Unraveling the Impact of NAR Settlement

What's up, listeners? Jeff Zimper host of your marketing radio podcast. Thanks for tuning in. I got a special edition coming to you hot off the presses because of what's happened in the last several days regarding the NAR settlement. And I'm sure you've seen all the noise happening around the NAR settlement. So I've been posting some content on social media related to how you should show up on social as a mortgage originator. Some of the activities you can do. And if you don't follow me on social, please go do so on Instagram, Facebook, etc. You can just look up my name and go follow me there. But today's episode we're going to bring to you a special guest conversation. And I'm glad he made time from his busy schedule to unpack what actually is going on with this NAR settlement. What are the real changes that are happening? What's the origin of this whole thing? And then how should we respond? What do we need to do to prepare and how do we show up? So my special guest is James Climent. He is the managing editor for Housing Wire. And he's responsible for managing and directing the newsroom of Housing Wire, which if you don't know, Housing Wire is the nation's premier source of news and analysis for mortgage real estate appraisal and title. If you don't subscribe yet, follow the link at a show notes, go and subscribe at Housing Wire. It is some of the best information for you to stay relevant current information for you to be informed, but also for you to inform both your clients and referral partners. So here's what we do on this podcast episode. We first start with the origins of this settlement that has taken place because there's quite a history here and it probably would make sense contextually for you to understand the timeline of events that happened related to the big news of the settlement coming up. Secondly is we're going to unpack some of the actual specific changes that are coming from the lawsuit. And we're going to take it from the approach of what's hype, what's emotionally driven versus what's factual and real. And we're going to talk about what is factual in real and the potential impacts to real estate compensation to the buyer's agent, historically as we've known it. And what some of the impacts of that are. And I think it's important to approach this from the context of setting the emotions aside, setting the narratives that the media is putting out there and really just look at this from a factual standpoint of like what's what's really changed. Hey, hint hint, not a lot. Okay. But you need to be informed. Why? So that you can have it informed response for the potential buyers that you're talking to for your past client database and conversations there for conversations with your referral partners and more because they're in every situation and opportunity. That's all about how you look at it and what your approach to that is. So I think you'll find this conversation useful. As a matter of fact, we're leveraging this in our community of managing classes where we help originators, you know, attract and engage with realtors to have conversations that lead to referrals. We're actually now helping some of our members set up panels in their own local market. So we host a panel of different local subject banner, you know, experts, couple successful realtors, title, escrow, attorneys, whatever makes sense on that. And you, you know, host a conversation, a town hall, if you will. So if you want to learn more about what we're doing at my agent classes, you can go over and if you want to learn more about our platform, what we do is we teach classes to real estate agents and now more than ever, of course, we want to become valuable and we want to not be a solicitor inventor, but we want to be a partner and appear more than ever. This is the time to be a partner and appear in our industry. So if you want to learn more about what we do there, you can go to mortgage marketing.pro. We're going to call with me there. Other than that, let's get into this week's show and unpack this whole NAR settlement and how you should be responding. Hope you enjoy this conversations with James Climent. Let's get into this week's show. James, welcome to the show. Hey, thanks for having me. It's a pleasure to have you. You've been on my radar actually for some time. You weren't aware of that. And I've had a few conversations with different folks at Housing Wire. But for those who may not be familiar with who you are, tell us who you are. What do you do? So I run the newsroom at Housing Wire and so we cover everything from, you know, allows and lenders, servicing, origination, you know, the big ugly capital markets, all that. We cover title insurance, appraisal, real estate, the brokerages, the life of a real estate agent, you know, all the way down to policy. So we cover pretty much everything from Soutanut. And yeah, I manage the staff and I do a lot of my own reporting as well. I typically focus a little bit more on the mortgage space. But you know, I cover the Sitzer Burnett trial on Kansas City, Missouri. And you know, certainly it's all interlinked, right? You can't talk about real estate with that mortgage and vice versa. You know, that brings up an interesting entry point for this conversation. Is I'm sure like me, there are some people who maybe aren't still connecting the dots on, what's the origin of this whole thing? You know, we hear it's some people can simplify and say it's just a bunch of hungry lawyers that, you know, saw this opportunity or whatever. But what's what's say you to if you could put the pieces into the puzzle of like, what's the origin of this whole thing? Yeah, so I think it's important to start by saying that the Department of Justice and the U.S. government has been interested in the way real estate agents do business for a very long time. The NAR has been established since the 1800s and they have largely set up a system that has resulted in what we have previously called cooperative compensation, right? And so essentially, I'm the cell site agent and you scratch my back, I scratch yours, right? And so it ensures that both parties get paid and it has set up, but I think a fairly efficient market system. Now what people should pay as consumers into that market system is obviously a matter of debate and it is absolutely true that the U.S. has among