Loading summary
Transcript85 lines
- [00:00]
A
James, welcome to the show.
- [00:02]
B
Thanks for having me. Super excited to discuss all things non existent in residential real estate lawsuits.
- [00:09]
A
So what do you want to talk about, man? Want to talk about music? How about this? Let's talk about. You grew up in Slo, right?
- [00:14]
B
I did. I was born and raised in San Luis Obispo, California. I think was just voted in one of the top 10 cities to, to live in the United States. Saw in a magazine recently called Slow Town. But yeah, I was born and raised.
- [00:25]
A
There, so I know the area well. My son is in his third year at Cal Poly.
- [00:30]
B
Mechanical engineering is Go Mustangs. It is the school for engineering, it's agriculture and a school for having the greatest bars downtown and a great nightlife.
- [00:43]
A
So sure, I wish I had my, I got a Frog and Peach shirt. I wish I had got it just for the show.
- [00:48]
B
Great, great pub to go have a beer at. Yeah.
- [00:51]
A
And he, he's been in a band and they played at Frog and Peach and a bunch of venues down there.
- [00:56]
B
So I, you know, I was there. I'm 44 and I grew up in San Luis my whole life. So I saw San Luis Obispo downtown transition from some of the ball bars to some of the bars that we are now. So it's, it's, it's evolved a lot. Yeah, for sure.
- [01:09]
A
That's cool. Yeah, I always love to find when people are like, from there, know their, you know, that, know slow, know the whole community. It's a very unique, it's very cool vibe there.
- [01:18]
B
It is. Yeah, I dig it.
- [01:20]
A
I dig it. But. All right, so we're not here to talk about that. Who is James Wiggins? What's, what's he all about? What do you want to tell the listeners who might not be familiar with who you are?
- [01:28]
B
I mean, you know, I hate talking about myself, but third generation in residential real estate. My grandfather started his real estate company in San luis Obispo in 1967. Ironically, both my parents were brokers, my grandparents were brokers. So I worked in that side of the business, worked in prop tech, started and sold a couple software companies in residential real estate and then got involved in franchising in 2006 for a company called Realty World. Eventually became the vice president there and then my business partner today from Next Home. And I bought that company in, in 2014. We ran that franchise here in NorCal with about 400 offices across Northern California market. And then we started next home in 2014, which is our current national franchise. And that after about a 10 year run is about 630 locations across the U.S. we do. The company does a lot of business, over 30,000 deals worth over 12 billion in volume annually. So it's not a small business. It's been a fun ride and now we're in the thick of all the change going on. So.
- [02:32]
A
Okay, thank you for that. And we're going to put links to everything we talked about in the show notes. As a matter of fact, you also are co host of a podcast, right? Real Estate Insiders Unfiltered, which I've been listening to. And you have some, you have access to high level people such as the current CEO of the nar other folks. So anybody who's listening, mostly loan officers listening to this, first of all, share this conversation with your real estate agents. By the way, this is a great way to get some engagement and conversations with agents. Please also check the links in the show notes. Okay, so we're five days in to this August 17th n settlement thing kicking into official gear. You've, you've got obviously a very strong pulse on the real estate industry. You've got thousands of agents. Do you have a report card yet from the streets on how this has been going?
- [03:21]
B
I mean, I'll put it this way, it's not, it's, it's all things not unexpected. Um, you know, the companies that were prepared and had been really ahead of this, like my 6,000 agents, don't, they're all very clear on what the rules are. We retrained them before the verdict even happened in October. We retrained them starting in September last year. So, you know, when, if you were in, if you were in an organization that was understanding the changes and wasn't fighting it and just kind of going, this is where the puck's going to be, we got to skate towards that. Um, we're, we're prepared. I can't say that about everybody else. Um, there's, you know, there's a lot of people who waited till the last minute, don't understand the rules, don't agree with the settlement, don't agree with the terms, want to fight it. And so we certainly are seeing, you know, two camps. The camp of this is the process, this is how we communicate. We're not doing cooperative compensation any further. And this is the direction we're going to go. And then you're seeing people go, screw the lawyers, we don't care. And we're going to continue to do things the way we have or try to find what we're calling workarounds all of which those people will eventually get sued. And there's been two interviews done by the main, the plaintiff's lawyers over the past few days on Inman News. Michael Catchmark and Douglas Miller, who was behind the Morrell case out of Illinois, who have put in no, under no uncertain terms their intentions of making an example out of additional organizations that are not following it or are trying to do workarounds. And I, look, I think that we're in the first inning for lawsuits. This industry, as much as I love it with a passion, you know, has a lot of people that just can't get out of their own way and you're going to see more lawsuits occur. And unfortunately these lawsuits are going to be very expensive because, you know, I am a named defendant in one of these cases and I can tell you the legal bills are massive. The only people winning on this is the lawyers, of course. And unfortunately smaller companies, if they get sued will bankrupt themselves. They won't have the funds to defend it.
