring out oh we can make a lot of money off of this and starting websites you know IDX websites and picking up clients off of that and just shooting them off to different realtors and collecting a referral fee, right, and I gave in to say Zillow, who's like the big time referral fee platform, now used to just do a monthly fee to people, and I would say in the past 10 years has really pushed, and even the past two years has really pushed people into their flex program, which is referral fees, and into my understanding, they're slimming down on how many teams they're actually working with and giving those teams more leads, for, you know, anywhere between 30 to 40% of the commission that agent makes on the close of the sale. And so really I would say in the past 10 years have we seen this boom of companies that are pooling all the MLS data like a Zillow to get your attention, but really their main revenue source comes from you clicking on that button to contact an agent and then they turn around and sell you for a crap ton of money to set agent. That's, I think, where the train went off the tracks. I think that referral fees when there was maybe a service already in play or time spent or hours spent, was one thing, but now it's strictly let's get a brokerage license to collect referral fees because there's no liability. It doesn't matter if the agent totally messes up because they don't work for you, Zillow could refer you to a Howard Hanna agent and Zillow will collect that 35% in my area and they're not responsible for that agent. They have no, nothing Like they hand you off and that agent and Howard Hanna is responsible for your transaction. So the liability is like not much, not much at all for them.
Speaker 1:Okay, and on top of these referral fee platforms, then you have the internal, not internal the Facebook groups, the agent to agent referrals, and I know you're I think you're in the same group that I'm in it's like 200, 300,000 real estate agents and the last time I checked there were like six or seven times a day where someone would say I have a buyer in Orlando, Florida, like, who wants to help me. You know, and I'm like, wait a minute, like do you, do you know this buyer? Are you sourcing them off of like Reddit and then going on and trying to find someone? Do you actually know anyone like in Orlando that? Are you going to interview them? Are you just going to pick a name? Because then you know the comments blow up and they have like 300 people. They're like oh, I'll help you, I'll help you. So now, like how are you choosing who to use and how. I'm sure you've seen this because you work mostly near a military base, right?
Speaker 2:Right, yeah, and there's definitely values in like you know, like a true referral, like you really know the client and then you really really know the realtor. But it's what it's, you know, kind of turned into is just, you know, essentially strangers referring strangers who they don't know very well, and then my big thing personally is just, you know the disclosure of that. You know like, oh, you know so. So there are a lot of people who will say oh to strangers, like oh, let me, let me help you. I know a really good agent and you know there's just there's no requirement for disclosure. I think we're one of the few industries that doesn't require require any. But you know, as far as you know, not necessarily ethics, but values. Me personally, like I'm not super comfortable with that, you know. It's just you know, if you don't really know the client and, more importantly, you don't really really know the person who you're referring them to, is there really value in that?
Speaker 1:Right, exactly. And then as a consumer, you know, especially these platforms, the Dave Ramsey's, all of them say they're free, it's free to use, and I'm like, well, technically, like if I'm the seller and it's coming out of all this, you're getting 40% of my agents' commission. Then I'm paying them, like is it free to me? You know, it's kind of like use a buyer agent, it's free, and I'm like, well, technically, no, that's not what you're supposed to say. And so I just I don't know, it's so frustrating, this whole, this whole system is just absurd. But then I do see it. You know, going back to like military relocation, you know, I know that you and I have looked at a specific groups Facebook page. I went down the rabbit hole that you sent me and I'm like you got to be kidding me. And they have a whole system, a whole like business entity, of just referring the military clients. But it doesn't seem like there's any explanation of like the money that goes on behind that.
Speaker 2:Right and if you were to explain to me you know a consumer, you know. If I asked you like hey, do you know somebody in this state? And I really, and it does matter who you work with, especially in this industry, because there are unfortunately a lot of bad apples, but there's definitely value in really really knowing somebody, versus just kind of what it's turned into, where you don't really know somebody that well and you just kind of throw in names out.