the highest commission rates for real estate agents in the world anywhere between five and six percent, you know, and rare cases it gets above that and some markets a little bit below that, but generally, you know, it's five to six percent. And so it's back in about 2019, 2020, 2020, you know, around this period that some of these big lawsuits start popping up and what you said earlier is absolutely right. There's no doubt these are class action attorneys. They're mostly personal injury attorneys who have never dealt with real estate cases in their lives, right? And it's a totally different business to chasing down pharmaceutical companies or hospitals or, you know, people working under very different conditions in different industries, but essentially the case, the big case that we'll refer to as Citzer Burnett out of Missouri boils down to about five fairly blue collar workers in Missouri home sellers felt like they paid too much in commission in real estate commission and that they also paid to the buy side. So the adversarial nature of it didn't sit well with them and they didn't know they say that commissions were negotiable. And that kicks off a big class action lawsuit and there are a bunch of others. So it's not only home sellers, but they're home buyers in other jurisdictions and all these copycat lawsuits across the country that have really started to percolate in the market and it also coincides with the DOJ getting back and saying we're really going to be scrutinizing NAR and its practices, its rules, because we feel that the consumer might be up against some some pretty difficult antitrust conditions and it's not a good deal for the consumer. And so the case ends in I want to say it was the last day of October, maybe Halloween or just around there and the plaintiffs in Missouri, they won. And so the NAR loses a $1.8 billion judgment that could be traveled to $5.36 billion. The NAR is big and powerful as they are and they are the biggest most powerful trade organization in the country, the biggest lobbying group in the country. They do not have that much money straight up. They do not have that much money. And the brokerage is that we're sued alongside the NAR for effectively allegedly conspiring to inflate commissions or stabilize them over decades. They lost and they don't have that kind of money either. These are low margin businesses. None of these companies have hundreds of millions or billions of dollars in cash just lying around. They do straight up zone. And so at that point the NAR was really in a pretty bad spot and they don't have a lot of bargaining leverage really. They ultimately decided to settle even though they said up and down anybody who would listen, we're going to fight this to the death. We are not going to settle. We believe that the law is on our side and that this will be reversed when it hits the appeals court. They ended up settling for a $418 million settlement. They admit no guilt, which is typically what you see in these settlements. Big tobacco kills. X amount of people and they say, oh, we didn't do anything. We're not saying we screwed up here. We're paying money to make it go away because it's everybody's best interest. Very interesting, very interesting. Of course, it may not go away because I'm trying to digest and read some of the other aspects of this settlement and you may know better than I or be able to speak to some of the legal leads or other courses of action that can be taken against NAR. There are additional follow-up pursuits or legal pursuits or fines that can be pursued against NAR and other brokerages still, isn't that correct? Yes. I should clarify the case that was settled against the NAR, this $418 million settlement that we just spoke to. That is to settle all claims from home sellers nationally. There are other cases, a couple in Illinois in which home buyers are basically arguing the same thing on the other side of it saying. It's certainly an interesting tactic. Those cases are not settled yet. I don't know what might come of them in the future. We also have the potential specter of the Department of Justice coming in and saying, we don't like the terms of this settlement. We don't feel that this is a fair deal. If you're a home seller, so I bought a home in 2021, sold it a little over a year later. I would probably be eligible for some of money as a home seller. It will probably end up being like $10, $15. That will hold out of money. The Department of Justice might look at this and say, that's just not fair. Given that, James paid 6% in commissions for the sale of that home and maybe it had no as negotiable, whatever. There is that element of it. I do think that this judgment will probably stand. I do think the judge in Missouri is going to sign off on it. I don't think that the DOJ is going to intercede and say, we don't like this arrangement because it really does satisfy a lot of what the DOJ has been saying about the commission structure, which is really just fundamentally at the most core basic level, they do not want the sell side agent dictating any kind of compensation terms to the buy side agent. And that has been fully dislocated with this settlement. Right. Because as most of us listening to this know, traditionally, that's been set at the terms of the listing agreement, where whatever that percentage of commission is, that's usually some sort of a split between the listing agent and the buy side agent. And that's kind of how it's always operated for many minutes. This might get a little personal. You've obviously transacted real estate. I'm curious if you think that is a good thing from a let's set aside who one who loses in this whole thing. We'll cover that in the second perhaps, but like from a just a transparency standpoint, do you think that's a good thing to separate those out? I think transparency in any context is always a good thing, people should know about my biases when I write stories. People should know about what realtors are charging. People should have a little bit more of a conversation about what they're comfortable paying the sell side, the buy side, and we'll see how that works going forward. But there should be conversations. And I do definitely believe even though commissions have been negotiable for a very long time, and they have been either a penny or a dollar, or some insanely low number that