- [05:23]
A
So I heard a term, it might have been you who said this. 20 to 40% exodus.
- [05:29]
B
Yeah.
- [05:30]
A
Real estate population.
- [05:31]
B
Yeah, yeah, yeah. I think it's, it's somewhere in that number. Keeping in mind we've already had some of that decline already over the past 12 months, but you're going to see it really go into full effect here because this decoupling of compensation is going to, it's going to create the haves and have nots. The agents that know what they're doing and can articulate value are going to do just fine. Agents that don't are in it part time are going to have a harder time with it. They'll see commission rates or compensation rates drop. I'm estimating anywhere between 50 to 100 basis points. And then you'll start to see some pretty significant exodus from the business.
- [06:05]
A
Do you think you have a strong tech understanding and market efficiencies and you know, there's, there's some, some narratives around, you know, the market will always find the most efficient way, I guess if you want to kind of use that angle. Do you think this is just was a matter of time that this was going to happen and this will bring additional, call it efficiencies, professionalism, whatever, you know what I mean, to the industry?
- [06:33]
B
Long term, yes. Short term, I'm worried in the short term, yeah, I don't think it's going to be smooth. I, you know, just, there's going back to even just cooperative compensation. You know, exp is out there said they're not doing any further. We're not doing any further. And so there's a lot of companies that are moving to this camp of we're not going to do things the old way. And there's a lot of companies that don't want to do that. And so I think you're going to see a lot of really shady practices somewhere in the middle of all that for a bit until people realize that they need to start making this shift. And I do have some anecdotes just in general. I think that people, I think the lawyers and everybody who's trying to make these changes don't understand the psychology of buyers and sellers. They don't want to be unrepresented. It's an infrequent, complicated transaction, and they are wanting to sell and buy a house. And what I mean by that is the seller is interested in selling their home, whatever it's going to take to do that. And this is a part that I think is really interesting. We're in the, you know, not arguably right now, based upon the past few years, not the greatest rate environment. You know, we're used to much lower interest rates. If you go back in time, we all know this is actually isn't that bad, but that's not the point. And so the people that have been selling their houses over the past, you know, 2022 and 2023 and so far this year have been having to sell their houses because of life events like just life, kids, job transfer, whatever it is. And so we've been around 4 million units annually. Those people want to sell their house. So my point behind this is they're going to continue to do what it takes to make that happen. And if it requires the seller to pay the buyer's agents compensation, because we all know who are listening to this, the buyer cannot afford more stuff out of POC pocket. Right. They're gonna do it. And the anecdote is this. On my podcast, we have a one coming out next week. It'll be a very controversial podcast I'm trying to get canceled, where we. We brought a broker on who stopped offering compensation to the buyer's agent November last year.
- [08:45]
A
Yeah. Wow. Early bird.
- [08:47]
B
Yeah. Right after the verdict, he decided to do it, and we brought him on to share his story. And he did seven listings since then. All of them, he offered zero. But he stated the seller's willing to entertain any and all requests. Just put it in your offer, which is what we've been teaching. And I can tell you in every single one of those scenarios, where the buyer needed the buyer, the seller to pay the buyer's agent's fee, they did and everybody got paid because the seller, the psychology is when you sell your house, you have equity, but it's kind of found money like you didn't have really access to it. Now you do. And they all want to sell their house so they're going to do what it takes to put a deal together. So I'm not in this camp of you know, this is going to go the rate of the route of AI is going to do this whole thing. I think that's nobody wants to AI the sale of their home. It's way too complicated and frequent to do that. Do I think technology will shift things? Sure, in time. But this is still extraordinarily stressful, emotional, paperwork intensive and relationship based. Even on the loan side, like I. It's, it's still people want to sit down and talk with somebody and figure out whether making the right decision, etc. So short term I think you're going to see some of this, you're going to see things somewhat stay status quo before it changes.
