This Real Estate Lawsuit Could Change Everything!

There is a Real Estate class action lawsuit that can change the world of buying and selling real estate.  The Sitzer/Burnett Lawsuit and Moehrl v NAR lawsuit, are challenging the seller-paid commission practice.

How will this impact the already challenging real estate market? Even more important, will this create another obstacle for the Latino/x community who are trying to buy their first homes?

Join me in this week's chisme of what this lawsuit can do to the potential future of the real estate industry and the negative impact it could have to the Latino community.

Transcript

Speaker 1: 0:00

If sellers stop paying the buyer's agents commission, I can see it having like a negative impact on first-time home buyers. But Otamiana is going to create another obstacles on top of the ones that we already have in the Latinx Latino community, and that's coming just as we're working so hard to catch up. Hola, welcome to the Money Cheese man podcast. I am your host, violeta, a first-generation Mexican immigrant. I am a real estate investor and business owner. But let me tell you, just like other first-gen, I was not taught much about personal finance, and I mean, needless to say, I was well-pervided. I was so lost and I struggled a lot in my personal finance journey, and that's why I created the Money Cheese man podcast where each week I bring you the cheese man on how to manage and grow your money and other money talks to help you to kick ass with your finances, all right. So let's get into this week's Money Cheese man. Hola, hola, welcome to another episode of the Money Cheese man podcast. And today, you know, I want to talk about this lawsuit that I just recently heard about about like a week ago and I've been like looking at it, looking it up and figuring out like what is it talking about? And this lawsuit is threatening to change the world of real estate. So what's the deal with this lawsuit? Well, it includes well, it included a lot of defendants like Anywhere, remax and NAR and many others. Nar is like the National Association of Realtors, which is the main one, and the thing is that they are suing because they don't believe that the seller should be paying. You know what the buyers commissioned for their realtors, and the thing is is that that some of these MLSs require sellers, in order to be able to list their house in their MLS, they have to offer commissions, right? Otherwise the buyer's real estate agent is not going to, you know, it's going to be less likely to suggest their property to their buyers. So the sellers are kind of like you know why am I paying for their commission and there's really no choice, like you're forcing me to pay them and I really can't even negotiate the commission because otherwise then I can't list my house for sale on your MLS and then the agents aren't going to, you know, suggest my property.

Speaker 1: 2:53

Now there's two lawsuits. One is the Citzer Burnett case, and that one said to go to trial this October 6th, and then it is the Morrill I'm not sure if that's how you say it versus the National Association of Realtors, known as NAR, but both basically have kind of the same idea of trying to get rid of the seller paid commissions. So typically the way it kind of works when you are buying and selling is that most of the time the seller will pay your real estate agent, the buyer's real estate agent. They'll pay for that commission and usually, like the seller let's say it's 6% the seller's real estate agent is going to split that or give a portion of that to the buyer's real estate agent and so this is known as seller paid commissions and it's a typical practice. Every time I've purchased or sold, that's what's usually the norm.

Speaker 1: 4:00

Now this lawsuit is kind of trying to get that switched, which, as a seller and, you know, both a buyer I could see both sides and I've sold properties before and yeah, it can eat into your earnings of when you sell your property and especially if you're upside down on the house, meaning like you still owe more than what the house sells for you know, this can really put a strain in your finances because now you have to not only pay your own real estate agent to list your property, but now you have to pay for the buyer's agent as well. Now this lawsuit is already going to like put another hit on you know, realtors or real estate agents, because they're you know I see it that they get kind of some hate because, you know, people don't feel like they have that much value to pay them a commission. They don't see what they bring to the table, I guess, and they feel like they don't deserve to get that commission. But if you are the buyer, then this kind of like helps you out because now you don't have to worry about having to pay your real estate agent their commission. So that's one less cost for you and everything's already taken care of. However, if this lawsuit you know the plaintiff wins, it like it could change the game to where now sellers aren't paying the commission for the buyer. And you know this could really affect not only first time home buyers.