isn't relevant for the purposes of paying out agents a level of wage, they have to have these conversations. Consumers should know what they're paying for and the way in which they're paying for it. Is it at closing? Is it upfront? Is it some sort of a commitment before you've even gone through the sales process? You're saying, I'm going to give my agent 6%, and she's going to give 3% of that to the buy side agent, even if they're incompetent, even if they screw up the deal. I think that there's a lot of pluses in having an arrangement whereby both sides of the deal are very clear about what the costs are and who is responsible for bearing them. Maybe that changes during the course of the negotiation, but at least know what you're getting into ahead of time. Because I think often what you see is the buy side is just like, oh, the sell side is responsible for all this. I don't have to worry about it. They are paying for my cost, my representation. It's just like it doesn't matter. And so that's where you, I think, run into a lot of problems where one side just doesn't know or doesn't care. It's not stressed. That's the interesting question. Is that makes me wonder how many people actually knew the division of funds from that real estate commission that three or five percent, whatever it is six percent? How many people on either side, like the seller or the buyer? How many actually knew what was happening to you? I took a little poll of my friends and family. This is not a scientific poll by any stretch of the imagination. Just a bunch of group chats with family and friends and I asked, hey, did you guys know the commissions were negotiable? And if you did, how did that manifest? In practical terms, did that mean that you started at two and a half and they pushed back and you said, okay, sure, that's fine. That sounds reasonable. Did you start low? What did that look like? Half of them said they had no idea that commissions were even negotiable. They got a form, right? They get a piece of paper. It's buried in their 27 page agreement as the seller that commissions can be seven percent, six percent, five percent. And so, you know, in some cases, they'll just select the lowest number. They'll select the five percent if that's on the paperwork. And that's it. There's no other conversation. It's just, okay, like that's what I signed that I moved on because that's how it's always worked, right? There's sort of this institutionalized memory of how this deal was supposed to go. And people just tend to comply. And like on the sell side, I would think if you're not educated or you don't understand the industry and how it works and you're having that meeting with the agent, they're like, you know, my commissions, even if I negotiated with my, when I sold and, you know, and I know how the whole thing works, but I moved it down from maybe six to four or whatever it was. But again, I, and this is just a complete guess, but I think your kind of informal survey back to the up is, I don't think most sellers were aware that of their five or six percent half was going to a buyer's age. I don't think so either. I mean, again, this is not scientific by any stretch. And then I'm sure the NAR would argue that that's not the case that, you know, these conversations take place every day and, and brokers are very aware of, of, you know, setting the expectation, but I don't think that that has been the case. And, and yeah, and so many of them think that they just get it rolled up in the financing anyway, right? And so it's sort of like a, why would I care? This doesn't really affect me. So that's, that's one of the problems here. And so that's why I'm really in favor of a lot more transparency, but I think it also should be acknowledged that this is going to cause some disruptions. This is, this is, we're taking what was a fairly efficient marketplace and model for better and worse, right? Like all the words associated with it. And now we're saying, well, hold on, we're going to totally rip up the scripts. And now we're going to have each side do their own negotiations. And we're going to make sure that the buy side representative gets a signature to rip every single client on every single, you know, home that they look at and all that. And so, you know, there are a lot of potential implications that could come. It's too soon to know exactly how it will work out, but it will not be as frictionless as it was before. And in some cases, right. Sure. We've got to learn and adapt. And one of the things that comes out of this is that now the buyer's agents are required to use a buyer broker agreement, which I know I've been in this real estate game since 2003. And any real estate agent, trainer, coach, whoever I've ever been around worth their salt is always advised buyers, brokers, agreements. But I don't think that that's been the norm. I think there's been a fair amount of word of mouth stuff or verbal agreements. Yeah, it hasn't been the standard. I would say that, you know, more professional agents who work with legit solid brokers, they know if you're on the buy side, like, you got to get that side, right? And we've certainly seen a lot more of that over the last year since a little bit more of the case has gotten out. And people on the public start asking questions and saying, Hey, you know, what does this mean? Why are we doing this? But I mean, generally, the conversations are pretty straightforward. It's, I'm representing you as your agent. And you need to ensure that I get paid. I don't work for free. And people understand the concept of nobody wants to work for free, right? Like, it's not, it's not exactly the most difficult conversation to have. But it wasn't adopted at like a 90 something percent rate, you know, is probably considerably less than that. But again, like we're talking about a lot of agents who are not full-time professionals that were more likely to not, you know, ensure that they side a buyer side agreement. Well, I know on our side of the mortgage side, and you're well-steeps in the mortgage side is that a lot of LOs are talking about the comparison of Frank Dodd-Frank and Tread and all that stuff. That obviously impacted the industry in a big way. But of course, also pulled up the licensing requirements, uh, leveled up the professionalism as well. And I think that's what we're going to, that's why I think