A newly released episode of the Unfiltered Real Estate Insider podcast explores the future state of buyer-seller relationships in the real estate market. National Association of Realtors(NAR) Business practice changes will take effect on August 17th.
Co-hosts James Dwiggins and Keith Robinson chat with industry expert Ed Zorn to address what real estate agents are saying in the recent Ministry of Justice Investigations into multiple organizations, including California Association of Realtors.
Dwiggins and Robinson opened the episode by delving into Zorn’s thoughts on the Justice Department lawsuit. According to Zorn, the Justice Department issues a civil investigative demand (CID), which allows the agency to request information on a specific subject from a company or organization that is not involved in active litigation. The DOJ is continuing an investigation begun in 2019 into NAR’s commission practices, including its cooperative compensation model.
Following a change in Commission policy at the Multiple Listing Service (MLS) level, the Department of Justice now seeks to address the use of standardized forms designed by competing MLSs. Standardized forms can save consumers legal fees and other previously required costs. But there is a risk that the compensation offer could disappear.
“Industry-standardized forms are great and great for consumers,” Zorn said. “However, there is a risk that the offer of compensation will remain, as will the criticism and the reasons that led to the alleged conspiracy continuing through the table mechanism.”
The buyer’s agent may ask for a comp offer over the phone and may reject the listing based on the seller’s offer, essentially allowing the agent to steer the buyer toward a listing that offers a more favorable comp.
Dwiggins chimed in, wondering whether steering would cease to be an issue without standardized forms. Zorn said it would be more difficult to allege commission bias and make offers less controversial if brokers produced their own forms.
The discussion turned to objection handling scenarios in the new consumer-focused model created following the Commission proceedings. Zorn explained how he would approach sellers in new markets. When speaking with sellers, Zorn will share his services, experience, and other common elements of a listing presentation.
To drive listing traffic, Zorn will customize display content around three factors: market conditions, potential buyers and the type of property listed. For example, an entry-level home might appeal to federal housing administration (FHA) borrowers may offer concessions and other benefits to assist first-time homebuyers with costs.
Next, Dwiggins asked about the value of franchise data collected by the MLS and whether a lack of data would hinder the evaluation process. Lack of franchise data may prevent sellers from determining prices based solely on comparable market offerings. Zorn described this risk as minimal and expressed the utility of concession data to agents in specific markets.
“If you want this consumer-centric approach to work, then I, as both the listing agent and the buyer’s agent, need data to understand the components of a transaction so that I can provide my sellers and buyers with information on what Good advice for trading.
Robinson also brought up another situation where the listing agent received a call from the buyer’s agent asking about compensation. Zorn said he does not offer or accept compensation from agents. Instead, he will incorporate a compensation percentage into the sales price to help the buyer purchase the home.
The episode concludes with a discussion of the importance of establishing a clear buyer representation agreement and suggestions for handling buyer-agent relationships.
