Back in 2019, we made a rather bold prediction that the real estate market, which has been really unfair for first-tome homebuyers in the first place, would soon undergo a massive change. Initially it looks like change is definitely coming with this NAR lawsuit that’s making the headlines lately. But it’s not the real estate revolution we at the buyer’s side were hoping for. In many ways, this bogus lawsuit is even obscuring the real systemic issues and the collusion within the system that screws first-time homebuyers. What does this NAR lawsuit even mean? More importantly, how does it affect you as a first-time homebuyer? Does it change anything? Most likely not, but what can you do about it? Tune in and find out.
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NAR Lawsuit – The New Rules For Real Estate And How To Buy A Home – PART 1
How The National Association Of Realtors Lawsuit And Settlement Affects First Time Home Buyers
Remember how since 2019 I’ve been saying that real estate as an industry is broken, unfair to first-time home buyers and borderline corrupt? Do you remember how in many old episodes I’ve been saying that the rules could be changing in real estate? The number one people who are going to get changed in any sweeping real estate rules are the first-time home buyers. I’ve been encouraging you to try to get your planning together as quickly as you can while the rules still aren’t completely against you.
Remember how I talked about the lawsuits coming and how they might be changing the way that buyers buy homes and who pays for the buyer representation? The first hammer dropped on March 15th and it shocked everybody. We’re going to have a calm, detailed, non-click Beatty, fully informed conversation because there was a $418 million settlement against the National Association of Realtors Time for the Real Deal and how it’s going to affect you.
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Sit back and relax. This is going to be some very critical information from you, but rather than speaking to you in my usual impassioned, motivational spastic, sometimes cringe, goofy uncle tone. I’m going to do my best to present this to you in a chill way because the news is doing its best to freak everybody out. That’s because this is the biggest case of fear factor reporting and horror headlines that I’ve ever seen. The theme in this episode is relaxation. How do you beat fear, knowledge, facts, options, and solutions? Chill out with me and maybe take a few sessions to read this entire episode because it’s going to be a long one because there’s a lot to cover.
Unlike those headlines and the three-minute news segments, I’m going to help you guys out, like give you all of the details in this extra-long extended club remix dance version of the show. By the end of this show, you’re going to know all the actual facts and we’re going to also suss out those bogus myths. Mainly, we’re going to talk about how this affects you, the first-time home buyer.
In earlier episodes, I reported that in the last few years, there have been dozens of class action lawsuits filed all over the country against real estate brokers and the National Association of Realtors. I’ve let you know that eventually, this could be very important news for you, the first-time home buyer because there could be some changes to the way that it’s worked for the last many years. Usually, your representation when buying a home, that buyer’s agent, they usually get paid for by someone else.
That’s been leveling the playing field for you buyers for decades, giving first-time home buyers an actual fighting chance to have adequate representation. On March 15th in the state of Missouri, one of dozens of class action lawsuits that have been filed over 2023, and this one was asking for billions in damages. It was abruptly, suddenly, and shockingly settled by NAR. NAR is the National Association of Realtors. It settled for $418 million.
calmly, I want to explain to you the headline hit and the average American sees that the national organization that represents realtors is settling a multibillion-dollar case with a hefty $418 million settlement. People think, “What’s the scandal? Who’s getting all this money? What does this mean going forward?” Meanwhile, I’m sitting here calmly thinking, “How will this affect my homies, my first-time homebuyers?”
Since this massive lawsuit settlement was announced, I’ve been spending much time researching this. I’ve been buried in my laptop. I’ve been on my couch, my bed, or curled up on my beanbag. My wife started calling my laptop my mistress. I’ve watched several long and intense emergency webinars from the top real estate minds in the country, as well as had many phone conversations with real estate industry insiders.