there's this narrative of there's a lot of fear. There's a lot of pushback. There's a lot of negativity. Because A, people don't like change. And now that's creating some uncertainty. But it's also probably forcing some people to re-evaluate, you know, are they really a professional air quotes, realtor? So if you look at the numbers, there are roughly 1.5 million members of, of NAR. Um, and let's just ballpark it here. So let's say it's the 90-10 rule, right? So 90 percent of the business is done by about 10 percent of the agents. That's also true in loan origination, you know, so we're talking about a pretty similar, um, sales fields. And there are so many part-timers, well, I don't think are providing the best professional representation or advice to people. In a lot of cases, just like, you know, I was a state-owned mom, PTA mom, I mean, 15 grand, 20 grand a year, you know, selling a couple houses to friends or friends of friends or neighbors or, you know, a kid's friend or whatever. And, and that's perfectly fine. But they're not, you know, the, the tips top agent who is thinking about it from, I think, a more strategic perspective, and able to offer a little bit better representation, probably a better negotiator, because they seem more of the market changing, you know, for a minute to minute. And so if we lose a couple hundred thousand of them, is it such a great loss? I think there should be more professionalism in real estate. It's so easy. It's, it's more difficult to get a cosmetology license in New York than it is to get a real estate license. And that's, I mean, no offense to the cosmet colleges out there. You know, I'm sure that the beauticians are, you know, trained professionals and take their jobs seriously. But that shouldn't be the case. That's, that's crazy. Well, what's the, I forget the figure exactly, but of the 1.5 million, like, 50% of them only sold a home in the last one home in the last 12 months. Yeah. And I remember, yeah. And most of them haven't sold anything in the last three to six months because, you know, it's a pretty tough market. And it's very, you know, very specific subsets of buyers out there, right? So you don't have to move up buyers. You don't have a lot of the traditional kind of work that that was out there. You have some tough first time home buyer business. You have maybe a couple investors who are never going to use a part-time agent anyway, right? And then you have kind of the life event situations. And again, less likely to get that kind of business. So it's, you're going to see a lot of these people wash out over the next year anyway, just because it's a bad market. And then you add the difficulties of having to get, you know, a buyer to sign every agreement with you the whole way through. Yeah. Or you're going to spend the money you need to to maintain your licensing. And then what are you going to pay for Zillow or Redfin Leeds or whatever? It's just the costs won't make sense if you're a part-timer. Yeah. Anything is just a market efficiencies, you know, that has forced this change to happen. And again, nobody really likes to be forced to change, which leads me to the next segment for us to talk about, which is all the uproar going on across the various media. And of course, once again, mainstream media, fueling this misinformation fire, which I know you've probably seen some of the headlines about, you know, prices are going to go down, you know, commissions are going to be reduced. And you know, all these different things, which I haven't seen a close enough factual statement from mainstream media yet, it's just a lot of this clickbait stuff, which is really sucks for us in the industry too, because now we got to work that much harder at setting the narrative correctly. So, do you want to talk about like what's what let's talk about what really changes versus the hype and the emotion? So maybe we get specific from it for anybody who isn't familiar with what the actual specifics of the requirements are in this settlement. Let's take the obvious one first, which is the MLS, right, which previously, I think you alluded to this earlier. I'm kind of looking at some notes over here, but previously they put the for operating commission, is that the correct term? Yep. They put whatever the cooperating commission was to the buyer's agent in the MLS. Corporate compensation has been set up. So from the get go right, like let's say you're a buyside agent and you're thinking about taking your client to 10 different properties, right? If you're through the MLS and you basically have to be on your local MLS to be able to access deals, to be a professional in this industry again because of narrows. So let's we're going to pack that in a second, but basically what it meant is you knew upfront what that deal would pay you because the seller and their client had already agreed, we're going to pay 5.5% in commissions, which means it's going to be 2.75 on each side or whatever that is, but like you know already going into it. And so a lot of the concern has been, and I think justifiably, when there are situations in which the seller has not provided significant or what is considered average compensation to the buyside, then you have steering issues, right? So that's definitely, so that goes away. There is no field in the MLS to say, Jeff, the sell side agent is going to get his 3%, and they're going to be offering 3% to James on the buyside. And so James is going to be incentivized, right, financially, to bring his clients to check out that home and then Jeff's going to be happy because he sold the home. He got his 3%, right? James got his 3%, and the questions should the seller have been paying that, right? I mean, that's another, another, I think, dromity that we're still going to have to reckon with, but now that we don't have it in the field of the MLS, I as the buyside agent will have to, I guess, you know, you Jeff, or maybe Jeff, like you have a listing somewhere beyond the MLS, right? Maybe you have your own website for all your properties, and you'll say like, hey, you know, James, as the buyside agent, you can get his 2.75% on this one. But so there's going to be a lot more logistical, I think, challenges going into it because you don't know already what that'll pay. And the other wrinkle, of course, here is we can still get paid as agents. So Jeff, the agent on