Podcast Summary: Mortgage Marketing Radio

Episode: The Aftermath of NAR Rules—Agents' Reactions

Host: Geoff Zimpfer
Guest: James Wiggins, CEO of NextHome, real estate industry leader
Date: August 30, 2024

Episode Overview

This episode dives into the seismic changes in the real estate industry following the implementation of new NAR (National Association of Realtors) rules post-settlement on August 17, 2024. With guest James Wiggins—an executive deeply involved in brokerage, franchising, and proptech—Geoff Zimpfer explores the immediate industry responses, new agent practices, anticipated exoduses, and the larger impacts on buyers, sellers, and mortgage professionals.

Key Discussion Points & Insights

1. Introduction to James Wiggins & Industry Background

• Background: James is a third-generation real estate professional, co-founder of NextHome (now with 630 offices), and host of the Real Estate Insiders Unfiltered podcast.
  “My grandfather started his real estate company in San Luis Obispo in 1967…eventually became the vice president [at Realty World]…started NextHome in 2014, which is our current national franchise.” (01:27)

2. Immediate Impact of August 17th NAR Rule Changes

• Preparedness: Well-prepared organizations (like Wiggins’s NextHome) retrained their agents before the verdict, ensuring smooth adaptation.
  “We retrained [our agents] starting in September last year…when you’re in an organization understanding the changes and skating towards that, we’re prepared.” (03:21)
• Two Industry Camps Emerging:
  • Conformers: Accept the changes, no more cooperative compensation, focus on buyer rep agreements.
  • Resisters: Seek “workarounds,” risk lawsuits and significant financial loss. “We're seeing two camps...the camp of ‘this is the process,' and then people going, ‘Screw the lawyers, we don't care’...all of which will eventually get sued.” (03:40)
• Litigation Looms: Wiggins predicts ongoing, expensive lawsuits targeting non-compliance—with smaller companies at particular risk
  “I think that we're in the first inning for lawsuits…smaller companies, if they get sued, will bankrupt themselves.” (04:32)

3. Agent Exodus and Shifting Compensation

• Predicted 20–40% Exodus:
  “Keeping in mind, we've already had some of that decline already…this decoupling of compensation is going to create the haves and have-nots.” (05:30)
• Survival Depends on Value Articulation: Agents who can demonstrate value will thrive; others, especially part-timers, will be squeezed out.
• Compensation Adjustments:
  • Expect 50–100 basis point drops in commission rates.
  • Exacerbates the separation between full-time and marginal practitioners.

4. Market Efficiency and Professionalization

• Long-Term Upsides: Wiggins sees potential for increased professionalism and efficiency, with technology playing a supporting—but not dominating—role.
• Short-Term Concerns: Industry will experience turbulence, “shady practices,” and confusion before normalization.
  “Long-term, yes. Short-term, I’m worried…there’s going to be a lot of really shady practices in the middle until people realize they need to start making this shift.” (06:32)

5. New Negotiation Dynamics for Sellers and Buyers

• Compensation as Part of the Offer: Rather than advertising compensation upfront, listing agents advise: “Seller will entertain any and all requests; put it in your offer.”
  “We’re teaching: just get the offers in—then we’ll respond. It’s all about net proceeds to the seller.” (10:30)
• Danger in Pre-offering Compensation: Publicizing compensation figures can lead to breach-of-fiduciary-duty claims from sellers. “You just literally screwed me out of whatever amount of money...now you’ve got another class action claim.” (12:31)
• Seller Mindset:
  “When you sell your house, you have equity…it’s found money…they all want to sell their house so they’re going to do what it takes to put a deal together.” (08:46)

6. Buyer’s Agent's Role in the New World

• Four Compensation Approaches:
  1. Buyer pays agent directly.
  2. Buyer requests seller to pay agent in offer.
  3. Seller provides concessions for buyer to pay agent/expenses.
  4. Collaborative negotiation leveraging lenders (LOs).
• Fiduciary Duty Emphasized:
  “Any buyer’s agent not doing that…you’re violating your fiduciary duty…you should leave the industry.” (17:06)
• Steering and Collusion Risks: Agents/brokerages creating policies/forms not to show listings without upfront comp are exposed to potential lawsuits for steering and collusion.
  “Brokers that…state they’re not going to be shown houses that don’t offer compensation…will get sued. That is literally where this is going.” (17:53)

7. Mortgage Professionals: New Opportunities for Collaboration

• Proactive Partnership:
  “Every one of our loan officers is…calling every agent…to talk about strategy on how to get your compensation covered, your buyers into a house.” (19:39)
• LOs Attending Buyer Consults: Adds credibility and complexity, demonstrating the team approach.
• Education is Key:
  “Every LO and agent should be doing sessions for the consumer—explaining the new world…buyers are only hearing what they see in the New York Times…we have to have such a louder voice.” (21:46)
• Opportunities for Events: Homebuyer (and agent) seminars need to adapt messaging to reality under new rules.

