B (4:11)

The lawyers probably made off with. God. I can only imagine what lawyer fee of 20, 30% on 1.78 billion. It says on Your screen here.

A (4:20)

Come on, what are we doing here? And you know what else didn't make the news about this? This is what's funny. One of the guys, I think it was Sitzer, I'm not sure though, he started a company to help you sell your house without using a real estate agent, like a flat fee service, basically so that he's now making tons of money from his name being out there. And like, yeah, agents are bad, so you should come use me. And then you basically just like, pay per service you use. You want to see a house, pay me the money. You want to write an offer, pay me the money. You want to talk on the phone about it, pay me the money. So all these people that were like, we hate agents because we pay them too much. Now they're having to pay per thing that agents used to be providing. And you still don't know if it's going to be any good. So I only get say this because this side of the story rarely gets talked about. You do hear about how agents are morons and how they were greedy. And it was somehow this story came about a 6% commission and they got rid of that. That was never a part of the thing at all. They've always been negotiable. But you and I are going to cover today a summary of what went down and how it changed the way that real estate transactions are going to be conducted moving forward. You ready for this thing?

B (5:29)

Yeah, let's do it.

A (5:30)

All right. Number one, the Sitzer and Burnett verdict is appealed after losing a jury trial and being penalized 1.8. Sorry. $1.78 billion. NAR Home Services of America and Keller Williams, these were all people that were named in the court case. Home Services of America is a company that owns different brokerages. And Keller Williams is a brokerage asked the court to set aside the verdict or order a new trial. Attorneys for NAR and the brokerages took aim at numerous aspects of the case that. And they claimed that the plaintiffs irrelevant and prejudicial evidence inflamed the passions of the jurors. The brokers here were frankly shocked that they could have lost this case. It was a little weird because when you sign a listing agreement agreeing to pay a buyer's agent, it's not like it's hidden from you. The agent says, here's the commission. Here's how much I get, here's how much they get. It's all right there on a very simple piece of paper. So nobody had the wool pulled over their eyes and Then as the case got further and further along, it started to become aware that the jurors just don't like real estate agents, and there's a little bit of prejudice going on. And so as the case was appealed, the plaintiff's attorney said, yeah, we're not worried about it, and I don't believe it has been appealed yet. Number two, in February, Keller Williams broke ranks. So Keller Williams actually settled outside of the other plaintiffs in this case with this one. And then, of course, every time something like this happens and an attorney see that it looks like the defendants are going to lose, they go try to start their own, like, copycat case. They try to jump on board. Yep. So that's what they do. They go, this one was. Looks like moral and nosolic also had an action that came forward. And so Keller Williams had to settle that, too, because lawyers, like vultures, smell blood, and they jump in and they make a bunch of money. So Keller Williams ends up settling.

B (7:22)

Instead of making their $1.78 million cut, what, they made something else with a billion probably in it, right?

A (7:29)

Yeah. And if you don't know how much a billion dollars is, folks, a billion is a thousand. Millions thousand millions. That's a lot, lot of millions. So this was almost like 2000 millions because this was getting close to $2 billion here in March. What's that?

B (7:51)

That is just an unfathomable amount.

A (7:53)

Yeah, you guys, it's incredibly hard to think about how much money that is.

B (7:55)

You probably couldn't spend a billion if you tried every day for, like, 10 years. It'd be an incredibly hard amount of money to spend. It's crazy.

A (8:03)

On March 15, NAR changed direction, and rather than appeal the jury verdict, they entered into a $418 million settlement with the Sitzer Burnett plaintiffs. So out of that 1.78 billion, they ended up paying out 418 million. This agreement led to NAR prohibiting offers of compensation being published on the MLS and mandating the use of written agreements between Realtors and their clients. Here's what that means in real terms. This is so weird. If Christian and I are putting a house in the MLS for sale, we 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. I've yet to see how this is a benefit to anyone other than a big waste of time that you have a bunch of people calling and saying, how much are you offering? And then Realtors who hate conflict more than I know UC Berkeley hates the nra. Sorry, that was a shot at Christian there because he likes. Right.

B (9:04)

The very rare minority of UC Berkeley graduates that owns a firearm.