- [10:01]
A
So like any change, right. There's the pendulum that swings. What then back to this whole, you know, we're not doing the cooperative competency, we're not advertising, are we co oping on compensation? Submit all offers, what have you and speak to what you're comfortable around or not. But you know, what I'm seeing is certain camps provide training around advising the seller on the pluses and minuses of offering buyer compensation. Are you endorsing that as well?
- [10:30]
B
100%. And it's a very simple conversation. So this is to me, they're only the only I'm going to be controversial like I normally am. The only reason a seller in this new world should be offering compensation in advance of an offer is if it's a buyer's market where you've got just a couple buyers, lots of houses and you're going to try and incentivize a buyer to buy your home over another. Here's the part that's really controversial. This is what'll get everybody thinking. So effective August 17, mandatory buyer rep agreement before you show a property, which means that every agent's going to sit down with a buyer, have a conversation about their services, what they're doing, the products, all of the stuff, including comp and the buyer and the buyer's agent will agree to those terms. There's no scenario in this new world where those rates don't vary significantly. You know, Inexperienced agents are going to charge a lot less to get a deal done. Experienced agents are going to charge a lot more. So here's the rep. In a world where that now exists, the selling agent, the listing agent knows that rate is going to vary and you have a fiduciary responsibility to your seller, which is going to be to get the highest net price possible. Why would you ever offer or tell a buyer what you're willing to do in advance of an offer? Because hypothetically speaking, let's say an agent was paid X and the listing age, the seller was willing to offer double that. If you, if the buyer's agent was only going to be paid half of that amount based upon the agreement and you advertise something double, you just told what, told the buyer what to put in the offer, and now you just left money on the table. So the next claim that I think you're going to see, and my lawyers have confirmed this, is you might see fiduciary breach claims coming from sellers saying, why would you advertise this price? Why would you advertise this rate when the buyer's agent was only needed X to be paid? You just literally screwed me out of whatever amount of money. And that's an easy claim to show because you simply, you're just simply subpoenaing the records of the deal. You can see what the buyer's agent was paid, what you advertised, there's your damages, and voila, you've got another class action claim. So what we're teaching Jeff is really important. We're telling the seller this. So, Mr. And Mrs. Seller, here's the deal. What's most important to you? And they go the net. Great. We figured that would be your answer. So what we're going to tell you is this. We're going to say, seller is willing to entertain any and all requests, put it in your offer. The listing or this buying agent calls. What are you offering? Seller is willing to entertain any and all requests put in your offer. So you're not offering compensation? No, we're not saying that. We're saying we're willing to entertain any request that your buyer has just put it in the offer. And so we take the offers in, we look at those offers, we come up with a strategy to respond, counter all of them, accept whatever you want to do. But the point here is, even when the seller is saying, I don't want to offer any compensation to the buyer's agent, we go, Mr. And Mrs. Seller, you're entitled to do that. To be clear and we're not suggesting otherwise, but I'm going to actually suggest that you don't do any of that. Let us just get the offers in, then we'll respond. Because Mr. And Mrs. Seller, this is most important. You said net, correct? And they're going to go, yes. By the way, this is real world examples of what's happening. You may get two offers. One of them is all cash at asking price with the buyer saying they'll pay their buyer's agent's fee and you're going, woo hoo, great, I got what I wanted. But what if a second offer came in $100,000 over, but asked you to pay the buyer's agent's fee through the closing process, but it netted you $50,000 more? Which one's actually more? A better offer. And they go, oh, I hadn't thought about it that way. So don't leave all that stuff off the table. We're just going to bring offers in and then figure out our strategy forward. Easy conversation.
- [14:13]
A
That also positions the listing agent to provide more negotiation, more value to the transaction.
- [14:19]
B
You know, the whole point, the thing to me about what I'm trying to educate the industry on this. They just are not there yet. They'll get there, it doesn't matter. In the world of negotiation, it means nothing. I don't give a shit if the seller says sold as is. Okay, my buyer wants the couch. So like it's going to get put in the offer and you as a seller can choose whether you want to accept it or not. Like it just. The whole point is there's a house for sale, there's a buyer who wants to write an offer. The end. That's just the whole, the whole conversation is going to boil down to that. We just are going to get. There's going to be a lot of ways to get to that point.
- [14:59]
A
So let's, let's go devil's advocate here for a minute because I think you and I have a mutual acquaintance with Christy Jenks over there. And this was a response to that scenario you basically just laid out was submit all offers. All offers will entertain. And of course there's an agent who responded. There are buyers already stating that they will not visit a home that's not being offered comp. Blah, blah, blah, blah.