Speaker 1: 5:41

But I want to talk about how it could potentially affect, you know, the Latino Latinx community. So it's no secret that you know the Latino community. We are like behind on home ownership and you know building generational wealth, which a big way to build that wealth and that generational wealth is through owning real estate and passing that real estate, you know, to your children or whoever you know, and that's how you start building that generational wealth. And we fell, you know, behind because we just don't have the resources. You know lack of access and you know things like redlining and you know laws and stuff that kept us from purchasing houses and stuff like that. And now that we are finally figuring it out, we are slowly starting to catch up and we've actually been, you know, growing in home ownership and we're starting to make leaps and bounds to kind of catch up to our white counterparts.

Speaker 1: 6:48

So getting rid of seller paid commissions can really hurt the Latinx and Latino community because, you know, one of the things is that not only do we have to, you know, be able to get a loan and be able to, like, save up for a down payment and stuff like that. Now, with getting rid of that, now we have to try to figure out can we pay the commission for a real estate agent? So, on top of the down payment, now you're going to have to add another cost of, you know, paying a real estate agent. And so that's my deter first time home buyers from getting one and being like you know what. I'm just going to go and try to find a house by myself and that can be a disaster. Now, you know you may think that you know who cares.

Speaker 1: 7:39

You know real estate agents, you know, don't do that much or whatever, but you know, for me when I was a first time home buyer, the real estate agent did a lot because, as a first generation Mexican immigrant, like I didn't know what the hell I was doing and I really relied on that real estate agent to guide me through the process because I had no clue and you know, to figure out what could be wrong with the property, give me ideas, kind of basically guide me and, you know, help me navigate the, you know negotiations, all the paperwork, explain things to me. Because when you get that, that loan documents and stuff like the closing docs, like that's a lot of verbiage and a lot of freaking words and it's so freaking thick that you know your real estate agent is going to help you figure that out, as well as the lender obviously. But without the real estate agent you put yourself at risk and I know a lot of people don't see the value of a real estate agent, but to me that's an expert like you know. Obviously you have to get the make sure that you interview them and make sure you get a good one.

Speaker 1: 8:52

Real estate agents these are the experts of the market that you're trying to go into, whether it's an investment, if you just are looking for your first home or whatever, and they know those neighborhoods and stuff and you know to risk to of doing this by yourself when it's such a big purchase especially with these prices, like it's a lot of money to risk without you know having an expert there to guide you. On top of that, like not having a real estate agent because you choose not to put up that cause, you really put yourself in a vulnerable position to where you know you can be lied to or exploited by the seller or you know the lender or whatever it may be, because the real estate agent is going to advocate for your interest and you know help you find the home that will work for you and you know be an extra set of eyes and they are experienced again in that market and you might go out there and see a property and be like, oh wow, that's under market, I'm gonna get a good deal, but the real estate agent's gonna probably know the reason why that property is being sold under the market price because something may be wrong with it. And then that puts you at risk because you're thinking, oh my God, I'm getting a good deal. You go to the seller. The seller sees you don't have a real estate agent, you're a first time home buyer or whatever, and they might be tempted to hide stuff from you and not realize that you know what the AC is crap or you're gonna need to put a whole new roof or whatever. Because you don't know.

Speaker 1: 10:48

This is the first time you're buying a house and you don't know what to look for. Because when I first bought my house the first two ones I didn't know what the hell I was doing. I didn't know what to look for or whatever. And now you know I've learned you know what to look for and stuff like that. But when you're first time home buyer, your real estate agent can keep you, be that barrier to help you not get taken advantage or buy something that can really mess you up and not really what you want it. And even if it is the case that you do still want that property, your real estate agent is gonna help you negotiate that to where you get a better deal or fixes, or maybe a home warranty included to help protect you and be that kind of soundboard to help you make sure that, hey, are you sure you wanna get this property? Because by yourself you might be like whatever, I can do this, and then you get screwed in the end.

Speaker 1: 11:51

Now, if we get rid of the seller paid commissions, there's gonna be less incentive for Latino buyers to go out there and try to fulfill the American dream of home ownership, because this is something else, like I was saying earlier, that they have to pay for, and these commissions can really add up. On top of having to save up that five, 10, 20% down payment for a house and that's very pricey with the way houses are now, you know the prices are way up there, the interest is up there, and then now you would have to pay your real estate agents commission, which again it is a percentage from the final sales price, and so that's going to be another obstacle and really put home ownership further out of reach for some of those in the Latino community which for the median price of $250,000, and you have to do the 20% down payment, that's already 50 grand and then having to pay the real estate agent on top of that another 3, 4%. So that's like almost another 10 grand. Like it is a lot for those that are trying to buy their first home, on top of trying to ensure that they can afford the home with the high interest rates and stuff like that. So, and that's not even including if you find that the property that you are trying to buy sometimes the seller's not willing to pay for repairs and if you still want that home and you want to pay for the repairs, that's on top of that as well. So it can really put home ownership out of reach for Latinos.

