Real Talk Real Estate with David Greene: Episode Summary

Episode Title: The NAR Fallout: What Happened & Why | Episode 33
Release Date: January 21, 2025
Host: David Greene
Guest: Christian Bashelder

Introduction

In Episode 33 of Real Talk Real Estate with David Greene, titled "The NAR Fallout: What Happened & Why," David Greene and his partner, Christian Bashelder, delve into the significant upheaval within the real estate industry stemming from the National Association of Realtors (NAR) and the high-profile Sitzer Burnett case. Released on January 21, 2025, this episode provides listeners with a comprehensive breakdown of the events, their implications, and actionable insights for real estate professionals and homebuyers alike.

Understanding the Sitzer Burnett Case

Background of the Lawsuit

David begins by outlining the origins of the Sitzer Burnett case, highlighting how a group of lawyers initiated a class-action lawsuit against real estate brokers. The plaintiffs alleged that sellers were unfairly required to pay both the buyer's and their own agent's commissions when listing a house on the Multiple Listing Service (MLS).

David Greene [03:00]: "A bunch of greedy lawyers got together and they went to everyone that ever sold a house and they said, hey, do you think that you got ripped off when you sold your house?"

Dissecting the Allegations

The hosts emphasize that the lawsuit was built on the premise that sellers were forced to compensate buyer's agents to list their properties on the MLS, a claim they argue misrepresents the actual practices dictated by NAR guidelines.

David Greene [03:30]: "In reality, none of these sellers were forced to pay a buyer's agent commission. They were forced to pay some form of compensation to a buyer's agent if they wanted to list their house in the MLS."

Impact on Real Estate Agents

David and Christian express their frustrations with the average performance of real estate agents, sharing personal anecdotes to illustrate their point.

David Greene [04:50]: "The bar is too low. Most of them give bare minimum effort. And most importantly, you don't know who's good or who's bad until you get into the relationship with them."

Key Events and Legal Proceedings

Initial Verdict and Appeal

The episode outlines the initial jury verdict against NAR and major brokerages, resulting in a staggering $1.78 billion penalty. NAR Home Services of America and Keller Williams appealed the decision, arguing that the evidence was both irrelevant and prejudicial.

David Greene [05:30]: "All right, Number one, the Sitzer and Burnett verdict is appealed after losing a jury trial and being penalized $1.78 billion."

Settlements and Financial Consequences

Keller Williams later settled separately, contributing to NAR's cumulative payout. The hosts calculate the enormity of the financial implications, emphasizing the rarity and unfathomable nature of such sums.

Christian Bashelder [07:22]: "A billion is a thousand millions. That's a lot, lot of millions."

NAR's Shift in Policy

In March, NAR pivoted from appealing to settling the case for $418 million. This settlement imposed new restrictions on MLS listings, prohibiting public displays of buyer's agent compensation and requiring written agreements between Realtors and their clients.

David Greene [08:03]: "NAR prohibited offers of compensation being published on the MLS and mandated the use of written agreements between Realtors and their clients."

Implications for the Real Estate Market

Changes to MLS Listings

The new MLS policies mean that agents can no longer display the compensation offered to buyer's agents publicly. This shift necessitates direct communication between sellers and agents, potentially increasing friction and inefficiency in transactions.

David Greene [09:04]: "If you put a listing in the MLS, you can no longer say on the MLS how much the seller is paying the buyer's agent. You have to call us, and on the phone, we tell you."

Government Sponsored Enterprises (GSEs) Response

Fannie Mae and Freddie Mac clarified that they would allow buyer's fees to remain within regional norms, ensuring that these changes wouldn't overly burden borrowers.

Christian Bashelder [10:43]: "As long as it's not an unrealistic amount of compensation to your agent, you know, we'll allow for the borrowers to pay their agents and not count that against all of the loan thresholds."

Further Legal Developments

The legal battle continued with NAR seeking a Supreme Court review and facing additional rulings against them. By December, all appeals were dismissed, solidifying the settlement and altering long-standing real estate practices.