- [15:25]
B
Right.
- [15:25]
A
So you, I don't think that's a strategy to work for them. So we need to know ahead of time whether there's comp. By the seller or not. How do you respond to that?
- [15:31]
B
The buyer's agent's not Doing their job correctly.
- [15:34]
A
Okay.
- [15:35]
B
It's really simple. So, Mr. And Mrs. Buyer, so I'm going to give you the other script. So in this new decoupled world, this is my fee, this is what we agreed to. This is my services, blah, blah, blah, blah, blah. Okay? We have a couple ways that we can do this for payment. You can pay it is one way to do it, or we can put that request in the offer as the second step. So we can ask the seller to pay my fee directly, or the third option is we can ask a seller for concessions that go to you, and then you can turn around and pay either my fee and put it towards other closing costs. Whatever it is. Mr. And Mrs. Buyer, you need to understand that in this new world, every house is for sale. And it's my job to get you into that property. So any house you want to look at, we're going to look at it, we're going to tour it, we're going to write an offer on it, and then I'm going to negotiate with the listing agent on how to make this all work for you. And if for any reason they won't do it and you can't pay it, well, then we'll have to adjust at that point in time. But every house is for sale. I will show it to you. We will write an offer. We will negotiate. And here's the thing. I guarantee you, sellers are wanting to sell their house. So we'll try to figure out a strategy to do that. And then I'll add the fourth piece. We're going to work with our loan officer, so all the loan officers listening on the strategy on how to do all of this stuff too, so that we can write it, write a contract that is going to win out on others. We'll come up with a strategy together so we can make this happen. That's the pitch. That's it. There is nothing else to it other than that. And so any buyer's agent that is not doing that, to be clear, because I hope want them to hear this, you are violating your fiduciary duty. You are not following what you should be doing, and you should leave the industry. Because if you can't do your job correctly, then you don't belong representing buyers in this market. It is that simple. It's just that simple.
- [17:24]
A
So see some tantrums happening across the country?
- [17:27]
B
It is. And it's. And look, I mean, I'll share with you. I saw some stuff today where I'm just like, they're creating forms which I'M going to tell you right now because I have deep connections, as you are aware, to a lot of the people in the industry, including the plaintiffs in the Department of Justice, brokers that are creating forms and having buyers sign them that state they're not going to be shown houses that don't offer compensation. Advance will get sued is not steering.
- [17:54]
A
Really.
- [17:54]
B
That's called steering. And then when they're doing it together with other companies, it's called collusion. And so I found out about three of them doing it today in a market that they're colluding to make this so it keeps things standardized. Every single one of those brokerages will get sued and they will spend $100,000 a month in legal fees defending themselves or if they can't afford it, will bankrupt their. That is literally where this is going to go. In the two comments that were done by Douglas Miller and Michael Catch Mark over the past two days was exactly that. They are going to target people and they will make an example out of people that are doing it.
- [18:28]
A
Yeah, I wasn't a Catch Mark who said I'll be watching.
- [18:31]
B
They are. They both are. Yeah. Douglas Miller was involved in the. In behind the Scenes on morale. And then Catch Mark was obviously Burnett and Sitzer. They're all collaborating together because it's all one big class at this point.
- [18:41]
A
But, well, okay, so you mentioned the loan officers and seeing as that's who's mostly listening to this. But if you did receive this podcast by way of a loan officer or your real estate agent, make sure you thank them and ask them more about this strategy we're going to talk about right now, which is what happens when the buyer can't pay the agent out of pocket. What are the options and say the seller isn't paying. This is where financing. Right. Creatively comes in. And as I'm sure you well know, James and others that are listening, you can finance that into the loan or finance that into the price. Do you have any opinions on that.