the sell side can still absolutely get his 2.75 or 3%, I on the buyside could get my 3 or 2.75. It just, it'll probably be written in a different form. So it'll be thrown into the closing costs of seller concessions. So the seller will write out a piece of paper. It's not that complicated. And it'll say, Jeff will get his and James will get his. And then, you know, and that'll be that, right? And that'll dictate kind of what the price will be, the sale price to my buyer. And I think that will still be the arrangement in the vast majority of deals. Because like I said earlier, Jeff, it is a pretty efficient marketplace. Not always fair to everybody, right? Questions about how much it should cost in commissions. But it is a pretty efficient process. It's so much more efficient than when you look at how they transact real estate in other countries. Like the MLS is a really smart tool. It's a great marketing tool. And so you want to maintain, you know, the vestiges of that in this new form. Yeah. Right. And so you referenced, there's other documents that they can put the composition to the buyer's agent, the BAC buyer's agent commission that just has to not be in the MLS period. And they can advertise that as you referenced on their own brokerage website that has their own listings. They can, the whole thing is they can do it anywhere outside of the MLS period. Yeah. Which makes yeah, well, I don't want to go down the rabbit hole of Zillow and all that quite yet. But all right. So that's a fun one. Yeah. Compens, are there any other key changes or requirements that you would like to highlight relevant to the settlement? Yeah. So we cover the buyer, you know, needing to sign on representation with the buyer broker. We've covered I think the main form. But the biggest takeaway here is that the DOJ and in the terms of the settlement and this is a civil case, they do not want the sell side being able to dictate the terms of compensation to the buy side. They have left what I think you could probably characterize as workarounds. And so the first workaround is it's through concession, right? So you as the the sell the sell side, you know, you've convinced your client that this is the best way to do it. And they're going to pay me by two and a half or whatever. And they're just going to negotiate the price up or down. And then if let's say we're in a situation where maybe your seller has three or four offers, right? And she has to choose which offer she might go with the one that says, you know what? You don't need to pay for my representation. I'll pay for my own or I'll even go maybe unrepresented, right? So that that will probably be the biggest wrinkle aside from just some of the major changes for buyers that are already feeling the affordability pinch, you know, and just don't have, you know, money out of pocket. I think they're definitely big losers in this for sure. But in terms of rules, I mean, for the most part, it's it's pretty straightforward. Not only on the last buyer broker agreement, NAIR doesn't set any rules. They have killed what is called the participation role. That was the one that everyone was suing over. And and now the question is also what is the future of the NAR? If they don't really have, you know, we're going to see if it really is an efficient marketplace where if it has been, you know, self policing that has kept this practice, you know, as profitable for agents as it has been. That's one of the questions I was going to ask you is does this spell the end or unwinding of the NAR? It depends on you ask. It's too soon to say, but certainly the way that this agreement was structured now, I do want to mention that, you know, it's litigation. And so the NAR can't call all of its individual members and say, hey guys, like just so you know, we're thinking about signing this and you know, we're thinking about 418 million. We're going to pay it over four years and and oh, we got a car about four years. So if you're at two billion in revenue and below, like you're cool, you're fine. This doesn't affect you. You're part of our 418 million and do's aren't going to be raised this year. But maybe next year, you know, but if you're above 2 billion, well, you're kind of so well, like you got to fight your own battles, they kind of hung their big brokerage, you know, constituents out to dry here. So if you haven't already settled with Michael Catchmark, the plaintiff's attorney and the others, you're going to be on the hook for a lot of money and the NAR is not going to help. And so they have upset a lot of members. There a lot of members who already thought the NAR was not a very useful organization. They had more, we're doing more bad than good. And certainly, if you have 500,000 agents as some suspect, wash out, that's a lot of dues, right? And so an air is political capital, then starts to whither. And they just, they're just, they're already arguably a shell of what they were. What does it look like in a couple years when the membership really declines? And half of your members despise you. So that's, it's going to be hard to figure. And I think a lot of people do acknowledge that NAR does some good. You know, they have a lot of advocacy work. They have lobby, they fought really hard for some really important bills and housing. They have also done a lot of training. They've pushed a lot of education. For example, they had a big campaign to understand the pronunciation of the word realtor. It is not realtor. It is. What's that? You being humorous now. Sorry, a little cheeky. But yeah, I mean, look, it's, it's, it's, it's a really, really bad blow. And I think it's probably the best NAR could have done. And they hung out half their members to dry. And we'll see what, what happens. I was watching a video from somebody the other day, a prominent agent in the country who said that NAR had a chance to fix this a while back. Yes. And they chose, because they could have changed what they, the, the options for adding in the MLS. They could have put like zero or whatever they needed something in there. And they refused to do that. And so they had a chance. It sounds like you know what I'm talking about. They've had many chances. The DOJ has been going after them for more than 20 years. Since, almost 20 years, it was 2004, 2005 that they started, you know, and we're having a lot of the same arguments. We're