In a newly released episode of the Real Estate Insiders Unfiltered Podcast, we explore the future state of buyer-seller relationships in the housing market after the National Association of Realtors (NAR) business practice changes go into effect on August 17th.
Co-hosts James Dwiggins and Keith Robinson spoke with industry expert Ed Zorn to discuss important questions that real estate agents may have in the wake of the recent Department of Justice investigation that targeted several organizations, including the California Association of Realtors.
Dwiggins and Robinson began the episode by digging into Zorn's thoughts on the Department of Justice lawsuit. Zorn said the Department of Justice issues Civil Investigative Demands (CIDs), which allow the Department to request information on specific topics from companies and organizations not involved in the litigation. The Department of Justice is continuing an investigation it began in 2019 regarding NAR's fee practices, including the collaborative fee model.
Following the Commission’s policy change at the multiple listing service (MLS) level, the Department is now seeking to address the use of standard forms designed by competing MLSs that could save consumers legal fees and other costs previously required, but risk losing offers of coverage.
“Industry-standardized forms are great for consumers,” Zorn says, “but there's a risk that the offer of compensation will remain through the structure of the form, and that it will also leave room for criticism and allegations of conspiracy.”
The buyer's agent may call to inquire about compensation offers and reject the property based on the seller's offer, allowing the agent to recommend a property that offers better compensation to the buyer.
Dwiggins joined in, asking whether there would be fewer administrative issues without standardized forms. Zone said that if brokers created their own forms, it would be harder for them to allege commission bias and there would be fewer disputes over concessions.
The discussion then moved to a scenario of dispute resolution in the new consumer-centric model created after the commission lawsuit. Zorn explained how he approaches sellers in the new market. When speaking with sellers, Zorn shares his services, experience, and general elements of a property showing.
To drive traffic to a property listing, Zorn customizes his presentation around three factors: market conditions, potential buyers and the type of property listed. For example, an entry-level home that may appeal to Federal Housing Administration (FHA) borrowers might include discounts and other perks to help first-time buyers cover the cost.
Dwiggins then questioned the value of the concession data collected by the MLS and whether a lack of data would hinder the appraisal process. A lack of concession data could lead sellers to base their price solely on offers from similar markets. Zone said that risk is minimal and commented on the usefulness of concession data for agents in certain markets.
“For this consumer-centric approach to work, I, as both the selling agent and the buyer’s agent, need the data to know what the components of the transaction are so I can give the right advice to the seller and the buyer on what offer to make and how to approach and close the deal,” Zorn said.
Robinson also suggested another scenario in which a listing agent receives a call from a buyer's agent asking about commission. Zorn said he doesn't plan to offer or accept commission from the agent. Instead, he plans to include a percentage of the listing price as a commission to help the buyer purchase the home.
The episode ended with a discussion of the importance of having a clear buyer representation agreement in place and advice for navigating a successful buyer/agent relationship.