1: Welcome to How to Real Estate Today

In this podcast episode, Rebecca Green and Kim Borcherding discuss the recent settlement of a class action lawsuit brought against the National Association of Realtors for alleged price fixing of commissions. They emphasize the importance of buyer representation and the need for expert guidance in the complex process of buying a home. They also discuss the impact of the settlement on buyers, sellers, and brokers, and offer advice on how to navigate the changing real estate landscape. The key themes of the conversation include the importance of buyer representation, the need for brokers to level up their skills and value proposition, and the importance of transparency and education in the real estate industry.

Takeaways

• Buyers should prioritize having expert representation when purchasing a home, as the process is complex and infrequent for most people.
• Good real estate agents should focus on leveling up their skills and value proposition to provide the best service to their clients.
• Transparency and education are crucial in the real estate industry, and agents should be knowledgeable about contracts and negotiation.
• Buyers and sellers have choices in who they work with, and it is important to find an agent who can effectively manage the transaction and protect their interests.

Chapters

• 0:00 Introduction and Overview
• 0:57 The Impact of the Class Action Lawsuit on Buyers
• 7:43 The Role of the National Association of Realtors
• 10:04 Opportunities for Great Agents
• 13:24 Advice for Real Estate Agents
• 18:43 Advice for Buyers, Sellers, and Brokers
• 20:32 The Value of Buyer Representation
• 23:15 Conclusion

Transcript

Rebecca Green (00:00.078)
Hey there, welcome to our first podcast of How to Real Estate Today. I'm here with my friend Kim. We are here to talk all things real estate and what's relevant in the market as of today. This podcast has been an idea of mine for the last four, maybe five years, and I'm super excited to actually be here with my friend Kim Borcherding. She and I have a shared philosophy of collaboration over competition. We work for different brokerages.

We have different goals in our own real estate businesses, but we're here to talk about all things real estate. For those of you that might not be aware, the National Association of Realtors recently settled a class action lawsuit brought on by home sellers for alleged price fixing of commissions. The settlement is a $418 million settlement, and it does affect brokerages, buyers, and sellers in different ways. So we're here to talk a little bit about that.

So I'm gonna turn it over to Kim to ask her what her thoughts are. Gosh, Rebecca, I'd say I have a lot of thoughts on that. But I think for me, my first thought when this came out is really the impact for home buyers. So for me, I feel very strongly about home buyers having representation. So in my opinion, buying a home is not straightforward in most cases and there's a lot of complexities to it. And most people don't do it very often. So what you know, you buy, you know, maybe a handful of homes in your lifetime. So you don't do it enough to be an expert at it. And for me, I feel very strongly and actually that's one of the reasons that I've built my business the way I do. I feel very strongly about whether you're a buyer or seller having great representation. I bought my first property in Chicago when I was 24 years old. And you don't know when you don't know. So my family never spoke to me about investing in real estate. I was a waitress at the time in Chicago and a colleague of mine who was waitressing with me at the restaurant just gets a real estate license and I said, well maybe I should buy a place. And she said, great. So she ends up representing me as a buyer's agent. Again, I had no idea of the level of skill set required to buy a place. And she represented me, actually it was a dual representation on a property that was owned by her boyfriend that was a really complex property. It was kind of actually like a front house and a coach house. We had it split into different condos, a lot of complexity with that. It was infested with rats. I mean, a million reasons why I shouldn't have bought this property, but I had no idea. I trusted her and her advice.

