## NAR Lawsuit Shakes Up Real Estate Industry
**Key Takeaways:**
– A recent lawsuit filed against the National Association of Realtors (NAR) is forcing real estate agents to adapt how they conduct business.
– The lawsuit, which challenged how buyer agents are paid, has resulted in significant changes to the way agents will operate, with new requirements for buyer compensation agreements and restrictions on advertising commission splits.
– Many agents see these changes as an opportunity to differentiate themselves and focus on providing exceptional value to their clients.
– The shift in the industry also comes at a time when buyers face increased affordability challenges and are having to make tough decisions on how to stretch their budgets.
**A Change in the Landscape**
The NAR lawsuit, which has been a hot topic in the real estate industry, has fundamentally altered the way agents operate, particularly for buyer agents. The lawsuit, ultimately decided in favor of the plaintiffs, focused on how buyer agents get paid.
Previously, the standard practice involved listing commission splits being advertised in the Multiple Listing Service (MLS), which is a database used by agents and feeds information to websites like Zillow and Realtor.com. This allowed potential buyers to see how much the buyer’s agent would earn on the deal.
However, the lawsuit found that this practice prevented buyers from negotiating their own commission directly with the buyer’s agent, since it appeared that the commission was set in stone. While commissions were always technically negotiable, this became a point of contention.
**New Rules, New Opportunities**
The lawsuit, therefore, has ushered in two major changes:
– **No More Commission Advertising in MLS:** Buyer agents are no longer allowed to advertise the commission they receive in the MLS. This will shift advertising to other platforms, and agents will need to find new ways to showcase their value.
– **Buyer Compensation Agreements:** Agents are now required to have a buyer compensation agreement signed with all clients before showing any homes. This agreement formally outlines the compensation structure between the agent and the buyer.
Brooks, a real estate agent interviewed in the video transcript, sees these changes as a positive development.
“There’s going to be a lot of changes with regard to the way we operate as Buyer Agents…that are going to make the people that have taken great care in their business to grow and be professional…giv them an opportunity to shine and differentiate themselves,” he says.
He also notes that this will require agents to be more transparent and educate their clients about how they are compensated. This is something he believes will benefit buyers in the long run.
“Buyers agents are not going to no longer receive commission. You can still pay pay a buyer’s agent commission, and as a seller in addition, it’s going to be one of the best ways to advertise your home because you’re going to bring well represented buyers to the table,” says Brooks.
**Navigating Affordability Challenges**
The changes in the real estate industry come at a time when buyers are facing some significant challenges, particularly in terms of affordability. Interest rates have been on the rise, and inflation has eroded purchasing power.
“We’re still dealing with appraisal Gap coverage. We’re still dealing with affordability issues in terms of you know like the average debt to income ratio that you see on a loan now versus what it was you know four or five years ago is drastically different,” explains Brooks.
This means that buyers are having to make difficult decisions about how to stretch their budgets to afford a home in the current market.
“People are having to make more sacrifices for their job,” Brooks adds. “They’re willing to commute further, maybe live in a less expensive area. A lot of times it comes down to, ‘Well, I can buy you know this, I can making up a scenario, but I okay I can go all the way out to Maran and you know, I can buy a house with a little bit of land and some you know acreage, and yeah, I’ve got a 30-minute further commute, but I can save myself a 100,000 on my price point’. That’s that’s real money savings, and when you start looking at people that you know with inflation and everything else are kind of pinching every dollar in their budget, that’s where that consultation process comes into play, and you know really helping people understand like hey, I’m not just trying to sell you a loan, I’m not just trying to sell you a house, I’m trying to help you manage your assets and your debt and figure out okay where can we put you in the best position.”
**Shifting Commutes and Lifestyle Changes**
The shift towards remote work has also impacted how buyers are looking at housing. Buyers are less tied to living close to their offices, allowing them to explore more options in terms of location.
“The average distance that a person lived from the office went from 10 miles to 27 miles, which you know, so that’s almost the 3x increase in terms of you know your your your commute,” observes Steve, who is a mortgage lender.
Brooks adds, “When you talk about work from home in addition from being able to live in different places because you don’t you don’t have to go to the office, the other thing that that has really changed is the the living space that you need, because often you need an office. Sometimes both. If you’re a couple, both of the people involved have to live at home, and Ian start have to work at work at home and need an office or or some sort of dedicated space that they can conference calls on.”
This means that buyers are looking for homes with more square footage to accommodate work-from-home setups, as well as larger yards and outdoor space.
**Embrace Automation and AI**
Both Brooks and Steve discuss the role of automation and AI in the real estate industry going forward.
“In the next five years, there’s going to be so much automation in everything that we do,” says Steve. “AI is going to change the way we do business in so many ways.”
Brooks notes that he is already using AI tools to streamline his business processes and spend more time on high-value tasks.
“I use chat GPT to learn about other tools. I use Calendly to schedule appointments. I use Zapier to automate tasks. There’s a bunch of different ways, and then Apple just released, at the worldwide developer conference this past Monday, they are coming out in iOS 18 with apple intelligence, and it’s going to be integrated in just every part of our phone. Almost, it’s going to be a personal assistance that’s going to be more powerful. There’s going to be pieces that summarize text message chains, emails. AI is going to be taking over a lot of those time-consuming tasks.”
He sees AI becoming even more integrated into his business, enabling him to focus on the most important things, like building relationships with clients and providing expert advice.
**A Focus on Value and Client Experience**
The key takeaway for real estate agents is the need to adapt to the changing landscape, embrace new technology, and focus on providing exceptional value to their clients. The industry is becoming more competitive, and agents who can differentiate themselves by providing high-quality service, deep industry knowledge, and personalized communication will be successful.
“You possess a level 10 skill. Do not waste endless amounts of time on a level two skill task as a level 10 skill person. That just doesn’t correlate, and it’s not going to equate to operating more effectively and generating more revenue for your business,” says Steve.
Both Brooks and Steve emphasize that success in the real estate industry requires commitment, a willingness to learn, and a focus on client experience.
“I think we all win. If we all engage in each other’s stuff, like everybody everybody gets more eyes, which is what everybody’s after, right? But why it’s become a hot button topic is sometimes I’m scrolling and I’m like, there’s nothing here for me to engage with,” says Steve. “The way that we present it, our our president of Cutler has a great way of saying it, and you know he says, ‘If you aren’t engaging with your clients, somebody else is. 100%. And it’s about finding ways to stay connected with the people that you’ve worked with in the past, genuinely connected with them.”
In conclusion, the real estate industry is evolving rapidly. Agents who can embrace these changes, focus on providing value, and utilize new technology to enhance their business will thrive in this new landscape.