Let me very quickly get this out of the way too. This is my disclaimer that I am not an attorney. My expertise lies in eighteen years of fighting for first-time homebuyers. I’ve seen every episode of Law and Order. Every single one, all of them, SVU, criminal minds, organized crime. Don’t even test me while I was curled up in the corner going down the rabbit hole of this research, I got information from places like the Wall Street Journal, CNN, Fox News, MSNBC, the New York Times, my local paper, the Orange County Register, RISMedia, HousingWire, the National Real Estate Post, and from several different real estate insiders, including some of the folks I’ve mentioned to you before, like Brian Buffini and then one of my new mentors, Sharran Srivatsaa.
That’s the boring stuff. That’s all the disclaimers. Let me get right into this. The actual settlement is a 108-page document. It’s total legal gibberish. Listening to other people interpret this and me trying to interpret this as the reason why I haven’t been sleeping and I’ve been living on coffee and fun dip because I wanted to get you a real-world explanation. I have no idea how I’m staying this calm with this much sugar and caffeine.
Side note, if you’re one of the Millennials who clicked on this show and you were hoping that this is the beginning of some sort of GameStop, Reddit little man revolution, crashing the power structure through dorky cat YouTube videos, this is not. I am praying for that revolution in real estate, but this ain’t it though. I do encourage you to watch all the GameStop coverage like the movie Dumb Money, and the documentaries Eat the Rich and Gaming Wall Street. Mostly because I want to give you guys some good ideas on how to level up so we can start our homey revolution.
I’m going to start with a summary and then I’ll go into the details. If you came by and you want the very quick down and dirty super instant Cliff Notes version, well this episode is front-loaded. I must calmly in my most chill way tell you if you do that and you don’t have the full story, you’re going to be more afraid than informed. That’s never the best recipe for your success. You can break the lawsuit down to this one simple question it answers, “Mr. or Mrs. Realtor, if I hire you, what are your services and how do you get compensated?”
Not A Real Estate Revolution
We didn’t keep it in, but I stared at the camera for ten seconds because that’s the only question. Here’s what I’m going to cover. You know how this affects you and your homebuying process. First, I’ll do a brief summary of the lawsuit and then I’ll cut to the chase. I’m going to cut to the chase and I’m going to give you the three most important changes from this lawsuit, then I’m going to explain to you who is the National Association of Realtors or NAR the people that were being sued and settled for $418 million, and how does NAR affect you?
I’m going to go deeper into the details of the lawsuit and how it will affect you. I’ll then give you a full explanation of how the commissions and compensations work in real estate, also known as the agent payments, then I’m going to go over the ten worst myths that I have seen during all my research, the clickbait headlines that have arisen in the wake of this lawsuit that’ll help understand for you what’s relevant to you, what you should ignore, what you should straight up realize is misinformation and wrong reporting and how that’s going to affect you and your planning in the future. Finally, how does this affect you, the buyer? What changes should you expect? There are three big potential changes and that’s when we’ll wrap up the show.
Let’s begin. On Friday, March 15th, the National Association of Realtors agreed to pay $418 million over four years for a class action lawsuit in the state of Missouri. It institutes a series of sweeping changes to its rules about the way broker and agent commissions are offered and displayed. Here are the highlights, NAR is going to pay $418 million in damages over the next few years. NAR agrees not to create rules that allow listing agents to set compensations for buyer agents. The next highlight is that offers of compensation will no longer be displayed in the MLS starting around mid-July of 2024. Next, it says that MLS participants will be required to enter into written buyer representation agreements before taking buyers to tour homes.
There’s no admission of guilt with this settlement and this settlement is subject to the DOJ and court approval. The next thing I say is, “What the hell does all that mean?” You’re making it tough for me to stay calm, but let me give you the three cut-to-the-chase pieces. 1) You will sign contracts known as buyer agency agreements, buyer representation agreements or buyer broker agreements. 2) Buyer agent compensation will no longer be displayed on the MLS, but offers of buyer agent compensation by the seller can be publicized in other places. I can’t tell the buyer agent how much they’re going to get paid on the MLS, but I can tell you any place else, like my website, I can slip a note under the door or we can have a separate agreement.
This is supposed to increase transparency, but it is now completely decreased transparency on the compensation.