A (9:08)

That's true. I forget that you went to UC Berkeley because you never come across as the people that I frequently came across working in the Bay Area, for sure. So realtors hate conflict, and they don't like saying what the buyers are or the sellers are offering the buyers. So instead they say, write your highest and best offer included in there. It's just a big nothing burger, A big waste of time that came out of it. And the other half of this thing was that when you go to buy a house, you now have to sign an agreement with your buyer's agent telling them how much you're going to pay them. Instead of the seller paying it, the buyers pay it. But then when you write your offer, you ask the seller to cover how much you said you were going to give your agent. And again, huge nothing burger, but a big waste of time and makes everything less efficient. The trade group settled in order to end uncertainty as well as liability risk for its members. What the deal did not do is set commission rates for the brokers involved on either side of the transaction. So just like they were negotiable before, they are still negotiable. And those lawyers made a whole bunch of money to basically do nothing of substance. Next, In April, the GSEs clarify their positions on commissions. GSE stands for government Sponsored Enterprises and Pop quiz. Christian, what are the two main GSEs that we deal with in the mortgage industry?

B (10:23)

Fannie? Freddy. There's definitely technically more, but Fannie Mae and Freddie Mac are the, are the big dogs on the block, right?

A (10:29)

That is exactly right. Both Fannie and Freddie Mac said that they wouldn't count buyer's fees towards their limits on seller contributions as long as the amounts were in line with the regional norm. A position similar to that for the Federal Housing Administration Mortgage Insurance Program. So, Christian, what does that mean?

B (10:43)

Yeah, so there, there's, there's a limit that buyers can have in terms of, you know, know, fees on their loan. And one big thing that we were worried about in the, in the mortgage world was if a borrower does indeed, you know, as a result of this, have to compensate their real estate agent because the seller's not doing it anymore, are they going to be going over these thresholds that were allowed and they would basically make a loan, like, impossible? Right. So of course a solution was they're not just going to make it impossible to get a loan Right. So they basically said, as long as it's not, you know, 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. The loan thresholds in terms of fees that the borrower can be charged.

A (11:32)

Thank you for that. Next. In May, the plaintiff versus plaintiffs ended up in a settlement tif the day before a final hearing to approve the Sitzer Burnett settlement with parties other than narrative. So this was outside of the 418 million that NAR was going to pay Sincere. Burnett is also negotiating settlements with all the other brokers and people that were named in this. A group of plaintiffs in one of the Batten cases sought an injunction, looking to halt the proceeding. A federal judge in Illinois rejected their claims, noting that they were already objectors to that settlement and would not have a chance to express that during the May 9 hearing in Kansas City, Missouri. The next day, that court did approve of the portion of the settlement for ReMax Anywhere Real Estate and Keller Williams. The settlement released their defendants, their subsidiaries, brands, affiliate agents with their franchisees and their agents from ongoing and future litigation surrounding the antitrust claims. Besides Burnett, the deals covered cases known as Moore and nasalec. So as more money is becoming. Is entering into the fray, more people get involved and say, no, we want a piece of that too. Of course, it gets messy because money tends to draw people, like sharks are drawn to blood. As far as the antitrust claims, that argument basically spelled out that nar, which manages the multiple listing service, the mls, was forcing the sellers to compensate the buyer's agents at least a penny to list their houses there because they didn't want. If. If Christian's working with a buyer and I put a listing in the mls, his buyers could say, hey, we're cutting you out of the deal, Christian. We're going to go directly to David. And so to protect the buyer's agents from that happening, NAR told the sellers, you got to pay the buyer's agent something, even if it's a penny. They have to get something because most people weren't going to pay a penny. That would stop Christian's clients from leaving him and coming directly to the seller and. And asking for the compensation to go to them instead of to their agent. That's why that was there. That was considered a trust, like a monopoly. And I just thought I couldn't believe the logic that went down in this. If you would have heard the lawyers that the national association of Realtors put out there, they are about as smart as a box of hammers. I was shocked at some of the arguments that these agents were making. You can see why it was lost. We definitely did not put out our best and brightest there. All right. And then in June, the dog answers. NAR's attempt to reverse the decision, 2 to 1 vote in the appellate court, ruled in favor of the DOJ's attempt to reopen its investigation into NAR, a matter the group thought was settled in 2020. This is weird that the DOJ actually, the DOJ actually got involved in this case. I think that that's because of the antitrust element. That's why they had some relevancy to get in here and say, like, we're realtors conspiring to rip off the public. NAR filed for a rehearing in May, saying it could have far reaching implications if the government was allowed to renege on the agreement. But the Justice Department said the decision did not violate any legal principles that NAR raised. In July, a DC court sides with the Justice Department in two separate single page rulings. The US Court of Appeals for the District of Columbia rejected NAR's motions to have the April decisions overturned. The organization was looking to have the original three judge panel review the ruling. Failing that, it wanted to have the entire court rehear the case. And both attempts were denied in unanimous vote. So all of NARS efforts up to that point had been shut down, but NAR just kept coming. I mean, I guess they don't really have much else to do. Like, do you feel that they do a whole lot for us as realtors? I've always wondered why we have nar. What's your thoughts on that? Christian? I've never asked you this.

