I used to know someone who would read your future in the dregs of Turkish coffee. It was very entertaining, even if it was total nonsense.
“I see travel in your future,” he would say, nodding wisely. “And a new project.”
I wonder what he’d say about real estate.
“Damn! That’s a mess!” would be a fair description.
2024 is going to be fascinating. There is a huge shakeup in real estate, but you may have dismissed it because it sounded like insider stuff. It’s not. It’s going to impact every buyer and seller. This is a shift as big as the creation of a professional license for real estate sales.
In the crosshairs is the National Association of Realtors.
The national organization that has become a gatekeeper to the multiple listing services as well as a powerful lobbying group has been taking some serious hits. Hits so serious that some are predicting its days are numbered.
A court battle questioning the long-accepted practice of having sellers pay both the listing and buyer’s agents was challenged, and the NAR lost. A court ruled that the standard commission split at closing between both agents unfairly inflates a seller’s costs. The NAR is appealing, of course. But it’s a huge shakeup and one that likely isn’t going to end there.
This is on top of allegations of sexual harassment and a “culture of fear” at the highest levels of the organization.
Some of the bigger brokerages are exploring creating their own industry associations. Some are unhappy with the big fees they pay the NAR, others don’t like the group’s political actions, and some point to NAR’s sale of Realtor.com, which agents were once told was their own answer to Zillow.
Zillow charges big fees for agents to get leads, while publishing the agent’s listings and selling those leads to someone else. Realtor.com is now owned by a company that does precisely the same thing.
To boil it down, most agents pay to be licensed and affiliated with a local MLS and the NAR, work to get listings, pay to advertise them, and don’t get paid until they sell. Meanwhile, Zillow, Realtor.com, Trulia, and many others, publish those listings without compensating the listing agent, and *sell* information on interested buyers either to the listing agent, or to other agents in the region. And the fees they charge are steep.
Meanwhile, Zillow, one of the behemoths of the industry, which also owns an electronic signature program called DotLoop, and an automated showing feature called Showing Time, is suing multiple listing services in Arizona and Wisconsin because those two regions use their own automated showing. This is a calculated risk on Zillow’s part, taking on the groups on which it depends for its listings.
Larger brokerages have been diversifying as well, buying or partnering with title search companies, insurance companies, and lenders, while lenders like Rocket Mortgage have been testing out pay for lead plans with real estate agents.
Boutique firms, small offices like mine that don’t recruit agents and have a niche business, can choose to avoid some of this. I don’t pay for client leads. I don’t pay big sites that use my content and my photos. I only recommend lenders or insurers if they do a good job, and I don’t have a financial relationship with any of them.
Until now, agents have been powerless to do much more than that. The state requires education and licensing, the MLS requires local and NAR membership to publish, and the big sites make money off the agents’ work (and charge them for leads). It’s just the cost of doing business.
Now we will have to navigate a new set of challenges. Sellers may demand they not have to compensate buyer’s agents. Will buyers agree to pay their agent, when they’re already navigating higher interest rates and high homes prices? Will agents show a property that offers no guarantees of being paid? Will sellers understand what they’re risking by refusing to compensate an agent who brings them a buyer?
No matter what happens in court, the bag of furies has been opened. The industry is on shifting ground. The whole independent contractor, no salary, no benefits model of real estate may have to eventually change, particularly if a new organization is created on a union model, to benefit its members instead of the industry.
For now, what does that mean for you, the seller or the buyer? Talk to your agent. Their obligation is to you, their client. It’s part of the Code of Ethics, and that hasn’t changed. If you don’t trust that, find another agent. Make sure you are all clear what you are all agreeing to do. Everything is negotiable, but it always was. What is changing are expectations. Communicate yours, and listen to what your agent says. And when they ask you to put your agreement in writing, do it. That protects you all.