Episode #14: Why the NAR / Realtor 6% Commission Shake-Up is a Good Thing

[00:00:00] I'm actually looking at everything going on at NAR right now.

[00:00:02] I'm looking at this more in a positive light.

[00:00:04] I think you have to get better, not only as a real estate agent in general, whether you

[00:00:08] work with sellers, buyers, both tenants landlords, you might do a little bit of everything like

[00:00:12] I do.

[00:00:13] But I think this encourages buyer agents to get better at their craft because the better

[00:00:17] you are as a buyer agent and if you're going to go buy a house, what's my job?

[00:00:21] My job is to educate you.

[00:00:23] Okay.

[00:00:24] Before we go look at 123 Main Street, before we go look at that and I take you through

[00:00:27] and you figure out whether or not you want to buy it, let me tell you about how commissions

[00:00:31] are paid because this conversation wasn't really had before because the commission was already

[00:00:36] advertised.

[00:00:37] Yeah.

[00:00:38] And then maybe when you and I would go out to look at the house, you're like, hey, how

[00:00:39] do I pay you?

[00:00:40] I'm like, you don't.

[00:00:41] The seller pays when you're like, oh my gosh, even better because guess what?

[00:00:44] I'm a buyer and they probably have more money than me in general.

[00:00:48] I'm not saying that's every time but more times than not, they probably have wealth.

[00:00:58] Okay.

[00:00:59] Welcome to the podcast dedicated to real estate, insurance and everything in between.

[00:01:03] Join us as we take you along our own brokerage building journeys with additional wisdom from

[00:01:08] our network of business experts.

[00:01:12] Welcome to Bricks and Risk.

[00:01:16] Hey everyone.

[00:01:20] Welcome to another episode of Bricks and Risk.

[00:01:23] I'm Tim Garrity.

[00:01:24] And I'm Sean Mooney.

[00:01:26] Tim, a lot of Scuttlebutt out there these days about real estate.

[00:01:33] It's on my feet everywhere I go.

[00:01:36] Yeah, it is.

[00:01:37] It's everywhere.

[00:01:38] Noir.

[00:01:39] Noir.

[00:01:40] It's very trendy.

[00:01:41] Noir.

[00:01:42] Noir.

[00:01:43] What is going on?

[00:01:45] Okay.

[00:01:46] Well, if you haven't noticed Sean and I decided to rock the stylist Copper Hill

[00:01:52] real estate trucker hats today.

[00:01:53] I went with orange.

[00:01:54] Yeah.

[00:01:55] It's tight.

[00:01:56] Like we got to be straight up.

[00:01:57] Is that a flyer orange?

[00:01:59] It is.

[00:02:00] It's supposed to be Copper, but let's call it flyers.

[00:02:02] Brent and D'Amico would be very happy with it right now.

[00:02:06] All right.

[00:02:08] So Noir, the National Association of Realtors.

[00:02:12] Yeah.

[00:02:13] First, it's the largest trade organization in the United States.

[00:02:17] That's number one.

[00:02:19] The highest it ever got was probably about 1.6 million members, which was last year.

[00:02:24] And then when the markets started to tighten up in residential real estate last year, people

[00:02:28] started getting out of the business.

[00:02:32] The National Association of Realtors too, the reason they're the largest trade organization

[00:02:36] is they basically oversee not only all the state associations.

[00:02:41] So you have national association of realtors.

[00:02:45] Each state has their own association.

[00:02:46] So again, Pennsylvania, we have PAR.

[00:02:49] And then in the states, you also have regional, like hyper-local organizations that cater to

[00:02:57] that group of agents.

[00:02:59] So here's a great example.

[00:03:01] In Greater Philadelphia, we'll go more hyper-local.

[00:03:06] There's technically three groups of realtor associations in and around Philadelphia.

[00:03:13] You have Tri-County Suburban Realtors, which is out in Malvern.

[00:03:17] You have one in Bucks County called Bucks County Association of Realtors.

[00:03:20] And then you have the Greater Philadelphia Association of Realtors called G-PAR.

[00:03:23] That's in the city.

[00:03:24] So you pretty much have three groups all servicing the same people, realtors.

[00:03:28] So there was a humongous lawsuit that just went down.

[00:03:32] It took about four years to get through the legal system.

[00:03:37] And what it was, it was a class action suit against the National Association of Realtors

[00:03:42] as well as some of the larger brokerage companies in the country, just because they handled the

[00:03:47] bulk of the sales and they were easy targets, in my opinion.

[00:03:51] And more or less, not to get too technical, the lawsuit was going against them, suing

[00:03:58] them to say that the way commissions were paid in real estate was antitrust, was monopolistic,

[00:04:06] was unfair, was price fixing is how they looked at it.

[00:04:10] And then after all was said and done, there's multiple lawsuits stacking up all over the country.

[00:04:17] One of the major ones that went through, it was in the state of Missouri, they won the,

[00:04:22] you know, plaintiffs, won.

[00:04:26] And it was going to be upwards of $5 billion.

[00:04:29] Is that all?

[00:04:30] That's all.

[00:04:31] Well, what happened is after that went down, lots of settlements started taking

[00:04:36] place.

[00:04:37] One of them was the National Association of Realtors.

[00:04:39] They fought this tooth and nail.

[00:04:41] In the end, they said, look, we're just going to stop the bleeding.

[00:04:43] We're going to settle this lawsuit.

[00:04:45] And again, hasn't hasn't been finished yet, hasn't closed this proposed settlement.

[00:04:50] $418 million, they're going to pay out as a result of this.

[00:04:56] But they're not paying and going away.

[00:04:59] They're paying and then changing how business is transacted with Realtors.

[00:05:05] Yeah.

[00:05:06] I mean, there's lawsuits all the time.

[00:05:07] Facebook gets sued.

[00:05:08] Google gets sued.

[00:05:09] And there's all sorts of big companies that get sued all the time.

[00:05:12] It's because for whatever reason, they're doing business in a way that that government

[00:05:15] doesn't agree with.

[00:05:17] And then that's why these things ensue.

[00:05:19] This $418 million is part of a class action.

