Podcast - 3/29/24

🏠🔍 Unraveling the NAR Settlement 🔍🏠

The recent settlement agreement by the National Association of REALTORS® (NAR) regarding broker commissions has sparked a flurry of questions and concerns within the real estate industry. 🤔💼 But amidst the headlines and misinformation, it's crucial to get the facts straight.

NAR is actively engaging with the media to correct any inaccuracies surrounding the settlement. Members are encouraged to refer to official NAR sources, like facts.realtor, for the most accurate and up-to-date information. 📰✔️

Here are two key changes mandated by the settlement agreement:

1️⃣ Creation of a new MLS rule: Offers of compensation cannot be communicated via the MLS. However, consumers can still pursue compensation options off-MLS through negotiation with real estate professionals.

2️⃣ Requirement for MLS participants working with buyers to enter into written agreements before home tours. This ensures transparency and clarity about the services provided.

In light of these developments, it's essential for both industry professionals and consumers to stay informed. Knowledge is power! 💪💡

And now, presenting our stunning #HouseoftheWeek:
🏡 9803 Accipiter Ct, New Market
💲 Price: $1,425,000

Featuring:
🛏️ 4 bedrooms
🛁 3 full baths, 1 half bath
📐 2,940 sq ft of meticulously designed living space
🌊 Rare lakefront lot with water views
🚤 Private boat dock
🏞️ Outdoor oasis with custom deck, covered porch, and fire pit
🔥 Luxurious interior design details and upgrades throughout

Join us for an open house this Saturday from 12pm to 2pm to experience the beauty and elegance of this remarkable home! 🏡✨ #RealEstate #NAR #SettlementAgreement #OpenHouse

Tom Whalen:

I'm Tom.

Jay Day:

I'm Jay.

Tom Whalen:

of Jay Day and the Day Home Team at LPT Realties with our weekly real estate podcast. Jay, this past week or so I've heard in the national news something about realtors, something about some kind of court case, something about some kind of deal. But I said, man, I really don't have to pay attention. I've got Jay coming in to do a podcast. What happened?

Jay Day:

Yeah, so I mean, as we've talked about before, most of the media that's out there is not giving the full story. They're not giving all of the answers. I've seen crazy headlines as well. And so first of all, let's just put out there what was announced. I think it was two weeks ago, two and a half weeks ago, I can't remember. It was a Friday. And it was basically, there have been a fair amount of lawsuits in the past few years that have sort of lingered out there, and it got put out that there was an agreement on proposed settlement. So the proposed settlement, remember this proposed means the parties have agreed to it. However, the court has not signed off on it yet. So this could be what's going to happen. However, as we know, things can change in between. If you follow, and again, I hate talking politics, but when you talk about Congress and the Senate, they talk about all these bills. Then it comes out in writing, then all of a sudden what's in writing doesn't match what was said. So until everything is actually court approved, it's all a, here's what we think is happening. Now, I can give you just the very basic facts about the proposed settlement. And again, right now these are facts about the settlement. Not saying that this is a hundred percent done or that all of these terms won't change. So the biggest thing in there, it releases the liability from a certain amount of lawsuits. So this will settle those lawsuits. There are some caveats and some brokerages that are not included in that. I'm not going to get into all of that stuff. You'll be able to see that online. You can actually pull it up and see who's included, who's not included. But let's talk about what you mentioned and what I'm seeing most of the headlines. So one of the facts of the settlement terms, again, not signed off on, but the settlement terms, is that the National Association of Realtors agreed to put in place a new rule that will prohibit offers of compensation on the multiple list. And that change is scheduled to go into effect by mid-July. So let's break down what that means. So the National Association of Realtors, anyone who is a realtor is a member of the National Association of Realtors. They had a rule, and their rule was that you should offer compensation to another side. It's not a hundred percent. Well, if we go way back, it was required. You weren't able to put in zero. They changed it a couple years ago where could put in zero. And what that meant was if you're listing a home in the multiple list, you are going to ask the seller if they would like to pay, they're going to pay your fee. And then out of our fee as the agent, we were going to pay a portion of that to another agent. And all of that was broadcast through the multiple list. So if it stands the way this looks, that will no longer be allowed. So in the multiple listing system, we will not be able to advertise that we're offering x percent, y percent, whatever it is to a buyer agent. So again, that's something that it was out there. And it was interesting because in the last couple of years during these lawsuits, it went from only agents could see it in the MLS, and then they wanted to be transparent. So if you go on Zillow today, Redfin, any of those places, you'll actually see what that cooperating commission is. So they made it transparent so that all parties could see what it was. I'll explain a little more into that. One of the other big things was that written agreements for MLS participants are required. So the settlement provides that anybody who is a member of the MLS and they work with buyers, they must enter into a written buyer agreement with those buyers. That change is scheduled to go into effect July, 2024. Now,

Tom Whalen:

What's MLS?