having a lot of the same debates now that the NAR was having 20 years ago. A lot of these practices could have been changed, you know, when, when people started making noise. A lot of the brokerages themselves have not been comfortable with cooperative compensation for years now. So it's, it's not that there were no opportunities. It's that, look, this is a system that has benefited, you know, a lot of the, a lot of the top folk at NAR. It has benefited a lot of brokerages. But, but certainly there were warning signs and there were opportunities to change this. And the NAR has been very successful fighting on, on many fronts for many years. And they bury, they bury people on legal fees, right? And they're, they're a very powerful organization. So I think there was a little bit more hubris than probably was warranted, you know, and we say that with the benefit of hindsight. And NAR did pretty well for, you know, almost 20 years with, with a lot of these practices, policies and procedures. The DOJ and other folks finally had enough and decided to all come together, you know, I mean, how can you continue to go up against the DOJ and win continually? No. Yeah, no. I can't think of a single, a single person who was, you know, indefinitely fought the DOJ and walked away and scathed. Wow. All right. So this is not a win, obviously, for NAR, even though I saw a couple of people posting that it was. I think it is a win in some respect. So if you think about it from the worst case scenario, they lost a case. They lost a very, very, very significant case. I don't think they would have won on appeal. I'm not a lawyer, obviously, I'm not a constitutional law scholar. I'm just a dude living in Brooklyn. And so that the worst case scenario for NAR is they're done. They're dead. It is finito because they would never be able to pay the bond. They would lose the case. And they just, they don't have the money to compensate the so-called victims. So from that respect, also, the NAR only paid $418 million. They just lost a $1.8 billion judgment that would have been trebled to $5.36 billion. That's only one case. There are other cases that were even 10 times the size of this argued on the same grounds. And so, yeah, I mean, the for them because they covered their ass. Yeah. I mean, they walk away and they still have the potential to fight another day. But they're definitely wounded, no doubt. They've been pretty bloodied here. Yeah, in a variety of different ways. Now, I also heard it said that the buyers lose in this settlement as well. I think it depends the way you see it. Certainly, buyers that have already had a difficult time that don't have a lot of money for when you're working with Guideschev, you know, the people who can't pay the appraisal gap, right? You know, they're already just barely struggling to get to whatever the number is that their DTI is under. They don't have the funds on hand. So, they'll need the sell side to compensate the, you know, that they're representation. Or they'll have to look into alternative forms of representation, right? So, maybe there's a flat fee model. Maybe they go unrepresented. Maybe they call the listing broker themselves. Letter. Letter? Yeah, yeah. But certainly, when you, when you practically speaking, change the dynamic from it being an expectation in the market that the seller pay these costs, and now that's very much an open question, and you don't know, you know, deal the deal if that's going to happen, and they lose purchasing power, right? They're losing some leverage. And it could be a lot of money, you know, a $400,000 house is probably going to be what, $13,000 or so in commission costs potentially. So. But let's look at it from this side as well. Like you talked about steering earlier, like as an agent, I look at MLS commission and it's like, oh, this is only paying, you know, and that was, you know, assuming to potentially drive some behavior, whether it was or not, I don't know. But the point being is that's still going to go on in a different way, which is if I'm a seller and I don't have BAC, like I'm not willing to offer compensation to a buyer's agent, what I'm already knowing and hearing is that much like, you know, it's the whole thing you want to get your property, you want to be your property to be as attractive as possible. And if you don't have a buyer's agent commission, right, available, then the argument from the other side is, well, you're probably not going to get your house in front of it. Is that many people? And we got a lot of first-time home buyers who need help and all that kind of stuff. What would you say to that? It depends on sort of the kind of the where you are in the market, right? So like, let's let's take an example of my hometown in Wyckoff, New Jersey. So nice kind of like bedroom community of New York City, there are now something like the last time I checked, there were eight homes on the market, single family homes on the market, and every single one of them had a bidding more. In most cases, those buyers are, you know, they're in a tough spot. There's so much demand, supply and demand is going to have a much bigger impact on, you know, these are second order effects from that, you know, like it's not the primary driver. I do think it's going to change the equation certainly for VA buyers because you can't roll that into the mortgage, you know, we can talk more about that if you like, you know, that there's a certain threshold for closing costs for guppy buyers for, you know, VA and FHA, and if you're already at a tipping point, yeah, I mean, you're not going to benefit from a rule that now mandates that you, you know, at least on paper say that you're responsible for this. So yeah, there, it's going to be a totally different game for buyers in, you know, lower to middle markets, but it's going to be like real estate always is it's going to be a local, you know, game. It's going to be different from MSA to MSA, and you know, we don't fully know how it's going to work out, but I think if the seller has more leverage, certainly they're going to, they're not going to lower the price of the home, like, you know, all these, these fictitious ideas that you alluded to earlier with, you know, the mainstream media saying that's going to lower the cost of the home. No, it's not. This is just going to, to, you know, put a little bit more juice