[00:05:22] So the attorneys that were involved are going to make a ton of money.

[00:05:25] And then sellers, people who sold real estate within a certain period of time are going

[00:05:30] to get a piece of that class action pool of money.

[00:05:33] Will that be me?

[00:05:35] Am I getting a check?

[00:05:37] You know what?

[00:05:39] I might have sold prior to.

[00:05:41] And if you were, if you've been part of a class action before, someone says, hey, you can make

[00:05:44] $150.

[00:05:47] Did you have a droid in 2018?

[00:05:51] Because if you did, you may be entitled to $75.

[00:05:54] I'm like, that would make sense because it's a pretty cheap phone.

[00:05:58] Can I sue NAR myself if I'm not part of this class action lawsuit?

[00:06:04] You can do whatever the hell you want.

[00:06:06] I know it might be an angle there.

[00:06:07] I know attorneys.

[00:06:09] That's basically what's happening.

[00:06:11] So are you a member of NAR directly or your company?

[00:06:17] What's the structure of that?

[00:06:20] Or are you a member of the regional membership that then they're a member of the net?

[00:06:27] Like how does it work that way?

[00:06:29] The simplest way to put it is that if you're a realtor, you're a member of all three.

[00:06:33] So you have to associate with a local association because they're the ones.

[00:06:37] They're more like your partners.

[00:06:38] They're helping you out through your business because, again, we're all independent contractors.

[00:06:42] So they're like a local support system.

[00:06:45] I also belong to the Pennsylvania Association of Realtors because they are the ones responsible

[00:06:50] for our paperwork.

[00:06:51] So you've bought real estate like the Agreement of Sale, the Consumer Notice, buyer agency

[00:06:56] contract like Sellers Disclosure.

[00:06:59] That's all written by PAR.

[00:07:01] And then I'm also a member of the National Association of Realtors because you have

[00:07:05] to be there, the governing body.

[00:07:07] So I'd say between the three bodies that I'm a part of, it's probably like, $600, $700

[00:07:14] a year to be a member of all three.

[00:07:18] That's for all three.

[00:07:20] Very cheap.

[00:07:22] Now, I'm curious...

[00:07:25] So this has been going on for four years.

[00:07:27] I'm curious if...

[00:07:29] Because it feels like it came out of the blue but I'm sure that there was some speaking

[00:07:35] of this prior to the release.

[00:07:37] Absolutely.

[00:07:38] This has been in the forefront of my industry.

[00:07:41] This is really residential real estate.

[00:07:43] Trying not to just get this confused that people are selling office buildings or industrial

[00:07:47] warehouses or doing leasing in like in Center City, Philadelphia, like this doesn't really

[00:07:52] have much to do with them.

[00:07:54] They already operate on a different model.

[00:07:55] If you're in commercial, you operate on a different model.

[00:07:58] If you're in residential, chances are you are a realtor and you operate under

[00:08:01] this structure.

[00:08:04] Can you talk about the 6% because they're saying that it was price fixing.

[00:08:10] Yeah.

[00:08:11] Can you talk about how it is currently and like how it's divvied up and how that's paid

[00:08:18] out?

[00:08:19] Yeah.

[00:08:20] So I think the number that most people associate with selling real estate is that it costs

[00:08:25] me 6% of my purchase price to sell my home, let's say, or my investment property, my

[00:08:30] condo, whatever it is.

[00:08:32] The reason that is it's been around that range for probably, if I had to guess, about 50 years

[00:08:39] or so.

[00:08:41] What people don't talk about is that in the last couple of decades, that number has consistently

[00:08:48] gone down from 6 on average to somewhere closer to 5% to sell a piece of real estate.

[00:08:56] Reason being there's more competition.

[00:08:58] There's more realtors.

[00:09:00] There's more brokerages.

[00:09:01] There's more ways to do business.

[00:09:04] Obviously, advertising on the internet and social media.

[00:09:07] Everything's more reliant on the agent now these days.

[00:09:10] Us as solo practitioners, whether you're a solo agent or on a team, it's really up

[00:09:15] to you how well you want to market a listing.

[00:09:18] The brokerage doesn't do that for you.

[00:09:19] The brokerage is basically the house that gives you cover, gives you support, gives

[00:09:25] you insurance, protects you, makes you comfortable.

[00:09:28] Plus they also have training, they have marketing, they have a brand, whatever.

[00:09:31] But today the agent really runs the show and that 6% was always out there just as like

[00:09:38] a general rule of thumb.

[00:09:39] That's what it costs.

[00:09:40] But to keep it more boots on the ground, like you have sold real estate before.

[00:09:45] I've sold real estate with people within our network.

[00:09:48] When I go out to them, I would traditionally say you've probably heard 6% before for

[00:09:55] most of my friends and family ever since I've been in the business.

[00:09:57] I have been usually selling for about 5%.

[00:10:00] Meaning if I put on the market and there's another agent involved, which 9 times out

[00:10:05] of 10 there is, my brokerage would get 2.5%, that brokerage would get 2.5%.

[00:10:11] That's the best way I can explain that 6%.

[00:10:13] What is it?

[00:10:14] Why is it?

[00:10:16] And what's interesting about this whole thing, if I can just kind of be on the

[00:10:18] side of agents, is that when this lawsuit happened they kind of made it seem

[00:10:25] commissions were non-negotiable.

[00:10:28] Because when it comes down to price fixing, they're looking at it as like everyone is

[00:10:31] collaborating together and conspiring together so that 6% never moves.

[00:10:39] And I think honestly what were some of the cases that spurred this?

[00:10:41] I think they were higher end sales.

[00:10:43] So think about it, you're selling something for like $10 million out in California or

[00:10:46] New York.

[00:10:47] I mean 6% or 5% of $10 million is a ton of money.

[00:10:54] And there's agents who run their business all different ways.

[00:10:56] Some do it relationship based, some do it transaction based.

[00:11:00] Sometimes you're more transactional.

[00:11:01] You don't care if it goes well or if it goes poorly because you're like I just

[00:11:05] want to get this deal done, get paid and move on.

[00:11:08] You ask me to sell your house, I'm getting it done.