Jay Day:

The multiple listing service.

Tom Whalen:

I see, I see. Yeah, you explained that earlier. I was thinking Major League Soccer, but because I'm a lay person.

Jay Day:

Yeah. So basically what happens is the MLS, we put all of the homes in there and then it goes out to all the portals. It goes to even the Zillow, Realtor.com, Redfin, Homes.com. The MLS is what syndicates all that out to all these other sites.

Tom Whalen:

Okay, I know what that is then.

Jay Day:

Alright, so two things. We mentioned, one, you won't be able to offer compensation to a buyer agent through the MLS. Two, if you're actually a member of the MLS and you're working with buyers, you have to have a signed buyer agreement before you can show a property.

Tom Whalen:

Are these big changes?

Jay Day:

Well, across the United States? Yes, and that's what I wanted to sort of talk about. So here in Maryland, Maryland agency laws have been in place for a while, and the way that it works in Maryland, you have the agent who's listing the home. They are the seller agent, they represent the seller. They have fiduciary duties to that seller. If for some reason you call someone like you're looking on Zillow, so you call the agent whose name is on Zillow, and that agent, just so everybody understands the names that pop up on these websites, the majority of them are not the listing agent. You're actually calling another agent who is paying for those leads. So it might be my listing, but you end up calling Agent Y at Re/Max and you talk to Agent Y. And Agent Y has had two options before this goes into play or into place. Option one is they could be a seller stub agent, meaning they don't have a written buyer agreement. They can show the house to that buyer without any buyer agreement, but they represent the seller. So the buyer has no representation at all. Option two is they enter into a written buyer agreement and then they have a fiduciary duty and they represent the buyer's best interest. So it was already in play for our team. We had a team company rule that we did not want any of our agents showing any homes without a written buyer agency agreement because we felt what we saw and buyers didn't understand, like, hey, if I call the person on the sign, or if I call the person that's paying for these leads on Homes.com or Realtor.com or wherever, if I don't sign, I've written agreement with them. They work for the seller too. So you've got two people potentially negotiating that are professionals for the seller, not for your best interest.

Tom Whalen:

Wow.

Jay Day:

Yeah. Now, but here's the kicker, and this is what caused a lot of these problems. Buyer agents were saying, oh, don't worry. You can sign this agreement. It doesn't cost you anything. I work for free. And that is not the case. So if you say you work for free, that does not mean that I'm not getting paid by you. When you say I'm working for free, that should mean you get paid $0 from anybody you're working for free. Free is zero. Right? So what was happening was the listing agent had in their agreement that they were going to make X percent and they were going to share Y with a buyer agent and Z with a subagent. So the way agents were working this is they were saying, Hey, no big deal. Just sign this. It's not going to cost you anything. However, when you look at the buyer agreement, the buyer agreement that has been in place in Maryland clearly states that the buyer is responsible for x amount, x percent and possibly a transaction fee as well. Now, what was going on was the agents weren't telling people or they were saying, Hey, I'll just put in here that we'll take whatever the seller wants to pay me or any of that. And they basically found this as something that was, they didn't think that it was very good, that it was good for the public because what they really want is they want to decouple commissions, meaning the seller is going to pay their agent and the buyer is going to pay their agent. And if that buyer agent is good, they could try to negotiate to get the seller to help pay, but they will no longer get that commission from the listing agent. I know this is super complicated.

Tom Whalen:

It's complicated. Do you think it's good?

Jay Day:

I do, because

Tom Whalen:

That's a good idea.