Speaker 1:Right. And then it seems like you know, these agent to agent referrals end up all being between like 25 and 30% of the commission. And where did that number come from? Like, who decided that passing my name along would make them $3,000? Like, how does that work? Like, where did that? Where did that number came from? I don't know if you do either, and I know you do something different.
Speaker 2:Yeah, yeah. So, for example, like I've had a couple of close friends asked me if they know, if I know a realtor in a different area and I'm like, no, but here's what I'll do, because they don't know, they don't know anything. So I've done, sat down and done like a lot of research and figured out. You know kind of which ones are the good agents, because you have to remember that the good, the good agents, if you call and say, hey, you know, can you, are you negotiable on the commission? Probably not. They're probably not going to drop out, especially on the buy side. You know, as this, you know old system comes to an end, so so I'll do my research and then I'll call them, I'll interview them and then when they bring up the referral fee, I'll just say don't worry about it, just take care of them, be flexible on your end. You know whether that's commission rebate, whatever. And then from that point you know they can have that discussion and work something out on their end. You know, yeah, that's kind of what I do.
Speaker 1:Yeah, and I don't think there's anything wrong if you're doing the work and investigating and interviewing these agents to be compensated for that, you know. I think the problem is, are all of these people helping you find an agent, is that worth the $3,000 price tag, you know? And if they don't tell you about it, I feel like that's even worse, because then you go to meet with this agent and I see it a lot and most don't admit it. But if you're paying someone 40% and think about it Zillow Rocket, most of these referral platforms follow you for two years.
Speaker 1:So if you are buying a home and you end up being paired with Agent A and you end up closing and you found that agent on Zillow, right, they connected you that agent's got to pay Zillow 40%, 35%, depending on where you live. But then you're like, hey, I also have to sell my home and then that agent is going to have to pay 40%, 35% again when you sell. And even for those agents that say they don't negotiate when you are buying and selling with them, majority of the time there's some way to work out some sort of deal. It doesn't necessarily have to be out of the commission, but typically you have a better chance to negotiate if you're doing two deals with them verse one but if 40% of what they earn comes out twice, like what is left for you to negotiate. You know, and I think that's what people don't realize is that these companies will follow you.
Speaker 2:Yeah, and that's why you know like I've done that for my friends a couple of times and verse, you know them calling somebody and saying, oh, hey, you know, here's what I want to do, and they'll say no, now they've got me who's not charging them a referral fee. And then that just kind of changes their mentality a little bit. You know, like, oh, I'm not doing a referral fee, they just want me to take care of the buyer and work something out and be negotiable. That makes it's just a change in mentality really Right, because commissions should be. You know, they're supposed to be negotiable. It's just there are so many but you have a bunch of strangers calling you. People get offended easily.
Speaker 1:So yeah, oh, yeah, yeah, yeah, you want to piss off some people. Just talk about commissions on TikTok and your whole world will just be oh my God, my messages. I didn't know there was like a bullying filter, but TikTok turned it on automatically for me this weekend after talking about commissions and I was like what is this? And then, you know, because I'm like a moth to a flame, I was like, well, it says I can review these comments. I'm going to look at them and I shouldn't have done that because it's just swear words, b words, just yeah. So commissions are a hot subject.
Speaker 2:And there's so much information misinformation going on about what's happening, and most of it actually is from the realtor side. Right yeah, you don't understand what's happening and not happening, and so it's. I've just kind of stayed away from that because it's frustrating, Right, Hearing a lot of you know essentially nonsense from consumers and realtors.
Speaker 1:There's a reason why it's a hot topic, so because Right, right and somewhere in between the consumer side and the, you know, they have the angry consumer. That's like good, you shouldn't make that much. And then you have, on the opposite end, the real estate agent who does a good job and has never screwed over their clients is like, well, what the heck? Like you know, that's insulting. Like I really work really hard. But then, like, below that agent are the agents that are just in it for the money and actually give agents that bad reputation that we seem to like not be able to remove from the industry for some reason, which maybe this lawsuit will help with. That, which we'll get to, because I'm really excited to talk about that, because I haven't been talking about it all week. Maybe we'll get some anti-bullying filters on the podcast here. You know, one thing I wanted to mention is my friend. She works in relocation and relocation takes a nice chunk of change, and so relocation used to charge companies for their services. But then they started to get competitive and they thought, well, like, oh, I can actually just charge, I'll take a referral fee from the agent. So again, they get their license right, so they can collect their referral fee, and now the relocation companies are getting up to like 50% of your agent's commission and put back into them. You know whether there's incentives from your company or not if you are told when you're relocating that you have to use a specific set of agents. That's why I think that model is gonna be interesting.