[00:11:11] The people who are more relationship focused, again this is just my own personal,

[00:11:15] professional opinion, they look at it differently.

[00:11:17] How do we both benefit?

[00:11:19] How do I set your expectations properly?

[00:11:21] It's more about the customer support.

[00:11:22] It's more about the service so that when you're done, you can say would you mind

[00:11:27] giving me an online review?

[00:11:29] Would you mind telling friends and family or people in your network about me?

[00:11:33] And if you ever have another need, if you want an investment property,

[00:11:36] you ever want to sell this place, you ever want to buy a house at the

[00:11:38] shore up in the Poconos Lake, make me your first call.

[00:11:41] And that's how I've always operated.

[00:11:43] I was reading in the New York Times recently and said that this 6%

[00:11:49] model, the commission structure is going away.

[00:11:53] Gone.

[00:11:53] Yeah.

[00:11:56] Is it?

[00:11:56] It's not.

[00:11:57] No.

[00:11:59] So my opinion, again this is all opinion based so please not take,

[00:12:03] besides some of the numbers I dropped.

[00:12:04] If they're tuning in, they know that this is our opinion.

[00:12:07] This is our opinion.

[00:12:09] No disclaimer needed.

[00:12:11] When the seller, part of the reason why I feel like the sellers have traditionally

[00:12:15] paid for real estate commissions, who's wealthier in a real estate transaction?

[00:12:19] Traditionally, who would have more assets or more money?

[00:12:22] The person selling the house or the person buying the house?

[00:12:26] More times than not, as real estate is the number one wealth builder

[00:12:30] in the United States of America, look it up by a big margin over the stock market.

[00:12:36] More people have realized wealth in America through real estate,

[00:12:40] then crypto, then the stock market.

[00:12:42] Therefore, if it's one of the biggest wealth builders,

[00:12:45] when you go to sell it, chances are you have more money than the buyer.

[00:12:50] Well what happened is like back in the 70s and stuff,

[00:12:52] they would pay commission and it would all go to the listing agent.

[00:12:58] Like there wouldn't be no buyer agent.

[00:13:00] It'd be like you go to the listing agent, you buy the house, guess what?

[00:13:02] They know the seller better than you and you're probably not going to get

[00:13:06] great customer service plus they're making a lot of money.

[00:13:08] So they just want to see the deal done.

[00:13:10] It was more about sales.

[00:13:12] It wasn't until the 90s, especially in Pennsylvania that we introduced cooperation.

[00:13:18] We said hey, if it's 6% of it's 5%, it's 4%, it doesn't matter what it is.

[00:13:22] You should split that, you should advertise, I'm going to put 2% out there,

[00:13:27] 2.5%, 3% to a buyer agent and back to your original question,

[00:13:31] why will this not go away?

[00:13:33] It's a competitive advantage for the seller, a competitive edge

[00:13:37] You offer a commission to the buy side so that the buyer doesn't have to pay.

[00:13:42] They probably have less money.

[00:13:44] Also you're going to get more eyes on your property.

[00:13:48] So the more demand there is for your home, if you have a pool of 5 buyers,

[00:13:53] you're going to get 5 opinions.

[00:13:54] If you have a pool of 5,000 buyers, you're going to get lots of different opinions

[00:13:59] after whether your price too high, too low or just right.

[00:14:02] So real estate supply and demand.

[00:14:05] The reason that commission I don't think will go away is because

[00:14:08] I think the majority of sellers, the number I've used, I think 75% of sellers

[00:14:13] are still going to pay 5% to 6% on average.

[00:14:17] The reason being is they want that competitive edge.

[00:14:19] They want to get the highest price for their home.

[00:14:21] They don't just want one office of 100 agents to look at and be like,

[00:14:24] does anyone have a buyer?

[00:14:26] That's not enough people.

[00:14:27] They want to put it out to greater Philadelphia, be like,

[00:14:29] of the 10,000 agents, does someone have a buyer?

[00:14:33] That's what they want.

[00:14:34] That's all recently somewhere it was put kind of like this, where if you're

[00:14:38] representing a buyer and then the agent would go to them and say, hey, listen,

[00:14:44] buyer client.

[00:14:47] How do you want to do this deal?

[00:14:49] Yeah.

[00:14:50] And they said, do you want us to look at only homes that had an offer?

[00:14:57] Because if the seller wasn't going to pony up the money and then let's

[00:15:03] just say, for example, that it would be the obligation of the buyer agent to

[00:15:10] absorb that cost.

[00:15:12] Pay for that.

[00:15:12] Pay their agent for representation.

[00:15:14] Right.

[00:15:14] So they would say, hey, buyer client, do you want to either look at,

[00:15:22] you want to pony up that price right now?

[00:15:25] Then we can look at anything.

[00:15:26] Look at anything.

[00:15:27] Or we can only selectively look at these listings that where seller was

[00:15:36] offering the commission.

[00:15:38] So for me, it's like, if I'm the buyer client or if I'm the seller,

[00:15:47] I want as many people through this door as possible.

[00:15:50] You want as many items in your property as possible.

[00:15:52] And I'm willing to give up now.

[00:15:54] People might have different opinions about what they're willing to give up.

[00:15:59] But I think just on the level, everybody's willing to pay something

[00:16:05] to get more traffic through the home.

[00:16:08] Yeah.

[00:16:09] So I think there's going to be three different ways commissions will be paid.

[00:16:16] July moving for July 2024 is when these new rules are supposed to be enacted.

[00:16:21] OK.

[00:16:22] The first major rule that's being enacted,

[00:16:26] they're forcing the National Association of Realtors to do this is that local MLSs,

[00:16:31] local multiple listing services are what advertised properties in any market.

[00:16:34] Philadelphia, Boston, Chicago, Texas, El Paso.

[00:16:40] I mentioned El Paso before, haven't I?

[00:16:42] I don't know why I do that.

[00:16:43] Listening block down there.

[00:16:45] Exactly.

[00:16:46] And if you're from El Paso, I love you.

[00:16:49] So being that the MLSs control local markets of real estate,

[00:16:54] meaning if you're going to sell at your home,

[00:16:56] you want an agent to put on the MLS.

