Ep001: How Will the NAR Lawsuit Impact Home Buyers?

In the inaugural episode of the All Things Real Estate Podcast, hosts Chris McAllister and Laci LeBlanc dive into the latest changes impacting the real estate market. With the recent National Association of Realtors (NAR) lawsuit settlement shaking up the industry, Chris and Laci explain how these changes affect buyers, sellers, and agents alike. They break down what the new commission transparency rules mean, the importance of buyer representation agreements, and how these shifts create opportunities for more informed and empowered real estate transactions.

Whether you’re a first-time buyer, a seasoned homeowner, or considering selling your property, this episode gives you the knowledge you need to navigate the new real estate landscape.

Key Takeaways:

• Overview of the NAR Settlement: Learn about the Sitzer Burnett vs. NAR lawsuit and how it’s changing the way real estate commissions are structured.
• Buyer Representation Agreements: A new requirement for all real estate transactions—buyers must sign formal agreements with their agents that clearly outline services and compensation.
• Commission Transparency: The settlement ensures that buyers are now fully aware of how their agents are compensated and gives them more negotiating power.
• Opportunities for Buyers: Buyers can negotiate flat fees, hourly rates, or commission percentages with agents, allowing for more flexibility and customization in service.
• Practical Advice for Buyers: Take your time interviewing agents, understand your options for commission payment, and ensure you're getting value for your investment in your real estate agent.

Quotable Moments:

• "This isn't about agents, it's about the people making the biggest financial decisions of their lives." – Chris McAllister
• "You have more control, more responsibility, and more negotiating power in the real estate process now." – Chris McAllister
• "I think the very best agents are going to get really busy, while those who haven’t been professional will start to fade away." – Chris McAllister

Actionable Steps:

1. Interview Multiple Agents: Don’t rush into signing with an agent. Take the time to find one who aligns with your goals and clearly explains their value and fees.
2. Understand Buyer Representation Agreements: Before signing, make sure you understand the terms, services provided, and compensation your agent will receive.
3. Consider Your Options: You can still negotiate with sellers to cover your buyer agent’s fees or explore alternatives like flat fees and hourly rates.

Resources Mentioned:

• NAR Get the Facts
• BuyWithROOST.com
• SellWithROOST.com

P.S. Want more practical tips for buying and selling real estate? Our ever-growing library of books, blog posts, podcast episodes, masterclasses, documents, and other tools is at your fingertips.

Learn More >>> The All Things Real Estate Resource Hub

Transcript

Chris McAllister: Welcome to the All Things Real Estate Podcast. I'm Chris McAllister, and it's my job to create and coach real estate opportunities and strategies that support and add value to homeowners and residential property investors. I'm joined today by my co host and marketing partner, Laci LeBlanc. Good morning, Laci.

Laci LeBlanc: Good morning, Chris. 

Chris McAllister: So why this podcast and why now? So Laci, you and I have been working on the Connect, Practice, Track and Grow podcast for real estate professionals, as well as the Landlord Profitability Playbook podcast for real estate investors for well over a year now. And it just seemed like with everything going on in the real estate world, that this was the perfect time to start a podcast that speaks directly to real estate.

To buyers and sellers. 

Laci LeBlanc: Yeah, I think you're right. There's so much going on. Um, in real estate and, you know, typically it's the agent's job. I would say to communicate that to the buyer or the seller that that they're working with. But I think it's a great time to Get the information out there kind of in mass so that buyers and sellers who maybe aren't working with an agent yet or don't have an agent in the family or that they talk to on a regular basis, um, can, can know what's going on in the real estate world and keep their finger on the pulse so that when they're ready to buy or sell, they're, Up to date with all the information.

Chris McAllister: Yeah, exactly. And you know, it seems like now more so than ever, the real estate market is changing and evolving rapidly, especially after the recent national association of realtors lawsuit settlement. And I got to tell you, I, for one, am very excited about the opportunities. These. These changes are creating for buyers and sellers.

And, you know, our ability, my ability as a real estate professional to, you know, differentiate ourselves in the market and most importantly, articulate the value we provide to our clients. So I want this podcast and our new all things real estate education hub to serve as a resource to help buyers and sellers and investors make more informed decisions in this new environment.