Speaker 1:I just keep wanting to segue into the lawsuit and I don't wanna do it.
Speaker 1:Yet I need to stop, you know. I think the other thing that's really interesting and it ties back to the person that we had discussed who was paired with an agent from Rocket Mortgage. So when you get into these companies that are like Zillow, who has home loans, rocket, who has loans, tomo, who has loans, better, who offers mortgage loans, there's usually a sort of whether in an agreement or like just a general understanding that, like you, should probably try to keep your client within those loan products. You know, I think Mike I always wanna say Del Pretty, I know that's not right, not that Mike listens to this, but if you do I apologize he put out a chart showing Zillow agents that are on the Flex program and how they are incentivized to get more leads if their clients close with Zillow home loans versus an outside lender, which I thought was interesting, because I feel like that apparently is legal, but I feel like that is the wrong incentive, especially if Zillow maybe isn't offering them the best rates, higher fees.
Speaker 2:And it goes back to values. So there's nothing wrong with, you know, a client shopping around with lenders. I mean the more loan estimates they see, the better. I could care less about pre-approvals on the buyer of a sell side, like I really don't care, especially as rates have gotten higher. You've seen a lot more deals fall apart at the closing table because lenders aren't showing them the loan estimate at the beginning, then they get the closing disclosure at the end and then at that point it's too late. They lose their earnest money. They've seen the payments. So there are a lot of lenders who've gotten kind of sneaky with that and then also with the points, with the rates. So they'll put in a really low rate but then won't explain that hey, this costs points.
Speaker 1:Yeah, the $2,000 origination fee, which is actually points. They just don't tell you that.
Speaker 2:Right, yeah, and there's all sorts of ways that they structure them and everything, and you can see it in closing costs. And then you know you'll see lenders that will low ball the insurance or the taxes. You get to the closing table and all of a sudden your monthly payments are 200 bucks more and you go back to the lender. They go back to the lender and they're like why is my payment so high? And then they tell you, oh, no, it's your fault because of the insurance that you chose. Well, yeah, sure, you can get an insurance policy for, you know, $1,000, $1,500 a month, but or sorry, a 1,500 a year, but it's worth it.
Speaker 1:Does it say a month? Where are we in like Florida? Where are we in California? Wildflowers?
Speaker 2:So, like you know, like a good like general estimate here is, you know, 2,500 to 3,000 a year, like for good insurance. You can get really cheap insurance, but you know high deductible and everything, a lot of things like that. That's why loan estimates are so important. And then, at least in Colorado, you know like we have the exclusive right to buy and part of our. I think our fiduciary duty should be to make sure that people are getting the best rates for the best deals that we're aware of.
Speaker 2:And there are different lenders for different situations. I've won out of state. She has really good rates and then one in state who's just super, super creative and also has decent rates. But just kind of different people for different scenarios. And there's, you know, lenders everywhere that people can shop around with. I mean you have that 45 day window where you can shop around, for you know 100 lenders and it only counts as one. Hit on your credit report names and loan estimates, interview the lender, make sure that they can close on time and meet the deadlines you know all the important deadlines other than closing, but shopping around is super important. Pressuring somebody into using a lender, especially if they're for other reasons, it's not, you know not the best Right and that you know that's the interesting part.