[00:16:58] So that gets all the eyeballs on it.

[00:16:59] It gets the eyeballs of agents.

[00:17:01] It also shifts out to sites like Zillow and Realtor.com

[00:17:04] and all these other consumer facing sites where you can see that as well.

[00:17:09] So being that's the case, they don't want NAR or MLSs

[00:17:15] to advertise buyer broker commissions.

[00:17:19] It was part of the reason why this lawsuit went down

[00:17:22] because listing agents used to advertise buyer broker commissions,

[00:17:25] it was almost guaranteed.

[00:17:27] So if you came in with your buyer agent

[00:17:29] and let's say that buyer agent wasn't even that good.

[00:17:33] So let's say that buyer agent was brand new

[00:17:37] and they're taking you through the house.

[00:17:38] They're going to still pay 2.5%, 3% to that buyer agent,

[00:17:41] whether they're good or not.

[00:17:42] So I think the thought was that that's kind of unfair.

[00:17:46] Why are we forcing commissions if the person's not that good?

[00:17:49] What if the service isn't that good?

[00:17:51] So the one rule they said can't advertise on the MLS anymore.

[00:17:53] That was rule number one.

[00:17:56] People will find a way to get the word out

[00:17:58] that their seller will pay or their seller won't pay.

[00:18:01] So that's where these three ways come in.

[00:18:03] After July 2024, when this goes down,

[00:18:06] it's either the seller can pay the buyer agent's commission,

[00:18:09] the buyer can pay the buyer agent's commission

[00:18:12] or they can both pay the buyer agent's commission,

[00:18:16] meaning maybe the buyer pays $500 or 1%

[00:18:20] and the seller will pay a couple of points.

[00:18:23] Whatever it is, now there's different ways to get it done.

[00:18:25] I actually think that's a good thing.

[00:18:27] And that's like a negotiation?

[00:18:28] Negotiation and the thing is-

[00:18:30] Would that be, hey, I'm submitting my offer

[00:18:34] and this is-

[00:18:35] Yes, that's part of it.

[00:18:37] I mean, I think about it now

[00:18:39] and the crazy things that are being offered now.

[00:18:44] I mean, a couple of years ago

[00:18:46] was like can't buy a house without home inspection.

[00:18:48] And then nobody gets a home inspection.

[00:18:52] Like the way that these changes get enacted,

[00:18:56] where it's 180 degrees,

[00:18:59] I think there's people gonna say,

[00:19:02] that won't happen or it absolutely will happen.

[00:19:06] And I think what I like about this,

[00:19:09] I'm actually looking at everything going on to NAR right now.

[00:19:11] I'm looking at this more in a positive light.

[00:19:13] I think you have to get better,

[00:19:15] not only as a real estate agent in general,

[00:19:17] whether you work with sellers, buyers,

[00:19:18] both tenants, landlords,

[00:19:20] you might do a little bit of everything like I do.

[00:19:22] But I think this encourages buyer agents

[00:19:24] to get better at their craft.

[00:19:26] Because the better you are as a buyer agent

[00:19:28] and if you're gonna go buy a house, what's my job?

[00:19:30] My job is to educate you.

[00:19:32] Okay, before we go look at 123 Main Street,

[00:19:35] before we go look at that and I take you through

[00:19:37] and you figure out whether or not you wanna buy it,

[00:19:39] let me tell you about how commissions are paid.

[00:19:41] Because this conversation wasn't really had before

[00:19:44] because the commission was already advertised.

[00:19:46] And then maybe when you and I would go out

[00:19:47] to look at the house, you're like, hey,

[00:19:48] how do I pay you?

[00:19:49] I'm like, you don't, the seller pays me.

[00:19:50] You're like, oh my gosh, even better.

[00:19:52] Because guess what?

[00:19:53] I'm a buyer and they probably have more money than me

[00:19:56] in general.

[00:19:57] I'm not saying that's every time

[00:19:58] but more times than not they probably have wealth.

[00:20:01] So with that being the case,

[00:20:03] now we just have to figure out how the commission gets paid.

[00:20:05] You say wealth, I say liquid money.

[00:20:08] You got it.

[00:20:09] More liquid.

[00:20:10] The more liquid, yes, that's a good way to put it.

[00:20:11] Wealth is not ever-

[00:20:13] Who's got the cash?

[00:20:15] Right.

[00:20:16] And whoever has the cash is kinda right in the rules.

[00:20:19] Yeah.

[00:20:19] That's why they say cash is king.

[00:20:21] I say Bitcoin but other people say cash.

[00:20:25] If you didn't know already,

[00:20:26] Mooney was a huge crypto guy.

[00:20:28] I mean Bitcoin-

[00:20:29] Very much behind the scenes

[00:20:30] but if you sit down with them and talk about crypto,

[00:20:33] this dude's like making retirement plans.

[00:20:35] Bitcoin maximalist is what they call me.

[00:20:41] Hey everyone, this is Tim,

[00:20:44] your favorite bricks and risk co-hosts.

[00:20:46] But don't tell Sean.

[00:20:48] I hope you're enjoying this episode

[00:20:49] and I'll get right back to it in a moment.

[00:20:51] Our audience grows through word of mouth.

[00:20:54] So if you would please take a moment of your time

[00:20:57] and give us a review on the platform you're on,

[00:20:59] that would be fantastic.

[00:21:01] Please also help spread the BNR word

[00:21:04] by sharing your favorite episode with a friend.

[00:21:06] We greatly appreciate your time and trust.

[00:21:09] Now, back to the show.

[00:21:16] Well let's get down.

[00:21:17] So when this comes through,

[00:21:19] who's it really impacting

[00:21:21] and who's the winner in all of this

[00:21:25] or who's the design to be the winner in all of this?

[00:21:29] So when this happens, there's a class action lawsuit

[00:21:32] where the plaintiff won the defendant lost

[00:21:34] the National Association of Realtors

[00:21:35] as well as large brokerages throughout the US.

[00:21:37] I don't even need to name them, just go look them up.