David Greene [17:06]: "NAR appealed several times. They did win at a district court level, but then they lost a 2 to 1 appellate court decision along with subsequent efforts for a rehearing."

Hosts' Perspectives and Critiques

Criticism of the Legal Case

Both hosts criticize the lawsuit as a "smoke and mirrors" tactic, suggesting that it was more lucrative for lawyers than impactful for the real estate industry.

David Greene [04:11]: "This case was mostly smoke and mirrors. It was a bunch of crap that came about."

Frustration with Real Estate Agents

David shares personal frustrations with agent inefficiency, reinforcing their stance that the majority of agents offer minimal value.

David Greene [04:50]: "The bar is too low. Most of them give bare minimum effort."

Christian's Insight on NAR and Agents

Christian concurs, highlighting the minimal tangible benefits provided by NAR memberships and expressing skepticism about the organization's efficacy.

Christian Bashelder [16:07]: "Without being disrespectful to the associations, I'm not quite sure what I get, especially knowing that I have to join three of them to get access to the MLS. Seems a little overkill."

Navigating the New Real Estate Landscape

Adapting to Policy Changes

In September, the industry required agents to adjust to the new MLS environment. A survey revealed that 86% of agents believed these changes would drive many out of the business.

David Greene [16:32]: "A survey found the prevailing sentiment among real estate agents was as a group, they hate the changes. And 86 of them believe it will push people out of the business."

Strategies for Buyers in 2025

David and Christian offer strategic advice for homebuyers navigating the altered market dynamics:

1. Leverage Seller Concessions: Take advantage of the new flexibility to negotiate concessions such as inspection contingencies, loan contingencies, and closing costs.

   David Greene [24:46]: "You can now get some things worked into your deal... you can get some concessions."

2. Competitive Offer Structuring: Incorporate seller credits to cover agent fees, aligning with the new requirement for buyers to compensate their agents directly.

   Christian Bashelder [26:15]: "Depending on the loan product, you can receive seller credits between 2 and 6%, with 3% being the most common."

3. Maximize Financial Efficiency: Use seller concessions to cover various costs, effectively managing finances in an expensive home-owning environment.

   David Greene [27:54]: "Depending on how the rate environment looks, cash in pocket is much more valuable sometimes."

Conclusion and Final Thoughts

David Greene and Christian Bashelder conclude the episode by emphasizing the profound yet possibly overstated impact of the NAR fallout on the broader real estate market. They acknowledge the increased costs and complexities for homebuyers but maintain that for experienced investors, the changes present manageable challenges rather than insurmountable obstacles.

Christian Bashelder [24:46]: "It was a lawyer cash grab. That's really my final stance on this topic."

The hosts encourage listeners to stay informed and adapt their strategies to thrive in the evolving real estate landscape. They also promote their resources, including reaching out for personalized advice and upcoming content on realtalkrealestate.com.

Notable Quotes

• David Greene [03:00]: "A bunch of greedy lawyers got together and they went to everyone that ever sold a house and they said, hey, do you think that you got ripped off when you sold your house?"

• Christian Bashelder [10:43]: "As long as it's not an unrealistic amount of compensation to your agent, you know, we'll allow for the borrowers to pay their agents and not count that against all of the loan thresholds."

• David Greene [17:07]: "Christian, how much can somebody ask for in closing costs if they're financing the property?"

• Christian Bashelder [26:15]: "If you're talking to a loan officer, reach out and ask him, hey, for the loan product that you have me in, what is the limit of seller credit that I can receive?"

Resources and Further Information

• Contact Christian Bashelder: Visit the1brokerage.com or follow @the1broker on Instagram.
• Follow David Greene: Connect on Instagram at @DavidGreen24.
• Upcoming Website: Check out realtalkrealestate.com for additional content, blogs, and resources.

This episode serves as a pivotal resource for understanding the seismic shifts within the real estate industry caused by the NAR fallout. David and Christian provide a balanced mix of critique, personal experience, and practical advice, equipping listeners with the knowledge to navigate the new landscape effectively.