And I bought this property and it was a nightmare for 17 years.....17 years! So actually I lived in it for the first two years that I decided to relocate to Oregon and I kept it as a rental property. I was underwater every single month as a rental property. So it cost me about $400 a month to contribute towards the mortgage because the rent didn't cover it also the tax increase in Chicago has been significant

So when I initially purchased it, my taxes were $2 ,400. When I sold it 17 years later, it was almost $7 ,000. And then I also ended up selling it 17 years later for $40 ,000 less than I purchased for it. I mean, tell me a scenario where you own a property for 17 years and you're selling it at a loss. I mean, it just doesn't... Anyway, a million reasons why. But mostly, I didn't have anyone looking out for my best interest in what mattered for me. So when I decided to get into real estate some years later, I felt very strongly about how important it is to educate my home buyers, particularly first time buyers. I feel very strongly. Also for me, again, I know plenty of agents do it. I don't do dual agency. That's where you're kind of one agent. Yeah, go ahead and explain that. Representing both the buyer and seller.

In the same transaction for me, I never felt comfortable doing that. I always want it to be very clear who I'm representing, who I'm negotiating on behalf. So I'm a very principled person, very kind of black and white. And I really, I'm looking out for my buyer's best interest. And so that is one thing. So when we're talking about this, you know, I mean, cause one of the pieces of this litigation is that sellers, so this is starting this summer, this is going to be implemented.

Rebecca Green (04:28.526)
That sellers will no longer be able to include the buyer's agent compensation in a transaction. Now that's... In the RMLS. In the RMLS. They're not allowed to actually advertise it. 

Kim Borcherding
Advertise it. That's correct. Exactly. So if you're not advertising it, then buyer's agents need to have a buyer's brokers agreement and that buyer potentially might need to pay that commission or it's negotiated in transactions a few different ways you can handle it. But in some scenarios, buyers will likely not have representation because they don't know any better, they can't afford it, lots of reasons. And so for me, like, they need representation because, again, what if a scenario where you have a seller who's savvy, you have a seller who has, I mean, a million things, and now you're buying an asset which is likely probably one of the biggest purchases of your life, and you don't have expert guidance talking to you about, I mean, gosh, all the things you need to know, inspections, condition of the property, contracts.

I mean, all these things, there's so many complexities to it. So that is my concern, is that buyers are not going to be educated enough to do it really well. And they'll get themselves kind of tangled up in a mess and maybe make a poor decision that will greatly impact them, like what happened to me in my scenario. So I feel very strongly. 

Rebecca Green
Yeah, and I think what you're touching on is that the way the settlement reads, a buyer,
has to be in contract with an agent. And in those contracts that we now have to sign with all of our buyers, which I've actually used for many years, I think those are great. In those contracts, the buyer is signing that if a commission cannot be negotiated or isn't offered, they'd be responsible for it. What is problematic about that is it's a barrier for entry for a lot of buyers that are strapped just to come up with the down payment. So I hope that from a broker's perspective,

There's a lot of education going on about how we can actually help a buyer and how negotiating the commission into the sales agreement so that it's not an out -of -pocket expense for them is still possible. Because I think that's what you're tapping into. The fear that buyers might have, and now they're trying to navigate those waters on their own, I'm sorry. 

Rebecca Green (06:48.846)
I don't think that's good for the consumer in any way. I don't even think it's good for the seller to have an unrepresented, unknowledgeable buyer on the other end of their transaction. 

No way. I mean, that sounds like a... That's problematic because it increases their liability. Absolutely. Yeah. And with that, again, many scenarios where particularly, I'd say, I mean, affordability is just going through the roof and actually owning a home and pretty much like is becoming unaffordable. So again, thinking about if you had to pay out of pocket for a buyer's agent, it might not be feasible. And for me, I am just a big advocate of people buying real estate.

Investing in themselves, building long -term wealth and stability for themselves and their family. So yeah, like a lot of us, I don't think it's gonna be good for the consumer. But I do like the transparency and that's something that we could have done better for a long time without a doubt. And I think when I look at the entire settlement, that's maybe the one part of it that, well actually not even the settlement, the lawsuit in general.

I look at the National Association of Realtors as a club that we've been forced to join for all these years. I started selling real estate 30 plus years ago, 32 years ago. 

Kim Borcherding
Which I always think you don't look old enough. Okay, thank you. 