Speaker 1:So when you hook up with Rocket and Moregage and you get a pre-approval and they say, hey, let's connect you to this real estate agent in our partner group that real estate agent and their broker so who that agent works for it says the broker agrees that they and their verified partner agents will educate themselves on the benefits of using Rocket and Moregage and other Rocket family of company services. Purposely steering a client from Rocket and Moregage to another mortgage lender is prohibited and could result in termination of the broker's relationship with Rocket Homes. So it's like, okay, wait a minute. You're recently telling them like you can't really tell them to shop elsewhere if you see something wrong. Right, like it's.
Speaker 1:There's a very big I mean the way it's worded. They have more lawyers than I could ever imagine to make sure they don't get in trouble. But I do know that the CFPB has been investigating them for quite some time. So but that's something like how would a consumer know that? How would a consumer know that, a the agent is paying Rocket Homes and Rocket Moregage up to 50% of the commission, but B like they agreed to not promote you to other lenders? That bothers me, like that. It's all the things that I think consumers should know, but nobody wants to talk about it, especially people that are on Rocket Homes. As an agent, you can't bite the hand that feeds you, and I'm not disparaging agents that use Rocket Homes to find leads, but there's a big missing piece of transparency here.
Speaker 2:And you know, at the end of the day, like you work for your client, nobody else Like I'm an independent contractor, my boss are my clients. That's it Like.
Speaker 1:Right yeah, and you know and I know you mentioned the word fiduciary duty, which, like oh good lord, has that word fiduciary been like beaten into my head for the past six months about these lawsuits. But you know, technically a fiduciary isn't supposed to profit excess in verse, like what was discussed right, without very much consent. So not just like here, sign a disclosure like hey, I want you to understand that this company is taking 40% of the commission. Not like, hey, I partner with Rocket. Just sign right here. You know, and I think that's a big missing piece and I think it's going to be interesting which I guess now we can get into the topic that has been rocking the world.
Speaker 1:Oh, so then Friday news dropped that apparently was leaked to the New York Times before the email went out, so only one of two people could have done it. The plaintiff's lawyers are in our I don't know which one, but the New York Times got a full breakdown of the agreement before anyone else did, which, basically, after three years of lawsuits after lawsuits, after lawsuits, NAR agree to settled their antitrust case, in which this settlement would remove them from all of the lawsuits which I think now we're over 20, 25. We were keeping track for a while and then when we got to like 14 or 15, I was like I can't, I can't keep up with this anymore because we're all over the place. But what's interesting about that settlement is that no one quite understands what this looks like, you know, like it's not approved. Okay, so the settlement is not approved. They did put out guidelines of what they want, but we haven't really heard from the Department of Justice. The judge would still have to approve this, and they kind of set out these guidelines like hey, a seller can still offer to pay, offer to contribute to the buy side commission, or they can offer concessions to the buyer, or the seller and the buyer negotiate, but in doing so, home buyers have to sign a buyer agency agreement with their agent before they tour homes.
Speaker 1:And that is the part that I'm concerned about, because I did a report about these buyer agency agreement forms, and as did the consumer federation of America, and some of them are pretty crappy. Not all of them, but some of them are pretty crappy. And the biggest thing is that most of them said hey, as your buyer's agent, you're going to pay me X, what I will say 2%, and if the seller does not want to contribute towards that, then you pay me the 2%. If they only pay me 1%, then you have to cover the other 1%. But if they pay me more than 2% then I as the agent just get to keep it, no questions asked. And I'm like, oh, so that's going to change. Your agreement of what you get paid is what you get paid. There's no more bonuses.
Speaker 1:I believe to the DR Hortons of the world who are pushing out 5K bonuses to real estate agents. And I do wonder, with this settlement, what happens to the bonus incentives? Have you seen Open Door gives bonus incentives to agents based on even builders too. Right, like the more homes that you get closed with a specific builder. Sometimes agents will get a bonus 5K. Sometimes they get a whole bump in their commission. Like I know DR Horton last year was promoting, if you close so many homes with them, if you get your clients to I think it was 5 or 6 homes you'll get 4% commission all of 2024.
Speaker 2:Oh, sorry, yeah, and there are quite a few states who just don't have that broker agreement at all. The old way to do it is you could do a range, but even then that didn't accommodate things like bonuses, which I don't really like those Because, again, it's just oftentimes adds up to, can add up to more, depending on how you write your contract. But it'll go back to the states that don't have it. Those will be required now, like the buyer broker agreements.