- [19:19]
B
Other than what you just said? Those are the options. I think that I'll go deeper a little bit in that. I believe for every loan officer listening here, you have the greatest opportunity of your career. So just for clarity, we have a mortgage company as well. And I can tell you what every one of our loan officers is doing. We told them, get your butt on the phone, call every single agent you've ever worked with, ask them to sit down so that you can talk about strategy on how to get your compensation covered. Your buyers into a house, both Strategy when you're asking for, excuse me, Concessions when you're asking to have the seller pay it directly. Like, this is the time where you create a much tighter bond between you and your agent. And I will go as far as saying, I think it's smart that the loan officer even attends some of these buyer consults and sits down and articulates value on what they do. So I love this idea of an agent going, here's the 150 things I'm going to do in a real estate transaction over the next 90 days. And this is my job, by the way. This is Jeff, my loan officer. He's a badass. And these are the extra 230 things we got to get right to make sure that your loan gets approved, qualified, gets through underwriting. We make all this stuff come together. So we're going to jointly talk about what this experience looks like. Two things occur there. One is credibility. Two, complexity. We want the consumer to understand this isn't an easy thing to do, and three, that they feel like they have a team working for them. I think that's a huge thing. I'll go a step further than that. I think it's important that loan officers are talking with listing agents, having them understand the different ways to receive offers and how they can make sure the seller understands that it's not just about whether you're paying compensation or not. There are ways that you can get a higher net by having offers structured in such a fashion to do that. That example I gave you of, you know, ab. So to me, this is a. This is a huge opportunity for the industry to collaborate more closely and educate. I would tell you, I think there's so much fricking confusion out there. Every lo and agent should be doing sessions for the consumer, like, explaining the new world. What does all this mean? What does it mean to you? No, you don't actually have to come out of pocket to pay your. Your buyer's agent that all the stuff the press and all the stupid mainstream media continues to put out is not accurate. We all know it's not accurate, but buyers are only hearing what they see in the New York Times or Wall Street Journal or whatever. And we have to have such a louder voice about what is actually happening. Boots on the ground, which is a huge opportunity to. To get, you know, new business. But we're not like, no one's doing that. I don't see any of these webinars or seminars going on, on. On, you know, social media right now. At least I'm not Getting asked to attend them. So I think there's a tremendous amount of opportunity to collaborate with this.
- [22:16]
A
Agreed. I just wrote that down because, as you may recall, that's a lot of what I do is help originators put on events and classes.
- [22:22]
B
So.
- [22:22]
A
Yeah, just jotted that one down. Do the cause, everyone clarity on. Yeah, the home buyer seminar. But how about in the new world, right, of home buying all that stuff?
- [22:30]
B
I mean, every home buyer thinks what they're reading online. The stuff that all the mainstream media is putting out is like, okay, buyers have to pay for their agent. Now, that's not. That's not accurate at all.
- [22:41]
A
Like, yeah, and I love the fact that you took the listing agent angle, which I've been preaching for years. I used to go after listing agents when I was originating and, you know, for multiple reasons, but they want to make the listing as attractive as possible. They know they're going to have buyers who can't pay out of pocket. So, loan officer, you can work with your listing agent to structure finance, flyers, scenarios, whatever. But the cool videos together, that shows, hey, here's your four options for getting in this house, right under the new rules.
- [23:07]
B
Also, I would consider doing more open house houses than you've done before. We're past Covid. We're all live still. Like, at least he's here. So, like, my point is just go, like, if you got opportunities to bring buyers in to your point, have those financing flyers give them options. Help them understand there are ways to do that. Another thing to add into this is you can throw on the webinar that you're going to do or what anybody else is going to do. The legal risk of being unrepresented in a transaction, which buyers are going to be thinking about this significantly, is massive. And one of the other talking points we do with sellers is to go look where you're going to see a couple things happen. Number one, you're going to see buyers asked to be dual, you know, dual agency. I'm a huge, huge. Like, I hate dual agency. I think it's an abomination for the industry. There's no scenario where somebody doesn't feel screwed in that situation. And so, you know, we're teaching we don't do dual agency here. I want my representations to you. I have a fiduciary to you specifically. That's why you hired me. But Mr. And Mrs. Seller, I also think it's incredibly important that we have the buyer represented by somebody who understands how to do this process. Because if we don't There's a much higher chance that this whole thing could end up in litigation. And that cost of litigation is going to be significantly higher than making sure that there was representation on the other side. I don't care if it's a lawyer. I don't care what, like the quality of the agent. I just want somebody on that other side with an EO policy to represent them. So there's the most sellers go, yeah, that makes sense. Like, you know, so there's, there's these multiple pieces to talk about with educating people on this, on this process, and we're just not having those discussions. The final thing I'll throw in E and O coverage. Going to be a big, big topic coming up because all the agents that are doing dual agency, you're going to see litigation increase, which I've talked to two NEO companies. I know this litigation will go up. E and O carriers will go, yeah, we're not doing that anymore. If you want to do dual agency, your coverage costs are going to double or triple. We all know how insurance works. And then eventually they'll just go, no, we're not going to cover anybody doing dual agency. And before you know it, all these companies are like, whoa, we can't get, you know, coverage. And so you can see what this next, like, massive problem coming. A lot of what needs to happen is setting proper policy now so that you're not dealing with these issues in six months to a year.