Laci LeBlanc: Yeah, I think that's fantastic. I just, I don't think that there's, there's, it's even possible to put too much information out there. The, you know, the more, you know, the better you can do. 

Chris McAllister: So this is our inaugural episode, but in future episodes, we're going to dive into the latest industry trends, practical strategies, and changes that are going to directly affect buyers and sellers.

So through the course of this podcast series, we're going to cover everything from negotiating commissions to maximizing the value of your home. So I'd like to do first is give everybody a quick background on the national association of realtor lawsuit settlement and why it matters. So the lawsuit is known as Sitzer Burnett versus the National Association of Realtors or NAR.

And this was brought by home sellers, I believe in Missouri, who claimed that the National Association of Realtors and several large real estate brokerages and franchise companies had conspired to inflate fire agent commissions by requiring sellers to cover them. So the lawsuit argued that this practice violated antitrust laws by limiting competition and consumer choice.

And now that they've come to terms and settled this, the settlement requires more transparency in real estate transactions, including written buyer representation agreements. And it also gives buyers the ability to negotiate commissions directly with their agent. Now, I would argue, and I think most of us would, uh, in the business that buyers and sellers have always had the ability to negotiate their commissions, but it's become clear as I've dug into this over the last few months that not every agent necessarily made that clear to the people they were working with.

Laci LeBlanc: Sure. Yeah. As a daughter of a car dealer, I've always known that everything is negotiable, but not everybody knows that. And I do think that there's probably been some You know, glancing over the contract and what's expected as far as commission is concerned. But for the people, can you tell us what, um, you know, what commission looked like pre NAR, um, as far as, you know, what the, what the problem was?

Chris McAllister: We all, we as realtors all operated under the concept of clear cooperation. And basically when we, you know, when, when we would sit down with the seller, we would say, we're going to list your house for, you know, this, this amount of money or percent of the sale price and a portion of that money you pay us, we are going to offer to whatever brokerage happens to bring a buyer.

I have to believe between you and me, that had we done a better job collectively in explaining what clear cooperation was all about and why it was occurring. This lawsuit maybe never would have come to pass anyway, but it has and it has exposed areas where, um, quite frankly, people, we weren't presenting it correctly and consequently buyers and sellers were in the, in the dark and it, uh, it was deemed that they were being harmed.

So that's basically how we. Got here. One of the key things that buyers are going to experience now is see the settlement changes, how real estate commissions are handled all the way around. And it induces introduces a nationwide requirement for what's called written buyer representation agreements. And that policy, the NAR policy started as of August 17th, 2024.

So any licensed agent or broker who is a member of the National Association of Realtors in order to continue to be a member and enjoy benefits of MLS participation and so forth has to abide by this rule. That's also, um, important to note. And at this point, I only know for sure about Ohio, but Ohio, uh, just recently introduced A new law that makes the requirement for a buyer representation agreement state law, as of, I believe it's, it was just this month in September.

So it's not just an NAR requirement. that every agent uses a buyer representation agreement in many states and now, including Ohio, it's a law. So before the settlement, buyers didn't have to sign formal agreements with their agents, and the commission structures were quite frankly, less transparent. Now, having said that, some agents always used buyer representation agreements.

And made it very, very clear as to, you know, what they, what the buyer could expect from their agent. And that was great. The difference was though, that in the era of clear cooperation, even though the buyer signed their name saying that, you know, they were entering into this agreement and ultimately, uh, you know, the buyer was going, the buyer's agent was going to get paid.

There was never any concern whatsoever as to where that money was coming from. It was always Assumed and automatically structured that that money was ultimately coming from the seller. Does that make sense? Or is that, am I making this too, uh, 

Laci LeBlanc: Yeah, no, I think that it's, you know, these are very practical changes that are happening.

So if you're a buyer now, you have to sign an agreement, whereas many didn't before. Um, if you're a buyer now, you have to, you know, at least make yourself aware or be concerned with, um, you know, how your agent is going to get compensated for the work that they put in helping you buy a home. Um, Because it's not just necessarily going to come from the seller moving forward.