8. Elevating Buyer Agent Value Propositions

• New Tools (e.g., Raise): Software to track and illustrate everything agents do for buyers—time, calls, services, even closing reports.
• Treat Buyers Like Sellers: Offer robust presentations, value-add packages, and service tiers (concierge, remodel analysis, apps, vetted contractor lists, etc.).
  “Show them: here’s everything that’s going to happen, what I’m going to do…articulating your value very clearly, because nobody knows what the hell we do.” (26:28)
• Tiered Service Models: Differentiate service for repeat buyers, first-timers, high-net-worth—mirroring hospitality/service industries. “Take 10% of your comp and put it toward products and services for the buyer.” (30:36)
• Premium Services: There’s a market for higher-priced, full-service moving/concierge; never prejudge what buyers are willing to pay for convenience.

9. Business Models: Flat Fee and Discount Brokerages

• Limited Consumer Appetite: History suggests flat fee/discount models (Redfin, Purplebricks, Help-U-Sell) have limited traction.
  “Most Americans…prefer full service. They like a discount price but want a full experience.” (34:17)
• Future Success Depends on Education: If agents educate buyers on creative comp solutions, full-service models will prevail; otherwise, discount models may find an opening.

10. NAR Leadership and Organizational Rift

• New CEO Appointment: Nikia Wright—admired for business acumen and willingness to listen but comes without industry roots.
  “She doesn’t pretend to understand our industry…she’s willing to listen.” (36:27)
• Risk of NAR Exodus: Major brokerages handling >$2B left out of settlement, causing rift. If NAR doesn't rebuild bridges, membership loss may weaken D.C. lobbying power, with downstream effects for real estate and lending professionals. “If NAR is weakened…there’s a very strong chance politicians…will write bills that will not be favorable for homeownership.” (37:49)

Notable Quotes & Memorable Moments

• On industry heads-in-the-sand:
  "This industry, as much as I love it…has a lot of people that just can't get out of their own way and you're going to see more lawsuits occur. The only people winning on this is the lawyers." — James Wiggins (04:23)

• On the need to articulate value:
  “If your price to work with you is zero, I can’t value you.” — Geoff Zimpfer (25:45)

• On agent compensation ‘collusion’ and legal pitfalls:
  “Brokers that…sign [forms] stating they’re not going to show houses without compensation in advance will get sued. That’s called steering…and collusion.” — James Wiggins (17:53)

• On full-service demand:
  “Americans love this idea of having somebody handle everything…They like a discount price but want a full experience.” — James Wiggins (34:17)

Important Timestamps

• Agent Training & Lawsuit Landscape: 03:21–05:23
• Predicted Exodus & Market Efficiency: 05:23–06:46
• Seller/Buyer Negotiation Strategies: 10:30–14:13
• Buyer’s Agent New Role & Scripts: 15:24–17:23
• Collusion/Steering Dangers: 17:53–18:40
• Mortgage Pro Collaboration: 19:18–22:30
• Value Proposition/Buyer Presentation Innovations: 25:45–30:36
• Service Tiers & Consumer Preferences: 32:28–34:17
• New Business Models & Discount Brokerages: 33:33–35:09
• NAR Leadership, Risk of Exodus, & Political Clout: 36:09–37:49

Takeaways for Mortgage/Real Estate Pros

• Proactive retraining and clarity in value prop are non-negotiable.
• Mortgage professionals have enormous opportunity to step up education and partnership roles.
• Consumer experience—convenience, transparency, and full-service—is king.
• Agents/brokers: Avoid formulating or enforcing “steering” practices or collusion on compensation displays.
• Leadership and collaboration within the industry are more critical than ever to survival and relevance under new rules.

For further details, check the linked resources, podcasts, and tools mentioned throughout the episode.