[00:21:40] We're talking like hundreds of millions of dollars

[00:21:43] is going to this class action suit.

[00:21:46] It goes to the lawyers who got this thing done,

[00:21:49] they get money for their time

[00:21:50] and it goes to home sellers

[00:21:53] who bought homes or who sold homes

[00:21:55] within a certain period of time.

[00:21:57] So the loser in this scenario with these rules,

[00:22:01] what I have read,

[00:22:03] if you read stuff on mainstream media about this,

[00:22:06] they're like, this is a more consumer friendly model

[00:22:08] that we're going into.

[00:22:09] I'm not gonna say that's untrue,

[00:22:11] but I will say it favors sellers

[00:22:14] because now the seller holds the cards.

[00:22:16] Oh, if I paid 5% before to sell my house,

[00:22:19] maybe I only offered two and a half now.

[00:22:20] So I pay less whether I get less buyers or not.

[00:22:23] So the sellers are technically going to benefit.

[00:22:26] The buyers will not benefit.

[00:22:28] And if you ask me, I actually think

[00:22:29] that's the part of the market that needs the most help.

[00:22:32] I mean, if you're a first time home buyer,

[00:22:33] let's say you're just getting started in your life.

[00:22:35] Like I bought my first house when I was 24.

[00:22:37] I was young when I bought my first house.

[00:22:39] You didn't know everything about real estate back then?

[00:22:41] I didn't know anything.

[00:22:42] I mean, I was in the mortgage business

[00:22:44] so I was learning,

[00:22:45] I was only doing it for a year and a half.

[00:22:48] And here's how I put together my first sale.

[00:22:50] So I'm living in Maniak, Roxbro,

[00:22:52] which is where we're recording right now.

[00:22:54] I'm renting with friends from high school and college

[00:22:57] and I'm doing well in the mortgage business.

[00:23:00] So I'm like, yeah, I'm gonna go buy a house.

[00:23:02] But in order for me to consider that,

[00:23:04] I could have gone and bought like a one bedroom,

[00:23:06] two bedroom, like condo or something like that.

[00:23:07] I bought a three bedroom townhome basically.

[00:23:10] The reason I did that is because I had two friends

[00:23:13] that said, we'll pay you rent if you buy that house

[00:23:16] because we're all like early 20s.

[00:23:18] I was like, yes.

[00:23:19] So I became a landlord.

[00:23:21] That is how I bought my first house.

[00:23:23] That is how I succeeded with my first house.

[00:23:25] Cause guess what?

[00:23:26] After my buddies moved out, I met Maria,

[00:23:28] we got engaged, she moved in

[00:23:30] and now it's the two of us there and we have two incomes.

[00:23:32] So like buying your first house

[00:23:35] is an extremely difficult thing to do.

[00:23:38] The largest base of buyers right now are millennials.

[00:23:41] Most millennials are not even buying their homes

[00:23:43] until they're in their 30s now.

[00:23:44] Why? It's unaffordable.

[00:23:46] You need too much money.

[00:23:47] The prices are too high.

[00:23:49] You got some rental situation just like,

[00:23:51] I'm just gonna keep renting

[00:23:52] because I'm putting more money in the bank.

[00:23:53] So it's almost unaffordable to buy right now

[00:23:56] and now the interest rates have gone up.

[00:23:57] It makes it harder for buyers.

[00:23:58] This is one more thing, in my opinion,

[00:24:01] against the buying community

[00:24:03] that's gonna make it harder for them to buy.

[00:24:05] Our listeners in El Paso

[00:24:07] are gonna have a hard time with Manny Yonk.

[00:24:09] Can you spell that out for us?

[00:24:12] And the funny thing is this joke about El Paso,

[00:24:15] nothing against El Paso,

[00:24:16] we brought that up in a past episode

[00:24:19] and it was just so super random on my end

[00:24:21] that now it's becoming a running joke.

[00:24:22] Argentina we have.

[00:24:23] Well, Manny Yonk, if you got affiliaxing,

[00:24:25] you probably don't understand what I'm saying right now.

[00:24:27] It's M-A-N-A-Y-U-N-K, Manny Yonk,

[00:24:31] which actually is Native American

[00:24:33] for I think it's the place we go to drink.

[00:24:37] That would make sense.

[00:24:38] How'd you like that for effect?

[00:24:41] I've bought homes before.

[00:24:44] What's the most valuable piece of the equation

[00:24:48] when buying, when you have the buyer's agent?

[00:24:53] I would say-

[00:24:53] Like if we're trying to make the case for,

[00:24:55] hey listen, the buyer's agent in this deal

[00:25:00] are getting cut out.

[00:25:01] Right?

[00:25:02] Everything, all the chips go to the side of the seller.

[00:25:06] Where is it?

[00:25:07] Tell us about the value and what's needed

[00:25:10] when we're talking about the buyer agent.

[00:25:15] The biggest value to having a buyer agent

[00:25:17] in residential or commercial real estate

[00:25:18] is you have a licensed agent looking out for you

[00:25:21] and your interest only.

[00:25:23] Like they are your fiduciary.

[00:25:25] There's a contract that says what they owe you,

[00:25:27] confidence, obedience, disclosure, liability.

[00:25:31] Like there's lots of things that come with being

[00:25:33] a fiduciary in real estate.

[00:25:36] The best analogy I can give,

[00:25:37] let's say that there's someone,

[00:25:42] a plaintiff is suing someone and there's a defendant.

[00:25:45] So that attorney's helping the plaintiff.

[00:25:47] Let's go sue this person

[00:25:49] because you had a problem with them.

[00:25:51] But then let's say once they get sued,

[00:25:53] that attorney that you had sued them

[00:25:55] goes over to the defendant and says,

[00:25:56] hey can I help you too?

[00:25:58] Do you want me to represent your interest?

[00:26:00] So who does the attorney know better?

[00:26:02] They know the plaintiff, the person who's suing.

[00:26:04] Just like when you sell real estate,

[00:26:06] who does the listing agent know better?