Um, so I think if you're a buyer or a seller, there's, you know, this isn't one of those times where you sign the contract without looking anymore. You've really got to pay attention. Um, and then if you're an agent, uh, then, then certainly communication is key. Um, and I think that like with any change like this, there are fears.

And then there's like, what's practically going to happen. And so like how close the fears are that people are having buyer sellers, agents. Um, to what's actually going to happen is yet to be seen if I'm, you know, if I'm kind of looking at this the right way. 

Chris McAllister: Well, I would tell anybody listening that it's your, your agent is far more fearful than you likely are.

Or most of the general public is. This is a much, much bigger change for agents and how they do business than it is for buyers and sellers. But that's not the, that's not the, uh, The point of, of this podcast, this podcast is about going directly to people who already own residential property or want to buy residential property.

And quite frankly, it's just not about agents and it never should have been about agents. This is really about the person making the biggest financial decisions of their lives. And I've decided it's time to quote, cut out the middleman and, and, uh, speak to buyers and sellers directly. So now buyers must sign this agreement with their agent that ensures transparency in the services provided and spells out exactly how their buyer agent will be compensated.

And this empowers buyers to have more control and more clarity in their real estate transactions. But it also requires that buyers take more responsibility for, um, their, their own well being. And it does mean that, that buyers are going to have to take a little bit more time to really think through and read through and understand these, uh, various documents that they're going to be asked to sign going forward.

So I want to talk a little bit about how buyer agent commissions are now more transparent and more negotiable. So as I mentioned previously, in most cases, the seller ultimately paid both the buyers and the sellers agents. And most of the time this happened without the buyers even being aware that it had happened because they, so many buyers didn't really understand the structure.

It was just sort of magical that lo and behold, I get this agent, they helped me get my, get my house. And, and, uh, you know, they, they get me to the closing table. I know they get a check, but I also know it didn't cost me anything. I mean, that's, that's pretty much how it was. No, we didn't really worry too much about how the, how the buyer agent was.

Getting paid. But now with written buyer representation agreements that explicitly these agreements explicitly define the commission structure. And the idea is to ensure that buyers know what they're paying for and they're giving them improved ability to negotiate with their agent. And in turn, the agents brokerage.

So the idea is, and I truly believe this is what's going that what's already starting to happen is this clarity allows buyers to see exactly how much their agent is being paid and it gives them the ability to negotiate terms such as flat fees, hourly rates or percentages with their agents. And what this means is your agent or any agent that you may interview to work with you on the purchase of a home, they're going to have to very, uh, in, in great detail, explain to you what, what value they bring to the table, what services they're going to provide and how much they're going to charge you.

And that's not something that was a common practice in our industry prior to literally last month. 

Laci LeBlanc: So do you think buyers now are going to be Putting part of the bill. Is that, I mean, is that the future that you see? 

Chris McAllister: I, I think that remains to be seen and we're going to talk about where, where the money will come from or continues to come from to help buyers compensate their, their agent, but I think the best thing that we can do for folks today in this first episode is we're going to put a link in the show notes.

It's a link to a website, the national associate of realtors has published called Get the Facts. And it's a website for buyers and sellers and it talks exactly in great detail what the buyer agency agreement looks like, other things that will affect buyers with this settlement of the lawsuit and how it's going to affect sellers as well.

So key thing, day to day practical matters, if you're going out, if you're going to start your home home hunting search, um, anytime soon, or actually if you started at any time after August 17th, Your agent should have asked you to sign a written buyer representation agreement before they ever show you a house.

So again, this agreement outlines the services they provide and the compensation that they're requesting, right? But legally in Ohio, and because we're all members of the National Association of Realtors, we're literally not allowed to take you across the threshold of a house outside of an open house situation.

Without presenting this document to you and, and, um, asking for your signature. And in Ohio, this is very similar to the requirements that we've always had that agents and brokers provides prospective buyers with a consumer guide to agency brochure outlining where their agency loyalties lie. So now when you, if you were to call an agent to show you a house.