- [25:46]
A
Love that. Good notes there for everybody listening. What have you done then around coaching, training your agents, buyer side? I'm sure you do both, but obviously particularly on the buyer side because, you know, to use the old example of like, you know, what did somebody I was talking to Thousand Watt Consulting, and they said, you know, if, if, if your, if my price to work with you is zero, I can't value you. You know what I mean? Like, how do I value what you do? So I'm working a lot.
- [26:18]
B
Right.
- [26:18]
A
As a matter of fact, I have a slide deck here in front of me, which is for loan officers to teach agents about how to level up their buyer presentation, value proposition and all that stuff. What have you been doing with your people on that?
- [26:29]
B
So two things. Number one, you're, you know, I'm involved in the venture called Raise, which is this new prop tech company that is basically tracking. I'm going to simplify here. But it basically tracks everything a realtor does. All their phone calls are logged, their time, their mileage, you know, how long it takes them to write email, everything kind of Like a lawyer in concept, creates this collaborative, cool experience for the buyer to see everything. The realtor is going to do an amazing buyer presentation, laying out the 195 things they're going to do in the process. The app to collaborate, and then the closing report, which is just killer. So it's everything they did over the course of, you know, 60, 70 days, whatever the time frame is. The agents are taking those reports on their next buyer consult, going, here's the amount of work involved to work with, you know, to get. To get you into a home. And they're showing examples of that, very specific details. That's the first thing. Yeah, yeah. Articulating your value very clearly, because nobody knows what the hell we do. So now we're bringing to light all of this, all of these activities. The second thing, which is where we've moved, we've been training our people on this for a while, is you have to treat your buyer like a seller. And what that means is you don't go out on a listing presentation and just hand them the listing agreement. You do a consult, you talk to them. Here's my marketing is my advertising is what I do. This is the social media stuff, is how we're creating, you know, all. Just the whole list of stuff. Nobody does that on the buyer side, right? Like, nobody does that. And so we've created an entire new package for our agents to sit down with a buyer, do the consult, go through things with raise. Here's what you know, here's everything that's going to happen, what I'm going to do in the experience. And here's an example of the services I'm going to provide. So I'll just give a couple for context. So we cut a deal with a company called Kuba Casa. They do floor plans. And it sounds weird, but only 30% of listings have floor plans. It's ridiculous, but that's the number. And so as a service, we go, Mr. And Mrs. Buyer. Any house you look at that you're interested in potentially writing an offer on, let me know and I'll go out there and create a floor plan for you. And so they create the floor plan for the. For the buyer to see, like, what the house is. It's an experience of not having to go tour the home that'll do it for you ahead of time. And it's an extra service. They'll do a thing like we call a revive remodel. Here's what the current state of the home is. We think you could put 50,000 into this particular property. And the upside leg potential on it is an extra 250. We'll do a quote on that. Get like a whole process together on what we think the home could be with a certain amount of investment, because it is an investment. And so we want to tell them, here's where you're at, here's what you could do, here's the cost to do that, and here's what the upside, you know, potential might be. We give our buyers an app called front Door at the closing. It's this really cool app where it's like a handyman in your pocket. You have a problem. You can't forget to use the thermostat. Pull up front door. It's branded to the agent, and all of a sudden they can't contact front Door. It comes on video chat, and they'll show you how to use the nest thermostat. So we just. We're thinking about how do you create services to increase your value that you would. Same concepts on the list side, but on the buy side. And man, it just works. It's not. It's like buyers go, shit. Like, I. Makes complete sense. I love it. I love what you're doing. I'll pay you that. And then we have the conversation with them about, here's how my compensation works. If we can't get the seller to pay it and we can't get you a concession, then either you have to pay it, or we have to think about looking at another property or coming down in price. We can get more aggressive on the price when we're a little bit down in the price range. Like this. This just strategy. That's it. That's all it is.
- [30:02]
A
It reminds me of back in the day. I used to work with Walter Sanford out of Long Beach.
- [30:05]
B
Oh, man. That's a name I haven't heard.