B (15:09)

Yeah, it's, I, I used to think about this a lot because if any of you guys are licensed agents, we probably have some, a decent amount of licensed agents to watch the show. You have to pay your NAR fees. You have to pay. We're in California, we pay our car fees, which is the California association of Real Estate. And then you actually have to join a local association, which I'm in the Greater Los Angeles, the galar, which is the Greater Los Angeles Area association of Realtors. And I kind of feel like I, like, I get the forms, which is nice, you know, I get like my purchase agreement that gets updated every year and you know, it makes sure that it has the right contingencies and the protections. But I tend to agree, David, 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 for sure. Especially when they can't. Especially when they can't put decent lawyers on the. On the floor to. To win this case.

A (16:07)

Yeah, it looked to me like they just didn't take it serious, which I don't think anyone really did until it got serious. It was a very weird thing.

B (16:13)

Yeah, I. I don't think it was something that really people thought was going to start to hold any weight. And then it started to very quickly. And I. I do think it probably caught NARA off guard. But, you know, I mean, you, You. That's why you pay for legal counsel. You got to be prepared for everything. And it. Unfortunately, I. I don't think they were, you know.

A (16:32)

In September, real estate agents have to learn how to navigate the new environment. I was doing a lot of webinars talking about this, and 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. That was found in a clever real estate poll taken between August 28 and September 9. In October, Nara went right to the top. Following through on its previous filing, NAR Asked the u. S. Supreme court to grant a petition for certiori. I don't know what that word is. Have you ever seen that word certiorari?

B (17:06)

I have. No.

A (17:07)

That's a good question. Someone's listening to me saying this like, david, you moron, it's not rapper. It's rapport. I don't know how I never came across that word. And all of my time in law enforcement with all of the legal stuff there. Christian is going to be trying to work on a definition for that as I continue.

B (17:24)

Hit a quick google for us right now. We're gonna do this live. It is a writ or order by which the higher court reviews a decision of a lower court. Sounds like an appeal to me, but yeah, that's.

A (17:34)

Why don't they put that. And how do you pronounce this word? Does it say how to pronounce it? That's what I'm more worried about.

B (17:39)

Let me see. Here it is. Search. It's search. Interesting search. O'rari.

A (17:47)

Yeah, sure. I don't know that I've ever even heard that word said out loud. That's weird. I'm sure whoever wrote this had to look it up too.

B (17:53)

I think. I think an author was. The author was probably having a Little fun with that one. Like we're just gonna toss this one in there.

A (18:00)

That's good. So 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 before the original three judges and the full court. So NAR has just lost at every single level. Taking big Ls in November, the objections were rejected and the settlement was approved in December. NAR fought back against the New York Times article. So this is like they're just grasping at straws here. NARA refuted the allegations made in the New York Times article that claimed a nonprofit affiliate, the American Property Owners alliance, was donating money to right leaning non housing causes. Apparently they got mad at the New York Times and that is how this whole thing ended, believe it or not. So now we are left going into 2025 with buyers who already have a hard time buying homes. Prices are high, rates aren't high, but they're higher than they used to be. Supply is really low. Insurance costs are higher. Property taxes are going up. Maintenance costs are going way up. Labor and materials is going way up. Utilities are going up. Everything about owning a home is expensive. And now if you didn't think that was enough, you got to pay your own agent to buy a house. In addition to the down payment you have to come up with, in addition to the closing costs that you have to pay, in addition to the moving costs that you have, in addition to the make ready cost for the house, in addition to the home inspection, the pest inspection, the roof inspection and all the landscaping that has to be done now you get to pay for your agent to all coming at a time when everything is more expensive than it has ever been and it's harder to save money than it ever was as the economy is bad. But those lawyers sure did well. What's your advice, Christian, for the people who are trying to buy a house and they feel like it's just an insane uphill battle right now?