Or you've got an agent that you're currently working with, before they go forward with you on the next house, they're going to ask you for a written buyer representation agreement, and they're, they're going to give you a brochure, um, outlining the policy on agency. And generally, your agent will ask for a signature on that, um, they'll, they'll bring two copies, they'll give one to you, and they'll ask for a signature on the second one and put it in their file.

So buyers need to know that every aspect of this agreement, including the services, the fees, and the length of time the contract is enforced, can be negotiated. And it's essential that you only sign this piece of paper when the terms are clear, that you, you understand them, and they're agreed upon with your agent.

So these agreements define the business relationship between you and your agent, but they don't, they don't, they don't dictate. The specific type of relationship, they leave that open for negotiation. So for instance, buyers can choose different types of representation, such as exclusive representation, where you're only going to work with that.

Agent or non exclusive representation. Now in real life, practically, you're probably only going to be working with agents who are looking for an exclusive agreement with you so that they know that whatever time they put into the relationship, that they're ultimately going to get paid for their services.

Makes sense. 

Laci LeBlanc: It makes sense to me. Yeah, it's, um, again, I think that the, the fear is probably worse than the, than the reality at this point, but. 

Chris McAllister: Well, I think that, I think the quote fear and so forth is, I guess I understand it. Because the, the key thing for this buyer representation agreement is that you are agreeing to, to pay your buyer agent.

And that's something that was never clear before. So you're signing an agreement that says, Yes, I would love you to work for me, and I'm going to make sure that you get paid this amount for the, for your services rendered. That's not something that was ever clear before, outside of those few agents who were using buyer representation agreements prior to August 17.

So here's some practical advice as we get out there into the world. Discuss and negotiate the terms of the buyer agreement with your agent up front. Don't feel rushed. Ask questions and get clarity before signing. It is more than appropriate for you when presented with a buyer representation agreement to literally just cross out anything that says there's going to be a fee involved and sign your name that, you know, even that this is a one time showing.

If you feel great about the experience and you think that you might want to work with that, Uh, agent, then you need to set a separate appointment, sit down with that agent and really talk through, you know, how you guys are going to work together, negotiate the fee and then sign a contract that, that, that works for you, but discuss and negotiate the terms of the agreement with your agent upfront and do, and try not to feel rushed, try not to feel pressured.

Buyers are going to have the freedom, and they always have, right? You always have had the freedom to interview several agents to find the best fit, both in terms of services offered and commission rates. You know, it may have felt like all buyers agents were the same, you know, buyers agents sort of became a commodity the last few years.

Going forward, when a buyer agent has to show enough value to deserve you paying them, I think you're going to find that there are going to be certain buyer agents that really stand out and set themselves apart with the services and the counsel they provide. So take your time, ask your friends and family for referrals.

But interviews as many agents as you feel comfortable interviewing until you find somebody that's a good fit for you. Now, while the fee structure is now going to be clear, a well negotiated agreement can offer better value by securing an agent that understands your goals and can save you time, money, or stress.

I really think a lot of times the buyers got excited about a house. They called their, uh, third cousin twice removed who happened to have a real estate license and said, can you help me get this house? They didn't have to worry about paying that person. They didn't have to worry about what services were provided.

They just needed them to write and present a contract and get them to the closing table. Things are going to be quite a bit different now when you have to decide if you're going to pay that second, third cousin twice removed directly. And I think if you think back, you probably had representation in the past, if you bought more than one house, where you, you may be kind of happy that you didn't have to come out of pocket to pay that agent, that you're going to be potentially coming out of pocket to pay that agent.

I think you want to be more discerning about the person that, that, uh, You decide to have help you. And yes, of course, you can always go out into this journey and not have representation. That is absolutely your right and privileges. Well, um, so I think we're talking about negotiating fees. Let's make it clear.

Nobody has to have an agent. You can certainly represent yourself and go it alone. So when it comes to the fee, this is, this is where I think people, um, feel the most stress because I think, I don't know what percentage we're going to find a buyers that, that one desperately to have licensed representation, but I think it's still going to always be a significant percentage of the, of the buyer market.