- [30:07]
A
No. Walter.
- [30:07]
B
Yeah, with the little dynamite things. Yeah, yeah.
- [30:13]
A
Yes, I did that as an lo. I was sending those to realtors also. Funny. Yeah. Walter was an amazing marketer, but he was like, I think, early on. And of course, a lot of people use this or used to, I guess. It seems like it's gone away, though. But like that concierge service, right where. Here's a list of my. Like, but you've got the modern version, right? The front door, the cubicassa. But he had like a carpenter's builders, whatever.
- [30:36]
B
And we do the same thing. Here's our. Here's my Rolodex. Of people to work with. That's part of it as well, but we actually are putting services, like paid services into it. And I've told agents, look, you should be taking 10% of whatever compensation that you have that you're making should go back into products and services provided the buyer. And we also know this, so we're teaching to, you know, different levels of service. Yeah, this is my tears and there's. I don't, it sounds dirty and bad word but like it's not. Because if I bought a home before, right. And I've been through the process, I don't, I probably don't need as much of that hand holding. So to me that's like your, your tier one, your tier two is your first time home buyer who just needs to be held through the entire experience. And that's this level of service. And then there's the ritz Carlton Tier 3. And I love to use one of my business partners, one of the coolest people possibly is my co host on the podcast. I love him dearly and I would say this to his face. One of the laziest people I know as well, who, who's the guy that would pay a premium and did when he bought his house to have somebody pack all his shit, unpack all of his stuff, have the landscapers there, have the cleaning company there. Like he just wanted to be able to move and move in and didn't want to deal with anything else and paid a premium to do that. And I think there is a whole market for that too. So what we know for fact is that Americans are, we, we are in a world where it takes two incomes to make a living anymore for almost anybody in this country. 60% dual income households now and nobody wants to do this on their own. And we're also all about convenience and service. That's literally every survey you ever read is Americans want convenience. Think doordash. We pay just as much to have the food delivered as the food itself. And service create those experiences, people pay for it.
- [32:29]
A
Two quick things. One of the tiered surface reminds me of a story I heard years back, I forget it was a high level executive, I think at a tech firm. He was moving and talk about like he didn't want to be involved at all. He had photos taken of all his furniture and everything in the existing house so that the movers could put it in the new house and right exactly where he wanted it. And like two weeks later he moved in, just open door, boom, ready to go. I mean that's brilliant.
- [32:56]
B
Keith had, Keith had a special, a specific individual who came in to figure out how to. I don't even know what you call it. Feng shui the kitchen. So that all of your stuff is put away in a logical place. Right. Like pots and pans in this drawer. Because it makes. Are you right hand or you left hand, like. But that's my point. Somebody's willing to pay a premium for all that, right?
- [33:17]
A
Yeah, you shouldn't, you shouldn't like prejudge on what people are willing to pay for.
- [33:21]
B
Yeah.
- [33:21]
A
Speaking of that, this is the last point, then we'll wrap up. I know you're busy is. We're already seeing it. You know, the flat fee on the buyer side. What's your take on that? Do these new business models and how do you think those will play out in the market?
- [33:33]
B
It's going to come down to one thing. It's going to come down to how good of a job buyer's agents do in explaining to buyers how compensation will be paid. And what I mean by that is if the buyer thinks they have to come out of pocket every time, then I think you'll see these business models pick up. If the buyer's agents, you know, get their head out of their butt and like think about this a little bit and actually explain to the buyer that this isn't really something you have to do and we can probably get the seller to do it and have that conversation. Then I'll go back to the comment I just made and I can give you some statistics for this. So I think most Americans don't. They don't know. Most people don't prefer to work with what they perceive as a discount service. They want a full service experience.
- [34:17]
A
Yeah.
- [34:18]
B
Here's some examples of that. Redfin has been around for a long time, really, really struggled to take off. There's still a very small company in, you know, the north, the north, the Northwest. Most of the stuff is referred out across the US. Foxton's came over from the UK. Flat rate business model. I think it was like 3995 bankrupt within 18 months. Purple bricks, most recent one came over 2017. Bankrupt. Americans love this idea of having somebody handle everything for them and they're getting the full experience. They like a discount price, but they want a full experience. So it's going to end up with this one thing. If the industry does a good job of showing and explaining to a buyer, you can get full service and you're likely not going to have to come out of pocket on that, then I don't think those business models take off if they can't get that figured out, I think you'll see these things gain more market share.