Speaker 1:If you're listening to this Pennsylvania State Realtor, not the Realtor, the PA State Commission Board I've asked you for months to please make a consumer friendly one and you told me it's not your job, but it would really be nice if you would do it now. Sorry, go ahead, I just like to. I like to lay that comment and every time this comes up because I ask them like will you help us, because I don't think the current form being offered by the Realtor Association is fair to consumers, and their answer was it's not in our scope. The PA Realtors think their form is great. A bunch of lawyers have looked at it and it's not our job and I'm like okay, thanks, thank you for your service to protect consumers. It's been great working with you.
Speaker 1:So now I got to find a lawyer in Pennsylvania to help me draft a more fair one and it's not one to screw over an agent. I'm not 100%, I'm not saying that, but like give them a way out. The current one doesn't give them a way out. It doesn't address excess commission, absolutely none of that. Like designated dual agency. Good luck understanding that. See, I got off topic again. This is my hot button because I'm really mad at them for like not listening to me or like helping. But you're right, though, there are some states that don't offer it, so now it's going to be required if you're a Realtor.
Speaker 2:I think I might have missed it, but I know that from this they're going to require buyer broker broker agreements for the states that don't have them. And do you have to do? They have to sign that before you show them any houses. Was that clarified at all?
Speaker 1:I thought I read you know, don't hold me to this, but it was before you start looking at homes, like before you start down the process. It wasn't, because I think what they were worried about is, if they're required only when you make an offer, that the real estate agent would just look at what the commission is being offered and put that in, which is what was happening, as it is right, like don't worry about it. And they see it's 3%, yes. And then they just write in oh yeah, yeah, my fee is 3%. So I think they're requiring them in advance to avoid people creating a commission based on like what's offered versus like what they're worth.
Speaker 2:Yeah, yeah, and there's upside and downside to that is, you know, like a lot of Realtors are like signed you know the right way to do it is sign that, have a pre-approval letter and then you know, go look at houses. But, like for me, like I can tell generally based off of where you're at what you've told me, what you can afford, rarely does anybody do an application. They find out, oh I can't afford it because I kind of know a little bit about what to look for. And then also, you've just met me and you're going to sign this, you know binding paperwork, and then we're going to go start looking at houses.
Speaker 2:And I hear so many stories and know a lot of people in situations where they've done that. And then you know they get stuck with a Realtor who just can't get out. They're not doing anything in form and it's easier to get out than you'd think. But that's not explained right, right, like to me, like you know the buyer-worker agreement here, like there are so many different loopholes in there and there are people that know how to get out of that and work around it, because it really just comes back to procuring cause, which isn't super simple. I mean, it's really, really complicated, and that's also why I have an addendum implemented, which is the three-day termination for either the buy side or the sell side. Three days is enough time, you know, because, okay, if I'm selling your house, you're going to hate me until it's sold, right.
Speaker 2:But three days is really enough time to calm down. You know, if there's, you know, any sort of misunderstanding or anything, but you know, three days, hey, you can just terminate it. And that keeps the consumers, you know, safer and happier. And at the end of the day, if you don't want to work with me, you'll terminate it anyway. I mean, right, right, yeah, but the brokerage, the brokerage owns the clients, right? It depends on who's in what situation and how involved, you know, the broker is with that. As far as you making your own decisions on who to work with and when to break away from them.
Speaker 1:It took me I mean, I'm four or five years into this like it took me a while to realize like signing an agreement with your buyer's age, it means they work for you and not the seller and that kind of an acts that. But do she area? There's that word again that everybody wants to you. It's going to be like the word of 2024. But that an acts their duty towards you. You know, I just did some of these contracts I think it's Louisiana.