Rebecca Green
All of our properties were in a book, and sometimes they were well sold, long sold before the book even came out. So you were really working the streets to find a property for your buyer at that time. The NAR, definitely pulled the multiple listing services together nationally. And that has been a great repository of data. So everyone has access to properties, right? Everyone has access to available homes and also good data about things, recent sales and trends and all of that. As technology has increased though, there is like an old guard that I believe has created some of the issues that we're facing right now. And as real estate agents, we were forced to pay into this club, the NAR, in order to gain access to listings in our local market. So I really struggled. I've struggled with that for a lot of years. And I think the positive that's going to come out of this is that that will no longer be the case. I do believe firmly in advocacy, but I don't think

Rebecca Green (09:05.934)
I can't get on board with how the National Association of Realtors has managed money and managed agency. You touched on agency. And I don't like how they've managed commission and data sharing. So, you know, I struggle with that without a doubt. And I think, you know, it's going to put front and center. The cream will rise to the top so quickly in this situation. And I think that's a positive. 

There's such a low barrier of entry for brokers. I think consumers deserve better. Good brokers have always been transparent about how commissions are paid and very transparent about who's making what. I don't see that changing in any way. But I do think buyers deserve better representation. And they've not gotten it because there has been such a low barrier to entry. I hope that changes. Yeah, absolutely. I mean, that's something I think about. You know, I do think that would be one of the side effects of this, is that.

Again, great agents, like in my, for me, I'm always like, there's always opportunity every scenario. And anytime there's disruption, I'm always like, where is the opportunity? And so in this case, great agents, I think there's opportunity, man, because I do think if you were an average or below average agent who wasn't serious, you know, this was a part -time thing, or you didn't take it seriously, you likely, you know, are not gonna have the same opportunity as you would before. But if you're a great agent, this is an opportunity for you to actually potentially take market share. Because for me, I buy investment properties in other states, man, I get the best agent I can, and I am happy to pay them because their skills and their knowledge and their experience is tremendous and invaluable to me. When I'm talking about investing in an asset that is going to build wealth and build long -term wealth for me and my family, like, that is right, and I want the best agent I can. And so...

I think great agents are incredible, and they work really hard, and they earn their commissions, and I'm happy to pay it. But again, if you're an agent that was kind of so -so, you know, there might be need for concern. So I do think great agents, but I also think, you know, we all need to think of it differently, which is great. Like for, you know, this industry has, you know, we could love. 

Rebecca Green (11:27.63)
Yeah, for a lot of years and a lot of, well, a lot of transactions, people are choosing, have historically, not historically, but in some situations, people are choosing their buyer broker based on it being their neighbor or their nanny's mother or their best friend's friend of a friend. And I appreciate the relationship component of real estate very much, but the transactional component is so, so important. And I do see all of this change. It will be...the beginning of people really looking at their agents for their abilities to manage the transaction, negotiate harder, manage the process, understand the liabilities. So I think the transactional element of each deal is going to become more front and center than just the relationship component. Just like your example, I'm not saying that everyone you have a relationship with is a bad broker, but you had a relationship with somebody, and she lacked the skills and it really affected you. I've seen that play out in the modern-day real estate on a number of occasions. So I do believe that, like you mentioned, the good agents need to really hone their skills. They really need to get good at presenting and communicating their value add to gain that business. And I look at it more like going to a financial planner or going to an attorney.

You know, you're not looking for somebody that's your friend. You're looking for somebody who's gonna get the job done and protect you in the best possible way. Yeah, absolutely. And let me ask you, so if you, what advice would you give to a broker or a real estate agent? Well, actually it's something to mention here in Oregon, we're brokers. Another real estate agent or salespeople. But what advice would you give to a real estate agent right now, thinking about like how to pivot, what to be think about? Like what would you tell them?