B (19:48)

Yeah, 100%. And I feel, Let me, let me give this from the stance of a loan officer. Right. So unbiased by. I am a licensed Realtor, but unbiased by, by the real estate side of it. And just maybe to add some clarity because I, I feel like it's very possible. We'll have some listeners that are on the. Yeah, you know, screw realtor side of this debate. Right. Which I, I understand. And let me, let me break it down this way. I firmly believe this court case was lost because of the public sentiment against agents. And not that that's a good or a bad thing. I think it's mainly the, the agents who are responsible. And you know, to add some actual specifics here, you know, you think of shows like selling Sunset or you know, all these things where basically real estate is fluffed up into being this just who's who competition, right? It's like a popularity contest like who, who can wear the nicest dress to the, to the ball, right? And that's the person who will get the deal. Whereas I see people like David and his team or a lot of the investment minded realtors that we work with across the country and I see the value they add to their clients. I see, you know, walking them through 15 different properties, running the cash flow projections on them, you know, helping them get an insurance quote, helping them get a mortgage quote, you know, talking them through the whole process and how to write an offer and negotiating on their behalf. And most times those agents are saving the clients more money than their commission costs. Right? But like you said, David, in a time where especially first time home buyers, I mean like guys, this doesn't hurt the experienced investor like David and I like, I use agents, I still use realtors to represent me to buy houses, but I don't need them. I, I could absolutely go representation list and I could, I could get by, so could David, so could most seasoned investors. But a first time home buyer operating without a realtor, I mean David, I'm sure that's nails on the chalkboard in your mind right now. It's like man, somebody going with no advice, no guidance, going to the listing agent, who, who do you think he's loyal to? Like listing agents loyal to the list. The seller, right? The person who gave him the listing. And he's just going to bid that buyer up to the maximum amount to make a seller happy, right? And you know, he can say, oh you're, you're getting a better deal because you don't have to pay a buyer's agent. But man, the potential loss of representation that you're undergoing there, you don't know what the house is worth. Most buyers don't know how to run comps. You know, most buyers don't know how to look at an inspection and see what's normal versus what's of a concern. Most buyers don't know how to negotiate with like, oh my God, if somebody like if David was listing a property and one of you guys are trying to go against him negotiating like, I'm sorry, I'm sure we have a lot of talented listeners, but you're not winning. Like David's out negotiating you, right? I mean especially, I mean he's been doing this for years, you know, and it's to, to now stress on top of everything else, inflation and home prices and interest rates, the fact that, hey buyers, if you want representation, which I would absolutely recommend to first time home buyers, there's a growing increasing likelihood that you will have to pay yourself for it versus the long time standard that the sellers are, you know, using the equity that they built to cover the services rendered. And you know, there's an argument that it gets built into the purchase price. So it's basically the buyer paying for it at the end of the day anyways. But it's usually not cash out of their pocket, right? It's built into the price of the home, as is most things. You know, when you guys go to like anything that's high end luxury, when you guys buy a diamond ring, you don't pay the guy service, you know, servicing you, right? Like if you go to, you know, the jeweler, you know, the, the jewelry store, right, the engagement ring store, that guy's making commission on you to sell that ring, but you don't pay him. Right. It's not like an individual line item. It's built into the cost of the item. That's how most high value stuff operates, right? That's how cars, you know, you don't see a line item when you go buy a car at a dealership of commission, right? It's built into the cost of the car. And for some reason real estate is being targeted as like, hey, let's take it out of the cost of the asset. So you actually have to compensate your salesperson if you want it, which to me just doesn't make sense. It's completely out of line with every other high end ticket item that has a commission salesman involved in it. And I don't get it. I don't understand why it's necessary. It was working the way it is. And to be honest with you guys, we do a lot of business and less than 5%. I've seen this case actually impacted less than 5%. Sellers are still paying buyer's agents. So like at the end of the day, really, David, like you said, this is impacting less than 5% of transactions. And the realtors made a boat. I'm sorry, not the realtors. The lawyers made a boatload. It was a lawyer cash grab. That's really my final stance on this topic. And it's you know, it was a waste of time and a whole lot of rustling feathers for what I view not being a whole lot of a change.

A (24:46)

Very true. So, armed with this knowledge, now that you've listened to this episode, here's some pieces of advice for buyers going forward. Because the market is strong, but it's not red hot, you can now get some things worked into your deal. Kind of this would apply to most markets. I'd say that you couldn't before. You're not going to get the world's best price on the home, but there is enough wiggle room to get some concessions. Before you couldn't get anything, you're going to pay a crazy high price. You probably weren't even going to get contingencies in most markets. You can get an inspection contingency, you can get a loan contingency, and you can get closing costs paid for. Christian and I have taken advantage of this many times ourselves in deals that we've bought as well as deals that we've bought together. Our opinion is that in most cases, when money is cheap to borrow, it's better to pay an extra 10 grand for the house, but get 20 or $25,000 back in closing costs. Sometimes it's better to pay an extra ten grand and get ten grand back in closing costs and keep that money in your pocket. Especially when rates are at 3 or 4%, the money's a lot cheaper. That's what I'd recommend people do going forward if you're going to write a strong offer, which you probably have to also be very aggressive with what you're asking for in return from the seller when it comes to closing costs so that you can keep more of that money in your pocket, especially now that you're having to pay for your. Your own agent. Now, Christian, I want to ask you as a loan officer, as we wrap up here, how much can somebody ask for in closing costs if they're financing the property?