So you could still negotiate with the seller to cover your buyer agent commission. Now, just because that the sellers are no longer allowed to may or the sellers brokers are no longer allowed to make a blanket offer of compensation to every other agent in the market. The seller can still choose to To pay your brokerage directly for the services provided to you as long as it's written into the contract.

So it's not like everybody's going to come out of pocket for X amount of money, you know, to pay their agent. Although that could happen, right? I mean, you maybe have an investor who, you know, works directly with a, with an agent and they have for years. They never want to let that go. They negotiate a fee.

And they want to write the cleanest offers as they possibly can with the most likelihood of being accepted, and they're never going to write any type of commission reimbursement into the contract whatsoever. They're better off just writing a check directly to their agent, right? There may be some situations where Depending on the type of loan that you're getting, you may ask for, uh, buyer closing costs and prepaid items to be paid by the seller that may include all or a portion of your obligation to your buyer agent.

But the third way is more traditional in that, you know, you can ask the seller to pay your buyer agents. the fee you agreed to pay your buyer agents and have the, um, the proceeds of the seller's sale, go ahead and do that at the closing table. So it's not like everybody is going to be coming out of pocket and writing a big fat check for their buyer agent.

There are still ways to get that written into the contract, ask the seller directly to pay for it, but just please keep in mind that. You're, you're signing an agreement that says you're going to expect these services from your agent and you're going to pay your buyer agent X in return, but there are still a number of ways that, um, your agent can get that covered for you by the seller.

I can tell you anecdotally, and it's only been a month, um, I really haven't run across any, anybody who has said that, um, uh, sellers haven't been willing to, you know, offer a co op. In many cases, they're saying, Well, let's not promise anything, but you know, please, you know, they would tell their listing agent, let's not promise anything, but please let anybody know who inquires about the property that if you need help with your buyer agency fees, write it into the contract and we'll look at each offer independent and choose the one that works best for us.

I think that is something that we're going to see happen more and more going forward. Well, Laci, I hope I didn't confuse you or anybody else any more so than they already were. Hopefully that helps a little bit. 

Laci LeBlanc: No, I think it helps a lot. I think, um, you know, we know from our other, if you listen to our other podcast, we talk about how, you know, we're anxious.

We're a little anxious over here, but I think about, um, as a first time buyer, I bought my house from my grandfather's estate, which was being managed by my mom and my aunt. Right. And my Nana, my grandmother was my agent. And so I had a very, um, You know, it should have been pretty relaxed, probably, because I trust these people implicitly with my, with my future.

Um, but it was still very stressful. It is the biggest, you said it, it's the biggest, one of the biggest financial decisions you'll make in your life. So, I think about first time buyers a lot when we're thinking about these NAR, um, repercussions. And the way things are going to change and, you know, how little I think typically first time buyers know, even with family members in the business, even with family members who have bought multiple properties before, um, even with people they can trust around them, how intimidating it can be and how little you really know.

So I think that just. Knowing what you've said in the past five minutes about the options that you have for getting those, um, commissions covered, because for a first time buyer looking for their first, first home, a starter home, maybe, you know, the thought of, you know, taking part of your down payment and having to put it towards, um, you know, a buyer's agent can be helpful if you see worrisome.

Um, so I think just knowing that there are still options out there to get it covered, that sellers seem to be completely open to that in most cases so far, um, is, you know, puts me a little at ease on behalf of those other first time buyers. 

Chris McAllister: But, you know, I had, um, I had two of my rental properties that I, I listed for sale after August 17th.

And in lieu of You know, one of our agents was, was helping me with those and, and, you know, actually doing the listing and the legwork and so forth. And what we decided to do was. That we're not going when somebody calls and ask, uh, Tina about the property, she's not going to say automatically, um, Oh, yeah, we're offering a X percent co op.

What she's saying is we're happy to, um, you know, please, please, please have your buyer write their offer in a way that makes sense for them. We're thrilled to consider it and, uh, and see if we can make a deal. So instead of just saying that or automatically handing out blanket offer compensation, I do think that's what's going to be happening going forward is, is that seller's and seller's agent's response to your agent is going to be, write the offer that makes sense for your buyer, and we look forward to considering, um, that offer.