Yeah, great question. You know, I'm constantly amazed at how many brokers are not contractually astute. And that is problematic. I remember when I started selling real estate, I was 19 years old. I worked in Tampa, Florida. God bless Ordy Hendry. If anyone in Tampa, Florida is watching this, they'll know exactly who she is or who she was. Bless her. She was, I think, in her 60s, 60s or 70s maybe when I started selling real estate.

Rebecca Green (13:52.622)
She was iconic in the South Tampa market. I was in a deal, and my buyers wanted to withdraw, and they found another property. They wanted to buy something different, and I needed to find an out. And I went to Ordy and said, my client would like to withdraw. And she said, well, honey, I'm so sorry. In very proper Southern way, you know, Chanel suit and beautiful Ferragamo shoes and great lipstick and quaffed hair. She's like, that's not how it works.

And she said to me, you need to go find the clause in the contract. And I went back to the contract, read them, came back to her and said, what about this? And she said, no, honey, that's not it. Keep reading, keep reading. And sure enough, I read that contract probably 12 times and like a light bulb on version 13 or 35 maybe, I was like, that's it, that's the out. And it taught me so early in my career the importance of the contract.

Understanding a contract in and out is so powerful. And it's what buyers and sellers need from their agent because there are so many liabilities. Every line is a different liability for somebody. So really, like, hone your skills, know your contract. That should be a no -brainer. But beyond that, being able to speak to your process and being able to speak to how you manage the transaction. You know, what's your skill set in that arena? What are your systems? What are the processes?

And being able to communicate that because I think our interview process is gonna be a lot more stringent as we move forward. Absolutely, you know, I've been kind of telling agents this last week, I'm like, you need to be undeniable at your value. Like in no question, you know, that like absolutely from, again, from your con, from your systems, from your, again, every conversation, marketing, branding, everything, undeniable. So this is now the time to really dig in.

And actually really think about, do I want to dig in? Do I want this, have this as a business or is this just like a job? And so, yeah, so from whether you're a buyer or a seller that the consumer absolutely knows that you're the best choice for them. And also for me, I'm like, commissions have always been negotiable. Totally, I'm not just getting ready to say. I talk about the commission, it's negotiable, you know? And so that is the thing. And you negotiate your commission.

Rebecca Green (16:17.998)
Based on what you think you're worth. Totally. And talking, tying into that with the commissions, they have always been negotiable. And I think what the lawsuit has brought front and center is sellers might not have known that a portion of what they were paying their selling agent was paid to the other broker, right? And sellers have come and said, well, why would I pay a buyer's broker that doesn't even represent me? Why would I pay them anything? I know in our contracts, they've always been, it's always been super transparent what portion goes to the buyer's agent. So the thing I would say to sellers is, first of all, you can't believe everything you see in the media, because there's been a lot of false narratives. But what I'd say to sellers, and what I've already had conversations with sellers about is, ultimately, you're hiring us to market your home, to initially bring the buyer in, and then manage your transaction, right? If we could net you what you were looking to net, and we pay the buyer's agent a finder's fee, would it still make sense to you? And every seller I've talked to thus far has said, yeah, we don't care about that. Ultimately, if we get our price and we have the terms and you're representing our interests, the buyer's commission, if you wanna split what we've agreed to pay you with them, I haven't had a seller that's had a problem with it. So I hope that that continues. And I think those are the conversations good agents are gonna have.

I believe the media is trying to make it like it's going to be listing agent and buyer's agent pitted against each other, good brokers aren't gonna let that happen. Yep, absolutely. And I think it is also an ever-evolving situation. So most importantly, again, find your trusted source, really be well -informed. Buyers, sellers, agents, and everyone should be very well-informed about the situation and figure out how to pivot, navigate, and find the opportunity.

So Kim, what would your advice be for buyers, sellers, and brokers as they navigate maybe a new norm? Yeah, so definitely for buyers is mostly to get the best representation you can. Always. Whether you're paying for it or not, negotiating, get a great agent. They'll help you figure it out. They'll give you the guidance. They'll give you the education. They will tell you what you need to know and advocate on your behalf. Number one. Save you money. Yes. Like, do not go into this alone. So that's my advice. For my sellers, same.