in the, the sell sides leverage and they're not going to leave money on the table. I think one of the headlines I looked at before this, this conversation between you and I, which was, you know, 6% real estate commission slashed, you know, it's so daft. Yeah, it's insane. I'm, I wish there were more real estate reporters at these big national publications because they, they should know that that's not, that's not the reality. And then getting back to, you know, the sufficient ecosystem that we've kind of had already in place for so long, and it's just a matter of moving this item of brokerage and compensation outside of the MLS to some other means of communication. It is going to be a little bit, I think, harder perhaps because I mean, let's just face it. A lot of times agents, listing agents aren't the easiest to reach. Maybe they don't return the calls. And now instead of looking in the MLS to get the comp, you're like, I got a call, I got an email, I got to go through and then that's going to create some probably inefficiencies in the whole process. But I've already seen, and maybe you have as well, like I know of agent up in California. And then I saw on this same social media thread. And of course, you had mentioned earlier, other states got ahead of this that this is already happening. Like one broker that I know of said he took an offer and already had the conversation with the seller about the BAC, and there was no problem. Like whether that was 6% or not, I don't know, but the point is, as they disclosed it all, they presented it up front, the seller knew of the news and all that. Of course, and they talked about it with their client and they said, oh, yeah, well, that's normal to me. You got to pay the agent something, you know? Right. Exactly. So that that's why, you know, I do think that they're going to be changed is for the deals in which the buyer just doesn't have much maneuverability, you know, it was already hampered by affordability issues. And a seller that has, you know, a lot of options, you know, I think we're going to run into situations where that's where you see some of the the effects of this potential settlement agreement really take place. I think for the vast majority of deals, we'll still see what you just described, Jeff. We're going to see, you know, oh, okay, yeah, they signed that. Okay. Well, you know, I'm still, I still think this is the best way to transact. And, and you know, real estate agents are pretty influential. This, they've been able to put in sellers have been able to put in a penny or a dollar or some nominal figure for many years. In a lot of cases, a lot of analysis. And what they do is what they've always done, they pay the buyer agent two and a half to three percent or, you know, whatever it is in most cases, pretty consistently, where we're going to probably see the, you know, the, the examples of that not taking place is where you have totally disjointed positions of leverage where a seller says, I'm not going to pay anything because I know that I have 10, 20, 30 offers that are coming, going to end and come in. And previously, what I would have done is just picked the one that had them go to 50,000 over budget, right? Or, over list. And now they're going to go 40, but they're going to pay for their own compensation. And like, it's just the easier way to do it. Or you're going to see dual agency, depending on state that you're in. So, yeah, or maybe there are going to be flat fee models that emerge on the buy side. I talked to a guy, he runs a small brokerage in Iowa, in Davenport, Iowa, his name is Pete Voss. And he, he has this company called 3% listing company. And what they do is that they're all sell side at full service brokerage. And he signs on clients and he tells them from the get go, your only commitment is to pay us, you know, it is negotiable, but it's 3% right? Is the name would, would suggest. And you don't have to pay the buyer agent, you know, that's not your responsibility. And if you choose to, like, cool, that's fine. Like, that's totally up to you. And that's a business decision. That's a strategy you can employ. And, you know, what typically happens, the vast majority, the vast majority of his deals, the, the buy side is being compensated by Peter's clients, you know, because it's still the most efficient way to make that deal work to incentivize all parties. And then, you know, you just kind of play with the listing price up and down, you make sure that the pencils out for the mortgage and the appraisal comes back. Okay, like, there are some complicating factors, but it's, it's those rare deals, maybe not rare, but less frequent deal situations where that's where you're going to see the real effect of this ruling in my opinion. Yeah. We'll obviously reach a new norm at some point, right, where everything settles in after an adjustment period. Yep. But that's normal. Hey, I wanted to ask you a question about New York. I heard this the other day seeing as you said, you're from New York, agents in New York City are not members of the NAR. That's correct. So they're, their members of an organization, another shady, powerful organization called Rebney. It's the real estate board of New York. They've been historically a little bit more commercial real estate focused, but they obviously do have a residential arm. And, you know, they have a lot of similar rules as, as NAR and, you know, stay in local associations. They're all very similar in how they do it. But yeah, New York is among the few major markets, which does not have, you know, the NAR's presence. Another is in Washington state, where there's another big MLS that, you know, they don't have the network. They do that. Do you know? Sorry. Why did they do that? You know, I don't know the origins in either situation, but at least in Rebney's case, it's been like that for decades. And it partly in New York, the big real estate brokerage is in New York City have always hated one another and gone to extreme lengths to hurt the other, and so they could never agree on forming an MLS. I don't think it's, you know, that difficult in Washington. I don't think there's that much acrimony in Washington, but I'm not from there. I can't speak for any experience. So my guess is that's probably why, you know, Rebney has been sort of the de facto rulemaker in that jurisdiction. Do you see local