B (26:15)

Yeah, good question. And so just add clarity. David's question. This is as a percentage of the purchase price. So every loan product out there will have a limit of what you can get. For instance, you can't write an offer for a $500,000 purchase and get $200,000 in seller credit. That should make sense, right? There's a limit to where, hey, are you just buying the home for 300 grand? Right. And you're trying to, like, work some weird magic here, but within reason, which, depending on the loan product is between 2 and 6%. Now, that's a wide range. The most common one is 3%. That's the most common for most loan products. But there are some products that have more flexibility, there are some loan products that have less. The biggest thing that I can say is 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? And let's say it's 5% on that $500,000 home. That would be $15,000 in seller credit that you could receive. Awesome, right? You can use that to buy down your rate, cover your other closing costs, keep more money in your pocket. You know, like David said, depending on how the rate environment looks, cash in pocket is much more valuable sometimes. But if you guys are offering and you really got to be competitive, that is absolutely a way. Because there's, there's a, there's a, you know, internal, you know, feeling. When the sellers see their sales price, even though there's a credit, they don't think of it the same way. Right. 500 versus a 490 sales price. Even if the 500 has 10k credit. There's a subconscious thing. Oh, I got 500,000. Right.

A (27:54)

100. Especially not to cut you off. Especially when it comes to round numbers. 500,000. 600,000's a big one. If someone can say they got a million dollars for their house, even if you ask for a fifty thousand dollar credit or something like that, they're much more likely to go for it.

B (28:11)

100, 100. There's a, there's definitely a subconscious, you know, little satiation complex right there that gets, that gets checked off when they see their number. Even though they're giving a bunch of it up. Right. I mean like David said, a million dollars of the $50,000 seller credit, that's a 950 offer. You're just structuring in a way that's way more beneficial to you because you can use that 50k to cover everything. Rate, buy downs and everything else. Right? Definitely. In my opinion the strongest, far and away the strongest tactic that you can use in buying real estate that when I compare people who use it to people who don't, the people who use it come out way ahead in terms of interest rates, savings, cash out of pocket, everything. Use your seller concessions.

A (28:56)

Absolutely. The time I've been representing sellers, I have frequently seen sellers bulk at a low price offer and just immediately shut down and say I'm not even going to counter them. I'm mad. I've never seen a seller bulk at a offer that had a solid price and way too many concessions. Their answer is always, well, let's just counter it. But you're in the fight. If you get a seller account, most times that's what you're trying to do.

B (29:21)

They saw their number. There's, they're, I'm telling you, there's a, there's a, there's a, a complacency that happens when they. Oh, okay, well, we'll give a little bit up because they gave us our number. Right. Instead of, oh, they didn't give us our number. Yeah, so.

A (29:33)

So play to your ego.

B (29:35)

Get concessions on the back end. Absolutely.

A (29:37)

There you go, folks. And if you want advice on how to do that, Christian is available to help you. Christian, how can people get a hold of you if they want to reach out and they want to start the process of buying a house?

B (29:47)

Absolutely. And we love this conversation. Even if you're talking with your agent and they're not quite sure how to word it or what's allowable on your deal, put them in contact with us. We'll talk to realtors all the time. Not a problem at all. If you want to reach out to me, the one brokerage.com is just where, where you can find out more about our company. If you want to get me directly, I'm at the one Broker on Instagram and my email and contact information will be in the Description below. Christian, the1brokerage.com is where you can get me directly.

A (30:13)

All right, folks, and check out realtalkrealestate.com in the near future, we'll be up and running. It will have information from the David Green show as well as the 1 brokerage real estate blogs, real estate information, stuff that Christian and I are working on, stuff that we're working on independently, a whole bunch good stuff. Also, you can follow christian@the1 broker on Instagram. There's underscores between the one and broker and you can follow me at David Green24. So make sure you go do that and leave us a comment on today's show to let us know what you thought. We will see you all next week on Mortgage Monday.