[00:26:08] The seller or the buyer, they know the seller

[00:26:11] because they already met the seller,

[00:26:12] they already signed an agreement,

[00:26:14] they already said I'm gonna help you sell your home,

[00:26:15] they're gonna take pictures, put a lock box up,

[00:26:17] put a sign up, they're gonna market it.

[00:26:19] And then a buyer comes to them and says,

[00:26:21] can you help me?

[00:26:22] Who does that listing agent know better?

[00:26:24] They know the seller.

[00:26:26] So therefore if you go through that agent as a buyer,

[00:26:30] not only is that person traditionally making more money,

[00:26:33] but they know the seller better than they know you.

[00:26:35] Plus how can they give you both fiduciary representation?

[00:26:40] If there's two of you,

[00:26:41] if there's two of you,

[00:26:42] they almost have to be neutral.

[00:26:44] I can count on one hand

[00:26:45] how many times I've done dual agency in my life

[00:26:47] in a sale, in a residential real estate sale.

[00:26:50] And it's super awkward.

[00:26:52] Like there's no good way to do it.

[00:26:54] It's a conflict of interest.

[00:26:55] How am I supposed to tell a buyer what's good for them?

[00:26:57] You inspect the home and you're like,

[00:26:58] yo, what should I do?

[00:26:59] I'm like, I don't know, what do you wanna do?

[00:27:02] And you're like, well, you should be telling me

[00:27:04] what did you see?

[00:27:05] What's your advice?

[00:27:08] So you can't really advise as a dual agent

[00:27:10] because again, if you're giving advice to the buyer

[00:27:12] that's going against the seller.

[00:27:13] If you give advice to the seller, it goes against the buyer.

[00:27:15] So the real advantage of having a buyer agent,

[00:27:19] that agent is looking out for your interests

[00:27:21] and your interests only.

[00:27:22] It doesn't matter who's paying the money.

[00:27:24] So whether the seller pays it or you pay it

[00:27:26] or you both pay it,

[00:27:27] there's still your fiduciary in a contract.

[00:27:30] Like you signed a buyer agency contract

[00:27:32] to because you trust that person

[00:27:34] and you're like, help me get to where I'm going.

[00:27:37] Like most people don't understand real estate.

[00:27:39] You do it every five years, 15, 50 years.

[00:27:43] So if you don't know what you're doing,

[00:27:44] you need a guide.

[00:27:45] That's why there are realtors.

[00:27:47] That's why they have a job.

[00:27:49] It doesn't happen that often.

[00:27:50] Like a good realtor only sells maybe like

[00:27:52] two dozen, three dozen homes in a year.

[00:27:54] You're in the top 5% of realtors nationwide.

[00:27:57] If you do that and you're doing like 25, 30 transactions.

[00:28:01] Like just think about that.

[00:28:02] Some people sell hundreds of homes in a year.

[00:28:06] A thousand homes in a year.

[00:28:07] They're just like machines with people under them.

[00:28:09] So it's a totally different model.

[00:28:11] The high majority of real estate agents

[00:28:12] only sell like a home or a couple homes a year.

[00:28:15] And even they aren't that good.

[00:28:17] So to get back to your point about the buyer agent,

[00:28:21] where I think this is a benefit,

[00:28:22] I think there's some people that are in real estate

[00:28:24] who are unfortunate or just not very good at what they do

[00:28:27] because they don't do it enough.

[00:28:28] It's a part-time gig.

[00:28:30] And if you went to a part-time agent

[00:28:32] versus a full-time agent like me,

[00:28:33] someone who's running a team of agents,

[00:28:36] who would you rather work with?

[00:28:37] If it costs you the same amount of money

[00:28:38] or the seller the same amount of money,

[00:28:40] you're probably gonna want the person with experience.

[00:28:42] So you're saying over time,

[00:28:44] once this gets implemented, if and how and when it shakes out

[00:28:49] is that this is going to remove real estate professionals

[00:28:57] from the marketplace.

[00:28:59] Yeah, and here's a great way to put it.

[00:29:02] On average last couple of decades,

[00:29:04] around four million or so homes move a year

[00:29:08] over 1.6 million realtors.

[00:29:10] Lesson.

[00:29:11] So just think it's like each realtor on average

[00:29:14] can sell two to three homes a year.

[00:29:16] That's not a career.

[00:29:18] That doesn't make any sense.

[00:29:20] Back in 2008, when the financial meltdown happened,

[00:29:25] it affected real estate drastically.

[00:29:26] If you owned real estate at that time,

[00:29:28] like you took a huge hit.

[00:29:31] There were I think 1.2 million realtors back then.

[00:29:34] When all the dust settled in 2012,

[00:29:36] once the market started to tick up again,

[00:29:38] there were probably like 800,000 realtors.

[00:29:40] Or like 1.5.

[00:29:42] It needs to thin out unfortunately.

[00:29:44] That's just my opinion.

[00:29:45] I'm not saying that to be rude

[00:29:48] and I'm not saying that to say that.

[00:29:49] Well supply demand.

[00:29:50] Yeah, it's not even saying that I know the answers.

[00:29:52] It's just unfortunate there's a lot of people

[00:29:54] in this business, if you don't do it full time,

[00:29:57] you're just not really gonna ever truly get great at it.

[00:30:00] And buyers and sellers typically want agents who are great.

[00:30:03] It's the biggest transaction you do in your life.

[00:30:05] So who can I work with that's actually great

[00:30:07] at what they do, especially if I'm paying you now.

[00:30:10] So I think this is a good thing

[00:30:12] for the buying community once it happens

[00:30:14] that they're gonna be more selective about who they work with

[00:30:16] rather than working with their cousin

[00:30:17] or their neighbor or their coworkers.

[00:30:19] Like, oh, I got a real estate license, I'll help you.

[00:30:21] It's not to say they couldn't help you

[00:30:22] but maybe they weren't very good at what they did.

[00:30:24] Another thing I'm seeing is that there's certain

[00:30:28] brokerage areas or real estate realtors

[00:30:32] that are a part of this and some that aren't.

[00:30:35] Yeah.

[00:30:36] Who's, where is the line being drawn in terms of?

[00:30:39] Why are the big companies being brought in?

[00:30:42] Yeah, or why are some not even a part of this?

