A newly released episode of the Real Estate Insiders Unfiltered Podcast explores the future state of buyer and seller relationships in the housing market after the National Association of Realtors‘ (NAR) business practice changes take effect Aug. 17.
Co-hosts James Dwiggins and Keith Robinson chatted with industry expert Ed Zorn to address key questions that real estate agents may have in the wake of recent Department of Justice investigations targeting several organizations, including the California Association of Realtors.
Dwiggins and Robinson started the episode by diving into Zorn’s thoughts on the DOJ lawsuits. According to Zorn, the DOJ issued civil investigative demands, or CIDs, which allow the agency to request information about a specific topic from a company or organization that isn’t involved in active litigation. The DOJ is continuing an investigation started in 2019 regarding NAR’s commission practices, including its cooperative compensation model.
Following the commission policy changes at the multiple listing service (MLS) level, the DOJ now seeks to address the use of standardized forms designed by competing MLSs. Standardized forms can save consumers money on legal fees and other previously required elements. But there is a risk that offers of compensation could disappear.
“Forms that are standardized by the industry are fantastic and great for the consumer,“ Zorn said. “However, there’s a risk that the offers of compensation remain as will the criticisms and what caused the alleged conspiracy to continue through the forms mechanism.”
Buyer agents may inquire about compensation offers over the phone and potentially decline listings based on the seller’s offer, which essentially allows the agent to steer a buyer toward listings that offer more favorable compensation.
Dwiggins chimed in and asked if steering would be less of an issue without standardized forms. Zorn said that it would be harder to allege commission bias and would create less controversy about concessions if brokers made their own forms.
The discussion shifted into objection-handling scenarios in the new consumer-centered model created following the commission lawsuits. Zorn explained how he would approach a seller in the new market. When speaking with a seller, Zorn would share his services, experience and other common elements of a listing presentation.
To attract listing traffic, Zorn would tailor the presentation around three factors: market condition, potential buyers and the type of property being listed. For example, an entry-level home that could be attractive to Federal Housing Administration (FHA) borrowers might include concessions and other offerings to help first-time buyers cover expenses.
Next, Dwiggins asked about the value of concession data collected by an MLS, and whether a lack of data could hinder the appraisal process. A lack of concession data could potentially influence sellers to establish prices based solely on comparable market offerings. Zorn describes that risk as minimal and expresses the utility of concession data for agents in a particular market.
“If you want this consumer-centric approach to work, then I as both the listing agent and buyer’s agent need the data to know the components of that transaction so that I can give good advice to my seller and to my buyer on what kind of offer to make and how to approach and put a transaction together,” Zorn said.
Robinson also proposed another scenario where a listing agent receives a call from a buyer’s agent inquiring about compensation. Zorn stated that he would not offer or accept compensation from an agent. He would instead include a compensation percentage into the sale price to help the buyer get into the home.
The episode ended with a discussion on the importance of establishing a clear buyer representation agreement and advice for navigating buyer-agent relationships.