Rebecca Green (18:43.15)
Find the best agent you can, really. Find the best agent you can to advise and guide you and trust their guidance on this scenario. Again, it's an ever -evolving situation and we want to be on top of it and finding more important. And I think for me, in my opinion, I will always pay for great service. It is invaluable. And you don't want to make a mistake when you are transacting real estate. And for agents and real estate brokers, really,

It might be time to examine your business, making sure that you are leveling up in every way possible. Again, from the contracts to your negotiation skills to your marketing to your branding. I mean, that's a conversation I'm having all the time right now with the agents because we are down, I mean, I think what we're down may be 52 % transactions compared to this time last year. So there's less deals. So you're going to need to do better than you did before to do the same amount of business. So I'm like, I'm looking at everything, you know, where you're marketing, your social media, I mean everything. So, and also for agents, making sure you're in a group of really intelligent, forward thinking peers, that is so important. So you are, you know, identifying any blind spots in your business and figuring out where the opportunity is and also ignoring some of the media, you know, the media really can make things confusing. So just find your trusted group, your trusted sources and figure it out and either like dig in and rise above this or maybe, you know, look at it. Yeah. No doubt. Curious as to what you think. Do you really think sellers will lean towards not wanting to pay a buyer broker commission? I'm just curious. I'm sure some sellers, but I'd say most sellers, for me, I have a really great client base. I have a really, my business built on referral. My clients trust me, my trends, but I cannot imagine any of my past clients who really value my opinion. What they say is, Kim, what do you think? I mean, that's what they say. And I go, well, if it were me, and I was telling this else, this is what I would do, and they would likely do that.

Rebecca Green (20:58.51)
Now, but again, for me also, I feel like educating them. Here's pros and cons, here's all the options, here's all the things for your consideration. I mean, even talking about that for when we do a listing contract and we're offering a buyer's agent commission. I talk to them, hey, here's kind of different choices, pros and cons of that. You choose what you want to offer for the buyer's agent commission. So it's always the thing. So for me, in my business, no, but I'm sure there's some sellers who, you know, they try to figure out, but there's also been

I mean, you could have always done for sale by owner. FSBO's always existed. There's always been discount brokers. You could have always... And there's a reason that people don't go that route. Don't go that route, man. Or they try to... You get what you pay for. And ultimately, that is true in almost any industry or anywhere. Shoes, cars, everything. Same thing. I'm sure if I was getting divorced, I can probably represent myself in court. But you know what?

When I've got my children in custody and assets involved, the last thing I'm going to do is represent myself in court. Yeah. You know? I mean, so the same thing with, you know, real estate. Yeah. So I'm going to get... Well, I like what you said because you do invest in other, in property in other states. Yes. And you're a great real estate agent. You've been licensed for a lot of years, but you seek out in other states the best broker to represent you because you know how important that is. Yes.

You know, as a licensed broker, even though it's not your state, you don't have to do that, right? But you see the value, because every market's different. The nuance of every market is different. I mean, Rebecca, I bought a property, a vacation house an hour away from my home. We were initially looking in Hood River. I could have represented myself in Hood River, but I chose not to because I wanted a local agent there who knew the market and could really advise me. So literally, I don't even...

Represent clients on the mountain or at the beach. I've always felt strongly You know, there's so much nuance in each market. So getting the agent who knows like I don't sell at the beach. I don't know I've come yeah I'm like, I don't really know anything about beach property makes sense. So yes, and I think to wrap it up, it really boils down to choices and advocacy, right? 

Rebecca Green (23:15.598)
Buyers and sellers have always had choices in who they work with. You know, the difference is, I think, bigger on the buyer side because now they have to navigate how the commission gets paid. But a good real estate broker is going to educate them, give them choices, and figure out what works best for them. Right? You got it.