[00:30:45] Yeah, I mean, I run an independent brokerage.

[00:30:46] We're only a team of about 30 plus.

[00:30:50] So the reason again, I'm not an attorney

[00:30:53] and I'm not an expert.

[00:30:54] All I know, I know.

[00:30:55] Dylan put a little thing at the bottom here

[00:30:58] to say we're not lawyers.

[00:31:00] Tim is not an attorney.

[00:31:02] That's gonna be very helpful.

[00:31:04] And have it like scroll across like 1995 style.

[00:31:08] And we'll get a crypto wall address for donations.

[00:31:12] And then when Mooney opens up his flip phone,

[00:31:14] it'll look just as cool then too.

[00:31:17] So basically,

[00:31:21] what was the question again?

[00:31:23] Some people are a part of this and some people are not.

[00:31:26] Sorry folks.

[00:31:27] So when the lawsuits were going down,

[00:31:30] they went after the bigger companies

[00:31:32] because they controlled a bigger part of the market

[00:31:34] and therefore they have more money.

[00:31:35] So like if we're gonna get money out of this,

[00:31:36] go after the big guys and girls.

[00:31:39] What's an interesting statistic,

[00:31:40] and I haven't checked this in a few years,

[00:31:41] is that you think about there's large, large brokerages.

[00:31:44] I'm just gonna name some of them like Keller Williams

[00:31:46] or Caldwell banker, Remax, Compass, Berkshire Hathaway,

[00:31:50] Home Services, some of the larger brokerages

[00:31:53] in the country.

[00:31:54] Then there's Copper Hill.

[00:31:56] Copper Hill is a smaller independent brokerage

[00:32:00] and we're not a franchise.

[00:32:02] Most of the brokerages in the US,

[00:32:05] the majority of them, more than 50%

[00:32:06] are actually just like me.

[00:32:08] What's that number?

[00:32:09] The majority, I think it's like just over 50%.

[00:32:12] Wow.

[00:32:13] Our independently owned real estate brokerages.

[00:32:15] Residential real estate.

[00:32:17] I wouldn't have thought that but...

[00:32:18] And less than that are controlled by the large companies.

[00:32:21] So to your point, I think they went after

[00:32:23] the large companies because they know they could settle.

[00:32:25] I mean a lot of the large companies settled

[00:32:26] for like 50 million, 80 million on top

[00:32:29] of the 418 million that they're getting.

[00:32:31] Oh really?

[00:32:32] This is why this adds up to like close

[00:32:33] to a billion dollars so far and we're not done.

[00:32:38] And then when NAR settled, they actually protected my company.

[00:32:43] They said look, we settled to protect members

[00:32:46] that we felt needed protection

[00:32:48] and they're the smaller brokerages.

[00:32:49] So when they settled, they said look,

[00:32:51] Copper Hill, you're not a part of this anymore.

[00:32:55] But then there's still big brokerages

[00:32:56] out there battling right now.

[00:32:58] Berkshire Hathaway is one of them

[00:32:59] and nothing against them.

[00:33:01] It's just they're still in the mix

[00:33:02] because they're a beast and that's why.

[00:33:04] So to answer your question is because they were large,

[00:33:07] had deep pockets and they knew they could go after that

[00:33:09] to make money in the class action suit.

[00:33:11] That's just my opinion.

[00:33:12] Can I give you my proprietary...

[00:33:15] I love that.

[00:33:17] Solution?

[00:33:18] Yes.

[00:33:20] And I'm not a realtor.

[00:33:22] Dylan?

[00:33:23] Another note.

[00:33:24] Sliding across.

[00:33:26] To me as a buyer, I'm gonna wanna work with an agent.

[00:33:32] I need to be guided.

[00:33:33] I need someone's expertise.

[00:33:35] This is the biggest purchase I'm ever gonna make.

[00:33:38] That needs to happen.

[00:33:39] I need to have an agent.

[00:33:40] I need to have representation.

[00:33:41] If it were me and I wasn't licensed, I would agree.

[00:33:44] I don't want the seller to represent me.

[00:33:47] Right?

[00:33:48] So at the end, I'm gonna have to call...

[00:33:49] I'm gonna be the listing agent.

[00:33:51] I'm sorry, what is it?

[00:33:52] Seller.

[00:33:53] Listing agent.

[00:33:57] So I want the protection.

[00:33:58] I want the guidance.

[00:34:00] I don't want them.

[00:34:02] I wanna get my own.

[00:34:03] Yep.

[00:34:04] I'm okay with paying it, right?

[00:34:07] I think that that's gonna be the vast majority

[00:34:09] of scenarios, situations.

[00:34:11] And maybe there's a point here on the table

[00:34:14] for negotiation and such.

[00:34:16] Yep.

[00:34:18] My solution.

[00:34:19] Let me hear the Mooney solution.

[00:34:20] Without talking to anyone,

[00:34:22] without even hearing this ever before.

[00:34:25] This is me.

[00:34:26] This is mine.

[00:34:28] This is the Mollution.

[00:34:31] Morgage companies...

[00:34:35] Yeah.

[00:34:36] ...are going to offer the ability

[00:34:41] to put that commission into the mortgage.

[00:34:46] I mean, I think that is genius.

[00:34:50] And I also agree.

[00:34:51] You know, no one's saying anything yet

[00:34:54] because this is so fresh.

[00:34:56] The reason I think that may happen,

[00:34:58] I agree with Sean that I think

[00:35:00] mortgage companies would probably step up here.

[00:35:04] A couple of different reasons.

[00:35:05] One, mortgage companies are pro buyer.

[00:35:08] When you buy a house,

[00:35:09] the mortgage company has nothing to do with the seller.

[00:35:11] If anything, they're a thorn in the seller's side.

[00:35:13] We gotta raise the house.

[00:35:14] We need a month or two to get a mortgage.

[00:35:17] Like, I'm gonna be a pain in your butt.

[00:35:19] Yeah, if you have to pick sides.

[00:35:21] Yeah.

[00:35:21] So mortgage companies are pro buyer

[00:35:23] because the buyer chooses the mortgage company.