Speaker 1: 13:56

And this can be really shitty because we already have, we have the racial wage gap and we have the home ownership gap in real estate. Like, and just as we were starting to get momentum and starting to get people in the Latino land next community to start going out there to buy houses, to get into real estate investing, like now you throw this and it could really kind of like set us back, because now we have the extra obstacle of money, which has always been an obstacle, and with the wage gap we're like struggling as it is. So now we have to pay our own commissions and that makes us lose our negotiation power in our professional representation. So all of that really can set us back. However, I do understand that we're not always going to be the buyer. At some point we are going to have to also be the seller. So you know how do we kind of balance that out to where it doesn't set us back in the home buyer, like first time home buyers, but also does it kind of like screw us over when we do want to go sell our house and, you know, are worried about paying those commissions, for not only you know ourselves, our listing agent, but the buyer's agent, and it's kind of like a tricky situation.

Speaker 1: 15:28

And of course, this has sparked a big debate, like on TikTok. You know I've been following it on TikTok and you know you have debates, you know for and against it. Of course you have some real estate agents for it and you know first time home buyers for it, but then on the other side you have like investors and sellers that are obviously going to be against it and you know, like where do we draw the line? How can we balance this? Now, for me I can definitely see, you know, the seller's point of view, having been a seller for myself.

Speaker 1: 16:05

You know, and one of the things that you know kind of annoy sellers is that why am I going to pay for the buyer's agent which that agents help negotiate down the price? So now I'm paying some someone to further push down the price of my home that I'm selling and then paying you a commission on top of that. So that really kind of sounds shitty, of course. And then on top of that you don't really get to negotiate because you know sometimes they have a set you know range of commission and obviously you're going to want to pay the higher commission. So that way you attract buyers, agents and have a bigger pool of potential buyers.

Speaker 1: 16:51

So there's no doubt that you know something has to kind of change to you know, balance it out a little bit more and kind of make it fair for both sides. And you know, because this is pretty much unregulated, which is why it's all over the place and you have these kind of you know quotation marks, forced seller paid commissions. But getting rid of it completely, of getting rid of seller paid commissions, is going to be a bigger issue in the grand scheme of things, because yeah, you know the seller is going to save some money by not paying the commission of the buyer buyer's agent, but overall, like it might have a more negative impact in the big scheme of things, like you know, making sure that we are still supporting the American dream of home ownership and making it accessible to everybody, including minorities, including the Latino community. So, overall, there's really not like a clear answer to this. Like I really don't know how we can kind of make sure that it's kind of balanced. But whatever the solution is, they have to make sure that they keep equity in mind to make sure that we are continuing to narrow that housing ownership gap. Do you all have any ideas of what we can do to kind of balance this out without, you know, completely getting rid of the seller paid commissions? Because right now I can't really, you know, think about it, you know, because in one way I'm like, you know, if I was a seller, of course it is a disadvantage to me, but when I go by, then it benefits me, right. So we kind of like, to me, balance is out, as I'm a seller and buyer most of the time. So I of course always rely on the seller paid commissions for when I'm buying.

Speaker 1: 19:00

Overall, we're just going to have to wait and see and see how what happens with these lawsuits. Like I said, one of them is going to trial October 16. That's, you know, if they haven't settled by then or haven't settled now as I'm recording this. But I guess we'll just see what happens. But other than that, that's pretty much it for this episode. Let me know what you think, hit me up on my Instagram and let me know what you think about this lawsuit and the potential loss of seller paid commissions. But other than that, I will see you in the next episode. Bye. Thank you so much for listening. If you enjoyed this episode, please rate and share so others may find this podcast. If you'd like to be a guest on the show, you can email me at infomoneychismecom and don't forget to follow me on all my social medias that are listed below. Hasta la próxima, bye.