MLSs at risk of survival? Do you think there's a movement in the future towards a national MLS? Any thoughts there? That would be really interesting, right? If you had one national MLS, I mean, certainly co-starred with love to get in there and Zillow would love to get in there. And I imagine there are a lot of different players out there who would be salivating of the opportunity to have all that data and, you know, I've ever consolidated in one. I don't see it. You know, residential real estate is still one of the most fractured industries in the world. And that's the reason why you see so many like, they're going to be a million startups that actually come take place because of all these disruptions. And, you know, everyone's sort of like, you know, in the middle of it and trying to take a little bit of a bite. So I don't see a national MLS coming any time soon. I don't see that even in the, you know, distant, distant future. I do think that we're going to continue to see a lot more consolidation among the MLSs. We already have. We, we see a lot more of them joining forces and getting bigger. And you already have a couple really big ones, you know, like bright MLS. And California obviously has a couple of them that are, that are pretty huge. And down south, there, there was a big consolidation recently among three of the biggest ones. And like Georgia, Tennessee, and South Carolina maybe, I'm not entirely sure at the moment. But that's going to continue. We're going to see larger, you know, MLSs. It's going to go down from 400 something, you know, it's probably going to be cut in half in the next 10 years. Well, so you've got mortgage originators listening to this mostly. That's where you spend a lot of your time doing your writing and all that stuff. Do you have any parting words for them of advice of how they should show up or, you know, what they should, how they should respond to this situation? Yeah, if your business is entirely about courting by-site agents, you're at a really big disadvantage. And you should yesterday have been reaching out to people on the listing side. You should be really diversifying your list of referral sources because I think it's going to get pretty choppy. And I think it's also an opportunity potentially in the future where, look, you have clients that have already got their pre-approval information. You've already got all the finances. You know what they'll be able to afford in terms of paying a buyer agent. Maybe you're the one who can recommend, you know, the referral for the real estate agent to a buyer, right? So I think this is also a really good opportunity for you to get clients directly. So leveraging social media, right? Putting out smart, informative takes on what's happening in your local housing market, getting smarter with your SEO strategies. I think there's a lot of ways to capitalize on whenever there's a big disruption. It's the creative people who provide value and take a little bit of a risk. And they typically are the ones that end up reaping their rewards. And so for originators, I think there could be a big opportunity. I'm personally very leery of tool agency and, you know, L.O.'s being licensed as real estate agents as well. And, you know, we've seen on the flip side, you know, cases in which agents have been originators. And that hasn't been, I don't think that's been a success. You know, it's, we're going to see a lot of new, I think, models and forms. And I think it's going to be a pre-interrupting exciting couple of years. So I would say don't be scared to try something different. And at the end of the day, if you're providing your client value and you can show everyone in that deal, whether it's someone on the title side, whether it's the listing agent, whether it's, you know, someone else involved in that, that you're smart, you show up, you know, you're shit, and you get results and you work hard. You're going to be fine. The vast, vast, vast majority of business done by L.O.'s is like 10 to 15% of the L.O.'s. And they're already doing three to five, you know, loans a month in most cases, right? Same deal with the real estate agents. If you're trying to get, if you're cold calling, you know, buyer agents that haven't done a deal in six months, like what are you doing? Like why on earth would you think that this is going to be a fruitful source of lead referrals going forward? Like call the people doing the business, you know, it's like provide them value, like give them something to chew on. Yeah, I've said that for years. A lot of people focus on the buy side and oh, eight sides a year and all that kind of stuff. And I'm like, the listing agent, man, I mean, those are the ones that survive and thrive. They have the buyer leads anyways. So, you know, and they're the ones that have the buyers agents on their teams. And that's probably what's going to happen even more so now is if you're a listing agent and you've got this buyer situation now, you know, like you said, all these new models. So I'm still, you know, bullish on agents as a source of business, not the only one. But you've got to be smart, like with where you invest your time and energy on agents, for sure. Absolutely. Yep. And diversify, like go beyond the agent. There are a lot of other, yeah, I mean, I know it's, it's a little people don't want to discuss it, but probate, right? That's a great source of potential business. You know, call up the funeral home director or call up the divorce attorneys in your area. Call up the electricians. You don't think the age back guy knows what's going on. Like he does, right? I just thought of the funeral. I'm like, nobody's called calling the funeral director. Yeah, but they should. They should. They absolutely should. The good one. All right, man, listen, this has been a great conversation. All right. Well, thanks for tuning into today's episode. Hey, you got a question for you. Are you struggling to get engagement and referrals from real estate agents and feeling like you're constantly fighting for business and a crowded market? What if I told you there's a way to attract agents to a provide unique value that helps them grow their business and generate referrals on demand, helping you become the dominant loan officer in your local market. Look, I was an originator for over 10 years. 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