[00:35:25] The buyer is the one actually getting the mortgage

[00:35:27] or should purchase the house.

[00:35:28] It's getting a loan is what they're getting.

[00:35:30] So I do think mortgage companies would benefit

[00:35:32] from helping buyers.

[00:35:34] Also goes back to my example,

[00:35:35] buyers traditionally don't have as much cash

[00:35:38] as sellers do, especially once they sell.

[00:35:41] So I think financing buyer agent commissions

[00:35:44] would be super helpful to the buying community.

[00:35:46] I think it's good for mortgage companies.

[00:35:48] I think the sellers already got their choice.

[00:35:49] They already have their protection through all this.

[00:35:52] I mean, I think it would be a triple win.

[00:35:54] There's some red tape like FHA and VA,

[00:35:58] VA is a veteran program.

[00:36:00] FHA is usually beneficial to like first time home buyers.

[00:36:02] Yeah.

[00:36:04] They have certain rules in place right now

[00:36:06] where they don't want buyers to pay buyer agent commissions,

[00:36:11] which sounds ridiculous, but they do.

[00:36:14] They're more the minority of loans in the country.

[00:36:17] Most of the loans are done on the conventional side,

[00:36:19] which is like Fannie Mae and Freddie Mac.

[00:36:22] They're the two big beasts that support

[00:36:23] like Wells Fargo, Bank of America, guaranteed rate,

[00:36:26] like all these companies, cross-country mortgage.

[00:36:30] So I do think mortgage companies stepping up,

[00:36:33] offering to finance buyer commissions

[00:36:35] would allow buyers to get the protection that they want

[00:36:39] or they choose to have.

[00:36:40] They can still work with the listing agent if they want to,

[00:36:43] but they wouldn't have to come out of pocket for it.

[00:36:44] In the event the seller says, I'm not paying.

[00:36:46] If I'm not paying, who's it coming from?

[00:36:48] It's coming from you and you're like,

[00:36:49] well maybe I can make it work

[00:36:51] and work with the listing agent.

[00:36:52] I'm not saying you can't,

[00:36:54] but you might not be on the same level

[00:36:56] of protection of fiduciary if you do it that way.

[00:36:59] It's just a conflict.

[00:37:00] It goes back to that attorney example I made

[00:37:02] and you can disagree with me all day.

[00:37:04] This is just an opinion.

[00:37:05] This is one man's opinion.

[00:37:06] The other thing might be an opening or an avenue.

[00:37:11] I mean, years ago it was very common

[00:37:14] and I don't know what the math was behind it,

[00:37:16] but do you remember when like you'd buy a home

[00:37:19] with a first and a second?

[00:37:22] Like I envision like, all right,

[00:37:24] you've got a 30 year mortgage

[00:37:26] and then let's just call it 10 grand

[00:37:28] that you need to come up with to pay the buyer agent.

[00:37:35] Why not have like a 10 year loan

[00:37:37] under this like second mortgage?

[00:37:39] It's gonna like dwindle down over 10 years

[00:37:43] and that way it's all financed.

[00:37:47] You don't have to like come up

[00:37:48] with this additional 10 grand at settlement

[00:37:51] you're probably moving things to get to the table anyway.

[00:37:55] But I think it's an opportunity,

[00:37:58] an opening for banks, mortgages, finance companies,

[00:38:02] whoever to offer a product that would solve

[00:38:07] Yeah, to support buyers.

[00:38:09] That problem.

[00:38:10] Well, and I think that is a phenomenal solution

[00:38:13] with you not being in the business even having that idea.

[00:38:15] It's just we're gonna put the phone number

[00:38:17] so people can call all the banks, mortgage companies.

[00:38:20] You don't have to need some advice

[00:38:21] on buying selling real estate.

[00:38:22] No, I just wanna do the financing.

[00:38:24] Just the financing.

[00:38:25] Just the financing.

[00:38:28] No dude, I think that is super insightful

[00:38:30] and I personally think that'll probably happen

[00:38:33] because again, it's good for buyers.

[00:38:35] It's good for mortgage companies.

[00:38:36] It's good for buyer agents.

[00:38:37] They're all looking out for the buy.

[00:38:37] Here's what happens.

[00:38:39] Real estate is just like insurance.

[00:38:41] They're slow moving, slow to adopt.

[00:38:45] Very old industries.

[00:38:48] But once someone does it and has success in doing it,

[00:38:54] Everyone jumps in the pool.

[00:38:55] Everybody's so quick to follow.

[00:38:58] Why don't we think of that?

[00:39:00] Why aren't we doing this?

[00:39:02] Yeah, true.

[00:39:03] I think it's gonna be an evolution.

[00:39:05] In looking at all of the opinions

[00:39:09] and everything online,

[00:39:11] the end result, I don't think there's gonna be much change.

[00:39:15] I mean, I personally don't think there's gonna be a ton of change.

[00:39:18] I think if anything, the buying and selling public,

[00:39:22] people looking to sell real estate,

[00:39:23] people looking to buy residential real estate,

[00:39:25] people looking to buy and sell residential real estate,

[00:39:27] I think are actually gonna learn more about the process.

[00:39:31] They're gonna learn more about what their options are

[00:39:33] and they're gonna be able to make the most informed decision

[00:39:36] for them in that point of time that says,

[00:39:38] you know what, I'm better off going this way,

[00:39:40] that way or maybe in between.

[00:39:42] And that's gonna really be up to the buyer.

[00:39:45] So I think this is all gonna be good.

[00:39:47] So again, you got any questions for us?

[00:39:50] You know where to find us.

[00:39:51] Real estate, Tim, financing, Sean.

[00:39:55] Yep.

[00:39:56] Check me out on LinkedIn.

[00:39:58] Check me out on social media.

[00:40:00] You got any questions?

[00:40:01] Just ping me anywhere in the country.

[00:40:02] Anyone looking to get more information, happy to help.

[00:40:04] And that's all we have for this one, folks.

[00:40:06] So thank you for tuning in again

[00:40:08] to another episode of Bricks and Risk.

[00:40:11] See you soon.

[00:40:41] Thank you.