Posted Wednesday, April 17th, 2024 by Enterprise Property Management
In our latest episode, “Who Pays the Realtor in 2024? Shifting Real Estate Commissions”, we examine the DOJ’s latest guidelines revolutionizing Realtor compensation. Previously, sellers were typically responsible for the buyer’s Realtor fees, but now, buyers must negotiate these costs directly. This pivotal change aims to clarify and modernize the financial dynamics of buying property. We also explore how technological advancements, like Zillow, support self-representation, though caution remains essential to avoid potential pitfalls. As the real estate industry awaits standardized contracts from authoritative bodies, we discuss what these changes mean for buyers, sellers, and Realtors alike.
Richard
0:00:19 – In today’s episode, we’re going to address something that’s been in the news lately, and that’s the National Association of Realtors, re-examining how fees are paid during a real estate transaction.
Sponsorship
0:00:49 – Behind the Curtain Real Estate Podcast is sponsored by Memphis Real Estate Advisors. Memphis Real Estate Advisors is a realtor team led by husband and wife duo, Aaron and Alyssa Ivey. Bringing over 20 years of experience in both residential and commercial real estate sales and property management, the team works with investors, buyers, and sellers as a member branch office of the national franchise, EXP Realty. To get in contact with Memphis Real Estate Advisors, visit them online at a href=”https://memphisreadvisors.com/” target=”_blank”>memphisreadvisors.com or call 901-671-1015.
Aaron
0:01:15 – Let’s just break it open. Let’s talk about it. And I know that we’ll be talking about this for the rest of this year, because for the listeners out there, this is a transitionary year from the way that we sold real estate, the way that we compensated agents for 100 years. which basically states, and this of course is my read on the change in the law, it basically states that the seller of a property should not be encumbered to pay for the buyer’s representative’s compensation. So basically if I’m selling a property and I have a realtor, I shouldn’t be responsible, this is per the Department of Justice, I should no longer be responsible for paying the other Realtors Commission out of the proceeds of my home. What the Department of Justice wants to do is they want to separate out compensation from the transaction. So for the buyer’s representative, and this is the easiest way that I can describe it. If you’re a buyer, it is your responsibility, maybe not today, but in the very near future, it’s your responsibility to negotiate the compensation that you’re willing to pay your realtor to assist you in the purchase of a property. And we don’t know what that looks like. Like me and 10 million other realtors all across the country, that’s about how many realtors there are in the United States, 10 million. We are waiting for the National Association of Realtors to say this is how to do this because we fully expect that our non-governmental you know bodies that are regulating who we are and what we do, our professional groups like the National Association of Realtors, we expect them to standardize some sort of contract between the buyer and the buyer’s representative to to negotiate their compensation in such a way that is transparent because listener that’s a hundred percent required every cent that trades hands in a real estate transaction it has to be listed it has to be written out nothing can be unseen and it all has to be recorded in the transaction so my gut tells me that we have yet to see those standardized forms that are going to come from the National Association of Realtors, the Tennessee Realtors Association, and your various states, all 50 states, they’re going to have their own standardized forms. So when those come out, I believe that there’s going to be an education provided to realtors and to the consumer as to what this relationship looks like and what changes have been made and then we will spend six months to 12 months learning this new approach to buyers representatives compensation.
Richard
0:04:10 – Do you think with technology as well, do you think that’s going to promote more self-representation?
Aaron
0:04:17 – I think that technology has definitely positioned us to do more self-representation and I think that we’ve seen growth in the self-representation when it comes to buyers over the last 10 to 12 years. I remember when Zillow first came out and it was such a rude tool when it first came out. You couldn’t believe anything it said. It really didn’t know how to project property values. It didn’t know how to help the consumer as much as it knows how to help now. Zillow is an excellent aid to the consumer. So you could use Zillow and you could, you know, form your own idea of what a property could sell for and you could knock the door of the seller or call the seller’s representative and you could make an offer with the seller’s realtor, then they are giving a lot of very important information to the seller’s realtor, and the seller’s realtor could use that information to negotiate better on behalf of their client. So an unrepresented buyer is really unprotected, or at the very least, they are underprotected, because they don’t have the professional license, they don’t have the education, and there’s nobody out there saying, I will be your fiduciary in this, and I will have your best interests at heart, and behave professionally in such a way that makes sure that you are protected, and that you get the best purchase possible. So, for those of you out there that are considering self-representation, if you’ve never done it before, I recommend that you get on some blogs that are out there, maybe BiggerPockets, maybe Reddit. Don’t believe everything that you read, but try to find a qualified source. This is somebody like me who’s got licenses, who has decades of experience. And then I would also find a great real estate attorney, because if you’re going to represent yourself, then you need to have somebody that you can call and say, hey, I’m thinking about doing this, is that wise? You’ve got to have somebody that you can bounce your ideas off of. Or you may find yourself overpurchasing. You may find yourself purchasing a property that has damage, maybe from termites or the weather or something else. And there are a lot of checks and balances that come with that realtor representation. So again, you can represent yourself, but it is buyer beware to the highest level. Please be careful. Please don’t put yourself in a situation that you regret because it can happen very quickly. And before you know it, you’re committed. You know, you’re signing at the closing attorney’s table, you’re entering into an agreement that you may not have wanted, or an even worse case scenario, Richard, is where a buyer will come all the way up to closing they will have passed certain contractual benchmarks which are opportunities for them to pull out of the deal because they have you know due to the state of repair of the property due to lack of financing there are a number of different reasons that they can pull out of the deal but what if you move too far past those benchmarks and you no longer have the right to rescind that offer but you do it anyway you could be sued for something called specific performance and so if you’re sued for lack of specific performance you could end up finding yourself in a lawsuit which could cost you hundreds of thousands of dollars because you pulled out of a deal because you didn’t know what you were doing going into it. We want to thank you for listening to this specific episode about the NAR settlement again this is our opinion as a professionals it’s definitely not a legal summary of exactly what’s going on, and as we learn new details and how it affects the real estate market as a whole, we will keep you updated in future episodes. So please come back and listen as we figure this thing out together. You can always reach me to ask me questions on my cell at 901-461-0905 and I’d love to speak to you. Call me or text me there anytime and let’s have a great conversation.
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