Speaker 1:They have a clause that says, like you can't sue the broker for any damages if they give you incorrect or inaccurate like wrong information. That has a financial damage to you and not just them, anyone that works for them, any contractors related to them. You have. No, you wave your right to hold them accountable. It's wild, I'm like who would sign that? But again, as a home buyer, here's what we're going to come into. I meet you on Zillow and I meet you at the front door and you have to tell me hey, here you need to sign this, which is going to commit you to what they want to be paid. It's going to commit you to a length of time and that's going to be.
Speaker 1:The interesting part is we go back to these referral fee platforms who always consistently kind of banked on that two or 3% being available to them and now it's not. And so how are these referral companies going to proceed if other models come out? If we're looking at like concessions and I don't know, it's going to be interesting that these companies have relied on buyer agent commissions being pretty consistent and built a whole business model on it. I don't know what Dave Ramsey is going to do, but it's going to be interesting.
Speaker 1:The flip side is if sellers which, like I, almost preferred for sellers to offer money to the buyer to cover their closing costs, because I feel like that removed that pressure of like agents offering stuff and then the buyer can pay for their own agent. But if that happens and buyers choose to go on Zillow and look at a home but they didn't really want to be represented by an agent and they wanted to use an attorney, like now, what? Because now you have that you know procuring causes a very long thing. It's not just I showed you the home, but it's going to be interesting if you don't want to be represented and maybe you're using an attorney but you don't know when you go on Zillow and you go and tour a home and that agent meets you at the front door and asks you to sign something. I just feel like it's going to be messy.
Speaker 2:Yeah, a little confusing, even if you it goes back to procuring cause being a little bit more complicated than that depends on the state. But if you sign that agreement and then show somebody home and then there's a right way and a wrong way to get out of that and even then you know there are cases where that that's happened and then somebody goes and gets another agent.
Speaker 2:And there's, of course, like there's definitely grounds for a procuring cause hearing, but a lot of sometimes that the agent doesn't, even when, even though they showed the house and they have that agreement. And to me personally, like that doesn't really mean much. Again, I'm not like a door opener, like if I open a door and you have an agreement, I don't really care what. What matters is when. When I start negotiating for the property, like if I've negotiated for it and like gotten a good deal and for whatever reason, you've decided to back away, then that would be an issue for me personally. But you know, opening up doors and looking at houses, there's just not a whole lot of value in that.
Speaker 1:Right.
Speaker 1:But unfortunately I've seen the opposite side of that, where where people are saying I showed them the home and they signed this agreement, and the buyers, like I didn't even know I signed that, like I had no idea.
Speaker 1:So you know, I think in the big picture and I've said this before and I get in trouble for it but like I think that we did a really big disservice to home buyers for just going around and saying that use of buyer agent it's free, because now they don't really know what's going on, really, know what you do, right, and if they went through the process maybe they do, but it's been so devalued because you just told them it's free. Why wouldn't you use one like what you just go ahead, so they don't really know how you get paid and now we're going to turn around and give them this contract to sign the minute they meet you and it's going to tell them that they're going to have to pay this much money which they might not have or they might not understand how they could pay for that, not necessarily like out of their wallet and it's just going to be a very bumpy six months year maybe to really figure out what this looks like.
Speaker 2:I think people should figure it out, probably in that in that time frame it's not going to be a whole lot different than what we do now. So for the states that don't have that agreement, I think it's going to be a kind of a different mindset for some people. But in Colorado, I mean, it's there, it's in the paperwork, it should be explained in the exclusive right to buy. Hey, here it is. You know, it has to be explained to them that yes, you as the buyer are paying, but you know the buyer. So like there's a block that you check that says buyer is obligated to pay and then also seller may pay, and that's where that comes from. And it's really not going to be any different.
Speaker 2:And then I think it's a good thing that now there's going to be no displayed set amount of commission. It's going to be hey, here's what I'm charging you, and then you just go and you negotiate it for like anything else, and it's the same thing as like a purchase, you know, like a list price. I don't care about all this price, I care about you know what it's, what it's actually worth, because I mean, you'll see so many houses, and there's one in my neighborhood that was listed 575,000. And so we put in an offer for what it was worth at 515. And of course, they said no and walked away, and then, two weeks later, they lowered the price to 515. Are you kidding? We already found this house.