- [35:10]
A
So makes me think whatever happened to.
- [35:11]
B
Help you sell 1976 is when they were founded and they're. They're a tiny, tiny player in the market. And you really thought, yeah, during the greatest real estate.
- [35:22]
A
Right.
- [35:22]
B
You know, uptick, people would have used them. And they just. People want what they are.
- [35:28]
A
Fizzbos.
- [35:29]
B
Such a small percentage still.7% last year, lowest in recorded history.
- [35:33]
A
Yeah. Yeah. And of course, as you know, the percentage of people using a Realtor has increased, not decreased over the years.
- [35:40]
B
It's because it's a complicated transaction. And attorneys, despite how much I don't like them because of all of this nonsense that they're doing, they've made it more complex. And people also realize that it's incredibly complex, paperwork intensive, risky transaction. And so that's. That's also driven that up. So that's the only time I'm going to thank lawyers for what they do. So, yeah, it's a. It's one of those things where it's. It is. It's all going to be. It's all going to rest on leadership in our industry and how they teach their people.
- [36:10]
A
Yeah, yeah. Which. Which, by the way, one quick question before I let you go. If I'm correct, did I read that they just appointed a permanent CEO to the nar?
- [36:18]
B
They did, yeah. Nikia. Right.
- [36:20]
A
We just had our permanent CEO. Like, isn't that anti. You know what I mean? Like, how do you know that's always going to be performing well?
- [36:27]
B
I mean, all I can say is through all the drama they had over there between Kenny Parcell's departure, you know, the former CEO Bob Goldberg departing, they brought Nikia right in, who's, you know, I interviewed her. If you guys want to check that out, it's on our podcast. We just did that interview last week. You know, she's very smart. She's very bright. She has a significant business background. She's not from real estate. But I also admire about her, she doesn't pretend to understand our industry. Like, she knows it all. She's. She's willing to listen. They had her in as an interim while they were on a CEO search, but then they've decided to keep her on for. As a, you know, instead of interim, it's now permanent. I don't know what that contract length is. That was not disclosed. At least I was not told. So we've got, you know, she's in the seat and certainly we're wishing her the best, and I know that we're going to try and help her as along the way to help get this industry back on the right track.
- [37:19]
A
So I promised last question, but I lied then. Do you also see a mass exodus out of NAR itself? I know you guys, by the way, I listened to that podcast and we'll link it up in the show Notes. But it was a really great conversation about, you know, the value of NAR for members and advocacy and things like that. But do you see people bailing on narrative?
- [37:37]
B
I think NAR has some pretty significant issues it needs to come to grips with, and I don't believe that they see it yet. I think there's a little bit of what I'm looking for. I don't know. We'll just say that they are not.
- [37:50]
A
Was that mutiny?
- [37:52]
B
Well, I was going to say that I think there's maybe a little bit of they're being a little naive to the amount of discourse towards NER right now. You have to remember that in the settlement, anybody who did more than $2 billion in volume was left out. And so all of those companies, mine included, got sued separately and had to do separate settlements and negotiations on that. And so the problem with what they did, and I know they had to do it, I'm not 100% in agreement they had to do it that way. But let's just go with the fact that's what it is, is that, you know, 70% to 80% of the realtor members work for one of those hundred companies. Right. And so there's a lot of discourse there. If NER was being incredibly strategic right now, they would be figuring out how to build a bridge back to those companies. And if they don't, then I do think you'll see a mass exodus from nar. And that will be a shame because to the comment you made, and we can wrap here, is it nar? What its greatest strength is, is its power in Washington, D.C. just like NBA. Like the whole, you know, getting the VA to make changes was because NBA and NAR were working. And they're a very strong force in D.C. politics. If NER is weakened in size or position, there's a very strong chance politicians, who we can all agree are for the most part completely useless, will write bills that will not be favorable for homeownership, and then it will affect all industries and the lending industry included. So it is a concern that if they lose their membership, they'll lose their power in dc. All right.
- [39:25]
A
Well, this has been a fantastic conversation. For those listening, please check the links in the show notes to all of James resources, Podcast company, new startup Raise R A Y S E James, thank you so much, man. I appreciate it.
- [39:38]
B
Of course, my friend. Thanks for having me on.
- [39:39]
A
You bet. Listeners, you know what to do. If you like this episode, there's a link to also leave us a review. So do that in the show notes and we'll see you on the next one.