Laci LeBlanc: Yeah, well, it's, it's helpful too to know that buyers are still going to get paid. Right. The buyer's agents are still going to get paid because, you know, again, as somebody who prefers to have representation, um, you know, I want to, I want to make sure that. There are good people out there who are still interested in helping me buy a home, right?

And I have 

Chris McAllister: to tell you, I think the other reason why this is really good for buyers is I think you're going to find that the very best agents among us are suddenly going to get really, really, really busy and their careers are going to get, uh, are really going to take off. And I think you're going to see that people who carried a real estate license for many, many years and, and, uh, did so because they didn't have to worry too much about how they were going to get paid, that you're going to see a lot of those people fade away.

So I think ultimately one of the best benefits is going to be for, for buyers across the country is I think you're going to have, uh, the people you're going to be interviewing are going to be pretty, pretty experienced. They're going to be well versed. They're going to be able to articulate your value.

And I think it's going to raise the bar of professionalism throughout the industry, quite frankly.

Laci LeBlanc: If as buyers and sellers, we can be more educated about what we're getting into and not rely entirely upon another person's interpretation, um, then that's always going to benefit us as well. 

Chris McAllister: And that's the mission of this podcast, right? It's to provide knowledge to directly to the people that are going to be, you know, buying a new property or selling a property.

So as we've covered today, the real estate landscape is evolving and the recent NAR settlement is a major part of this transformation, the shift towards more transparency in commission structures and the requirement for written buyer representation agreements. Means that you as a buyer are now going to have more control and responsibility as well as negotiating power in the process.

So it's essential to understand these changes and make sure that you're getting the most value from your real estate agent in this new environment. So whether you're buying your first home, you're upgrading, investing in property, you know, having an agent who understands your needs is able to explain the process, articulates their value, negotiates in their best interest.

All those things are absolutely more important than ever, because you're actually signing a piece of paper saying that you're going to hire them for that expertise. And you're going to pay them for that expertise. So these changes empower you to make informed decisions and ensure that you get the service you deserve.

And I think that's really the kind of industry I'm excited to work in going forward.

Laci LeBlanc: Let's, let's make it happen. Um, I do think that the industry as a whole, when I think about real estate and having family in real estate and, you know, it's been everything from a full time maybe overtime job for them to a, to what seems like a side hustle, which, you know, Nana's getting up there. So she's definitely not as full time at it as she has been in some years, but yeah, I think you're right.

I think that, you know, kind of upping the standard, um, up in the bar. For folks is, is never a bad thing. I don't think that it's gonna, um, exclude anybody who really is passionate about real estate and, and has made that their living and their livelihood and cares about relationships and helping other people.

But I do think that some of those folks falling away who maybe don't have that as a priority is not necessarily a bad thing. 

Chris McAllister: I gotta tell you, if you interview a buyer agent that presents this profession as a side hustle, you need to go on to the next interview candidate. There's just no place in this profession that, for people who are just doing it on the side, quote, for fun or extra cash or as a side hustle.

You know, real estate is a profession like any other profession, you know, whether it's, it's the law or whether it's medicine. And yes, I will be the first to say that there's been many people in our profession over the years that have not. You know, quote, practice with professionalism. But I do believe these changes that have come to the market in the past few weeks are going to dramatically change the makeup of the people who practice in our industry.

So thank you for joining us on this first episode of the All Things Real Estate Podcast. If you found this information helpful, make sure to subscribe so you don't miss future episodes. We'll continue to explore key topics like how to choose the right agent, tips for negotiating commissions, and strategies for maximizing your home's value.

If you're in the market to buy or sell and want personalized service, visit our website www. ROOSTRealEstateCo. com or reach out to us directly at ROOST Real Estate Company. We're here to help you navigate these new rules and make the best decisions for your real estate journey. And also don't forget to check out the link to the NAR's Get the Facts page and the show notes for more detail, detailed information on these changes.

Until next time, I'm Chris McAllister, and this is the All Things Real Estate Podcast.