Speaker 1:It made your arm.
Speaker 2:You know, in everything, everything's negotiable. You know, it doesn't matter the list price, what they're offering, whether it's as is what's included or excluded, it's all negotiable at the end of the day.
Speaker 1:Yeah, yeah, it's just going to be a if different models, I don't know. I think there opens up because think about it, like originally it was all based on commission being offered and none of that could be accepted by the buyer unless they had a brokerage license, right, they couldn't pay attorney fees with that, they couldn't buy down a rate with that, they couldn't do things with their concessions or what would be offered, you know, in the commission, because they weren't allowed to touch it. So if a lot of sellers decide to convert to, like, offering money to the buyer instead of the buyer's agent, like it just could be really interesting. I don't know, I don't know, I don't think anybody knows, and I mean everyone in the real estate mastermind seems to know, because they're all throwing around insane shit and ridiculous comments and I'm like did you even read this? Like did you? Oh, it's just insanity, they're all nuts, I don't know.
Speaker 1:All right, let me get back to this. I don't know what do you think Zillow is going to do if that two to 3% is no longer guaranteed, because they certainly cannot get together a bunch of agents that work at a different brokerage and ask them to charge a certain percentage, because I feel like that would be a little bit of a violation there to ask a bunch of random people to charge the same thing Although that has been suggested in some of the Facebook comments is that we all need to hold firm and we should all be holding our 3% to the buy side to support everybody. And I was like, do you know what you're typing right now? Like two, a bunch of agents that don't work at the same office as you, and you're telling them all to charge 3% to protect the industry.
Speaker 2:Like oh, I trust whatever, but yeah, no, I've seen all the comments and you know it's. There's a reason that we have lawsuits.
Speaker 1:This is such my hill to die on that everything's important about this subject, but I've noticed just from having these conversations on social media that the agents I deem as like transparent, honest, consumer focused have sales, typically are not on these platforms and they're not buying these leads. You typically, on some of these, are going to end up on a team and I'm not like anti team, but typically how they're promoted to you is the head of the team and all their sales show up and you're like, oh, this sounds great. But then you typically end up meeting with, like or working with maybe some of the newer people and that's not necessarily a bad thing, but you think you're getting this person with 30 years experience and 100 sales a year, which I know is impossible for one person to do, which is a whole other subject of how you all report your team sales. But we'll get to that different day.
Speaker 2:So there's definitely a way to just get your license and do it on your own. I would say that you like the real estate school where you get your license that's not the school that the actual school to and the knowledge to be able to survive in the industry. A lot of time that comes off with starting on a team. That's how I started and it was so, like you don't get the direct experience, but also in the same, you know if you know they're doing it right. I mean there was nothing that I did that wasn't being advised by the team leader. So you do get that experience. In a sense it's definitely worth it, especially starting out, because, again, like the school doesn't teach you anything, like you don't know anything about the industry, like there's I mean, the contract isn't simple. There are so many tricks and so many different things that you can do to put in there that can either protect your client or set them up for failure pretty easily.
Speaker 1:Right. But the difference is, you know and again, I'm not like anti-team, but if you're working with that new person maybe needs to go check with the broker. Let me ask, let me make sure I'm doing this right Verse someone you know at your point now, who like understands the contract and is like I got this, like I can ask you a question and you can give me an answer. You know, verse maybe a newer person who has a question and they're like I'm not sure I'll get back to you, you know, and if time matters, you know, I think you know people talk about showing your value. I think there's some value to having an agent who has handled the contract and understands them and knows how to negotiate for you and like look for problems for someone who maybe doesn't know that yet. And that's not to say they're not valuable at all. But I think that what we get down to like people charging fees and stuff like that, I think there's a difference and I think buyers are going to ask that if they know they're paying the tab.