Jay Day:

So here's where we went wrong and we've had people call us and get mad at us. And I'll give you a real example. So someone calls, they call our team. Our team says, oh, we'd love to be able to meet with you to do a buyer consultation. We want to explain to you understand your wants and your needs. And then when they want to see a house, as of today, we made them sign a buyer agreement. So they're like, but hold on, I just called this person and they showed me the house without a buyer agreement. Well, if this stands the way that it is, you will not be able to show a house unless you have a signed buyer agreement. So that will put everybody on an even playing field, if that makes sense.

Tom Whalen:

That sounds good to a lay person.

Jay Day:

So the challenge becomes, you do have to let your buyer know, and if you're going to have a buyer agency agreement, that is you're a fiduciary and you have to have value for what you're going to charge them. You cannot just make up a number. Some of the language in here is you can't have a up to this amount or whatever the seller pays or whatever this person pays. You have to have a set number. And let's say for example, I'm just going to make something up. Let's say that that number is 4%. And again, commissions are all negotiable. I'm not saying any number needs to be what it needs to be. Let's say that's what it was and you were showing them a new construction home, the builder was paying more than that. Now, the way that it works, you cannot collect more than what is in your agreement that other money goes to the buyer. So that's a win because the buyer could end up getting a little bit of extra money, they know what they have to pay, worst case scenario, and the agent will do their due diligence and do their best to try to negotiate to get some of that cost offset. So it's not all coming out of the buyer's pocket.

Tom Whalen:

866-702-9038.

Jay Day:

Yeah.

Tom Whalen:

866-702-9038.

Jay Day:

Yeah. I mean, the gist of this is, and you mentioned it before we started recording this, and the challenge is commissions. There's no change. Commissions have always been negotiable. They will continue to be negotiable, but certain people have thought that this is a standard. And we've had people ask, well, is that the standard? And my answer is always, there is no standard.

Tom Whalen:

What we're talking about this new rules coming in, is that in all states we're talking about that you guys serve.

Jay Day:

Oh yeah.

Tom Whalen:

It's a national thing.

Jay Day:

Yes. This is across the board. So we have friends in other states that they don't even have written buyer agreement forms existing like they've even done it. They don't exist. So this is going to be a huge wake up call for areas that didn't have those agreements. And I think it's going to be a little bit of a shaker here. Even though Maryland had the rules, we know that not everybody followed them. We would get the calls and we would say, they would say, well, I just looked at a house with Realtor Bob and Realtor Bob didn't make me sign anything.

Tom Whalen:

And they have an attitude with these calls?

Jay Day:

Oh, they do. They think that we're being ridiculous, but it's the importance of meeting with them, explaining the person on the sign has a fiduciary duty to the seller. Everything that you say to them goes back to the seller. They have no interest in representing you. They have to be honest and fair and treat you properly, but anything you tell them, let's say that you called me on one of my listings. I explained to you, I work for the seller. We went out and we looked at the house and you're like, Jay, I would pay $50,000 more for this house because this is just what I'm looking for.

Tom Whalen:

You're not supposed to say that.

Jay Day:

So when you tell me that, I'm telling the seller we can get another 50 grand out of this person.

Tom Whalen:

Wow. Wow, wow, wow. That's why you call the pros.

Jay Day:

Yeah, and I mean, it will change things on the seller side a little bit, but how we've been doing it for quite a bit of time is, I'll give it a perfect example. I had one, you probably talked about the success story. They were over in Market Square. They had listed with another agent. Actually they were listed with multiple agents. The last agent they listed with before me, they called because there was an advertisement that there was a low commission that would be collected. So he's like, well, I can save some money. I'm going to call this agent and do this. Then when the person met with him, they actually didn't offer that program that they talked about. Then he got really upset, they changed it. He had people that came through, but then they changed it and reduced the amount being paid to a buyer agent. And all of a sudden he had no showings. He had nobody coming in. And when he met with me, I said, well, here's the deal. Here's what my fee is. My fee is X. Now it's up to you what you want to offer or if you want to offer anything to a buyer agent to bring a buyer through. And how I look at that and how I've been presenting that to my clients is, let's look at everything that is sold. Let's look at everything that got withdrawn. Let's look at everything that's under contract, everything that's active. Is there a correlation with if you offer zero verse 1%, verse two, verse three, whatever, does that change the dynamic of how quick a sale is? Does that change the dynamic of how much they're selling for? Does that change the dynamic of how quickly it moves? And then you can make an informed decision of what you want to do. So the agent he had before didn't explain any of that to him, and they were offering a co-op of 2%. As soon as they made that change, he had zero showings, nothing. It was deader than dead. He brought us in. I explained everything. He made a decision of, I told him, commission's negotiable. However, this is what I want to get paid. I am negotiable, but I'm negotiable to a point, and this is my fee period. The bigger negotiation is what you want to offer, if anything, to another side. He saw the value in mobilizing the other agents who had agreements with their buyers where they were due to get paid and that because the conversation would be, let's say that situation, he offered a 2%. So any buyer that was coming through that had a signed buyer agreement, that agent had to say, Hey, they're offering this. My agreement with you is for three, so they're going to pay 2%. You've got to pay me 1% out of your own pocket. So it can have that impact on things. Long story short, we did a certain co-op. We had that thing sold, and we actually sold it for more than both agents had it listed for. So he netted more money. It worked. And the biggest thing was he goes, I don't mind paying, but nobody explained to me the advantages and disadvantages, like what that means. He goes, all I heard was one number and that got me excited. Nobody explained to me how this person gets paid. That person gets paid. And that's the whole thing. A lot of people will say, well, as soon as they call, we haven't had it in a while, but it used to be, well, what are you charging? And you would say an amount. But that amount also included paying another agent out of that. But the public would generally think, wow, this agent's making all this money. Are you kidding me? That's not fair. That's crazy. But they didn't realize because the agents weren't explaining it, that a portion of that went to the other side. Now the way things are, we will not be able to advertise that. And again, we don't know where this is going to land because it hasn't been signed off on, but we're thinking it's going to be, is the seller open to negotiating and potentially giving some concessions to the buyer to help offset that cost? We'll see where it all lands. There's a lot of moving parts. If you want the facts and not the bs, you want the straight, Hey, here's what's happening. You can always reach out to us. Tom dropped the number. 866-702-9038. Lots of moving parts in here. We're all over it. We'll keep you up to date. You can reach out to us with any questions. We're here for you and oh man, I got so distracted.

Tom Whalen:

Got a home of the week.

Jay Day:

Yeah, man, thank you.

Tom Whalen:

I see. See it there.

Jay Day:

Alright, I got to put my glasses on for those that are for us.

Tom Whalen:

Yeah, so what we got.

Jay Day:

Alright. This one is absolutely amazing. This one just went on the market yesterday, 9803 Accipiter Court in New Market listed at 1,425,000. We have an open house this Saturday between 12 and 2. It's a four bedroom, three and a half bath home, 2,900 plus square feet. There's a partially finished basement. This is lakefront. So you are on the lake. You have your own private dock where you can take your pontoon boat out and enjoy. You can go fishing. There's water views from the back cause your right on the lake. There's a massive, well, there's extended front porch. It's stone and brick facade. The home has so much custom interior design, including upgraded lighting, 9 foot ceilings in the basement and on the main level. There's a central vacuum. Custom engineered hardwood floors. They have exposed beams, wainscoting, millwork, stone fireplace, custom built-in storage, gourmet kitchen, butler's pantry, upgraded cabinets, appliances, gas cooking, under cabinet lighting, tile backsplash, luxury bath. I mean this thing is like a total outdoor oasis. They have a deck with LED lighting. They have a covered porch off the back. One of the neatest things they have, and I have to read this exactly because I get confused on all of it here. There is, they actually have a oversized custom fire pit and a patio area that is made from historic Brazilian Black Stone.

Tom Whalen:

Well, why not?

Jay Day:

And that overlooks the lake. Like I said, it's got a little bit of everything. The yard is fully fenced. It's actually a pretty decent sized lot too. It's like a third of an acre in Linganore. You don't get lots that size. So if you want to see this beauty, go online to wfre.com. Look up Tom and Jay's Real Estate podcast. We have video, photos, aerial drone, little bit of everything. Or if you really want to see it, you can come out on Saturday between 12 and 2. And Mat from our team will be there hosting the open house. And this one's a beauty. You might not want to miss it.

Tom Whalen:

I'm Tom.

Jay Day:

I'm Jay.

Tom Whalen:

Jay Day and the Day Home Team at LPT Realty with our weekly real estate podcast. Tell your friends all about this one. We'll be here next Friday morning. Thank you for listening.

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