Speaker 2:Yeah, no, I mean it all goes into how you're set up and how flexible you are, because I mean a lot, of, a lot of agents, in order to be successful, they have to be on the team, they have to pay a higher split and sometimes it's worth it, especially when you get started to just go lower anyway, because it's not not a when I say referral based industry, I don't mean license to license, but it's a referral based industry in the sense that you have clients and then your projected growth. I mean it'll take years but eventually you'll get to the point where you'll be one of those agents that does 20, 25 deals a year and they have, you know little. It's all from referrals. So like very marketing overhead.
Speaker 1:Right. But again, like when you get to that point where you have personal referrals because you're doing a good job and people like you, those agents typically aren't on these platforms, you know, they're not on the home lights, they're not hanging out with Dave Ramsey, which, oh, you know what? I forgot to mention this about Dave Ramsey only because I really enjoy pointing out his hypocrisy. What was interesting to me is I've talked to brokerages that offered like a different type of model, maybe like a rebate portion based on like the amount of homes, stuff like that but also people that offered like a flat fee listing service, like $7,000 or $5,000, and he would not work with them. He will only work with people who were playing the traditional real estate game. So it's going to be interesting if he doesn't shift you know his If he doesn't open his mind maybe to like diversify what's out there in real estate, like it's gonna be really interesting to see what he does. Although he's got his loyal fans, I'm sure he can. He could tell them he walks on water and they'd probably be like, yes, you do, you're amazing. You're like the second coming of Jesus. I love you, dave, like I. Ah, oh, he makes me so mad. No offense if you like him, it's. It's nothing about him on a personal level. I just you preach all these Saving your money and all this stuff, but like, never once do you Talk about rebates.
Speaker 1:You know you pocket 30, 35% of what the agent makes, like you could give a little bit back to the home buyer for closing costs, because you're also collecting your monthly fee and you're also collecting like a three thousand dollar sign-on fee. So it's like, oh, I mean you could give a little bit back, right, like a little bit of tithing to your followers would be nice. Maybe I don't know. All right, what did we miss? We kind of were all over the place on lawsuits. But you know, I Think everybody is at this point because nobody really knows for sure. Like what is this gonna get approved, what this looks like, any any final thoughts?
Speaker 1:Because we went all over the place and I blame the NAR settlement for that, because we had a good flow of conversation and then that freaking settlement came out Friday which could implode All of this stuff to a degree. So any final thoughts on referral fees, agents, the settlement, no, I think, I think we covered everything what about tips on what's a green flag? Because everyone says I'm really negative. So, instead of a red flag, what is a green flag if you are interviewing a buyer's agent?
Speaker 2:Everybody's kind of kind of different. I would say that the biggest green flag is that they're not pushy. You know somebody who isn't, you know, pushing you into signing this contract. Now they're saying, hey, like shop around, like there are other real first. The big thing is that there's not pushy, right.
Speaker 1:But if, you, if, and the caveat, caveat, I cannot say that word. Whatever it is, I don't know. An add-on to that, I think, is if these agreements are being pushed when you first meet someone. Right yeah, an agent that maybe makes that agreement only for that property instead of 30 days or 60 days. You know what I mean. Like this just applies to this property. We can get to know each other. Make sure you like me before I, before we go further, you know.
Speaker 2:Yeah, you can do. Yeah, that's. I didn't think about that. But yeah, you can just do like a really really short, like introductory sort of thing with a, you know, with a period of you know, like either that house or five days, with also a holdover period of five days.
Speaker 1:It's gonna be. Everything's gonna be interesting for the next couple months. If you go down this rabbit hole, you know and you're online looking for agents. I think it's really important to pay attention to what might seem like a referral platform, and the biggest giveaway for that is if they promise to Introduce you or find you agents, but they don't do it. Unless you give them your name, your phone number, in your email address. They're typically tracking you to collect a referral fee. Hey, all right, I think we covered everything. Thank you for joining me, and if Somebody wants to be your next client so that their house can be tattooed on your arm, Is that an incentive?
Speaker 1:You're not gonna buy them a TV, but you're gonna give them a tattoo on your arm. I don't know about this, mr Boone, I don't know. Have a story or a question you want to share? Hit us up at the real estate replay calm.