The third thing is that the seller can sign an agreement with a listing broker that the seller will pay the buyer broker. We already do this in California. This says now that everyone is going to have to use a disclosure agreement in writing in advance before the sale of the home, like I said, which many states already do. That means your buyer agent can and will and probably still will be paid by others. One more bonus, cut to the chase. All real estate news is not aimed at you. It’s aimed at sellers.
It’s aimed at people selling real estate homes. You’ve heard me in the past say that when you hear about “bad real estate news,” that means bad for the sellers. That’s what the news cares about. The news is talking to homeowners, people who might want to sell their home or people who are sitting in an economy and want to know how their home’s going to retain value. The news doesn’t talk to first-time home buyers. Keep that in mind. That sucks for you. This lawsuit isn’t even addressing the real corruption, dishonesty and fraud that has been perpetrated by the National Association of Realtors and the entire real estate industry. This case is all about the sellers and their commissions.
Bad real estate news means bad for the sellers. That’s what the news cares about. The news doesn’t talk to first time homebuyers.
Tell me what’s going on. Be calm about it.
Rigged Industry, Bogus Case
Before I keep going with my calm deconstruction of the settlement, I once again need to drop the homey truth bomb that I’ve been saying here on the show since 2019. This stupid lawsuit completely ignores the real collusion that’s going on in the real estate industry. I’ve sharing this with you since 2019 so that you can find ways to legally circumvent a full-on rigged real estate industry that is currently set up to screw the first time home buyers so the brokers can make more profits and know the lawsuit didn’t do a damn thing to change anything about that.
I have a feeling this is why the real estate mafia is going to come and kill me. If I die in a mysterious way, I’m begging you, to investigate it. Look for the clues of my murder. It’d be easy for you to figure out who my murderers are. They’re going to leave clues behind the business cards with photos of those who are 25 years old and flyers telling you about their amazing new listing coming soon. You guys can even start a True Crime podcast about my ultimate death.
It would be called Dying To Buy.
I’m pissed off with this truth bomb. I explained to you guys is going to explain the next topic of this episode. Who the hell is NAR, The National Association of Realtors and why should you care? They get me riled up. I said riled up because I’m old and I did it on purpose because I want to say old so you have to drink because you’re going to need to be pretty plastered when you hear how the actual systemic exploitation happening in the real estate industry was not even touched in this lawsuit in this settlement. The National Association of Realtors known as NAR is the entity that’s getting sued for billions and it settled for $418 million.
It sounds good for the consumers. All you want to know is, “$418 million, what does that mean for me?” Let me explain who NAR is first because they’ve gotten a ton of crap from me in the past on this very show when I exposed their LAX policy on licensing realtors so they can increase their membership numbers. because more members, more dues, more money. Make sense? This leads to crappy service for you. You’d think a blockbuster lawsuit would mean they’re finally going to fix this who knows, maybe even some of you thought, “Does Sidoni start a revolution and upend the real estate industry?”
Nobody thought that.
As said by Judd Nelson in his classic role, the angsty teenager, John Bender in the greatest high school movie of all time, The Breakfast Club, “Not even close, bud.” Sadly, I did not start the revolution that upended NAR. So far all the show has done is help thousands of you out there beat this unfair system. I wish this revolution was bigger, but that day will come. This so-called Blockbuster Judgment for the consumer is a cheap play by class action lawsuit attorneys who found a loophole like class action attorneys always do and they found a way to exploit it so that they, the attorneys, can get rich.
They bunch holes in the policies, some big entity, and they use it to create these giant class action lawsuits, supposedly in the name of the consumers where the only real benefactors are the attorneys who make 33% of the settlements and then they send 10 million people a check for $7.38. This bogus case went after big bad NAR. the National Association of Realtors, who are they? What do they have to do with you trying to buy your first house?
Let me get this out of the way first. NAR’s most productive thing they do, they do a great job of this is lobbying the politicians. Through legislation, they work hard to keep housing as fair as they can for everyone. They do a great job of that. Do you read that, Real Estate Mafia? Leave me alone. For different reasons, I have been, shall I say, pooping all over them since I started this show. Why? Because of the way the real estate industry works, it’s a knowingly rigged system. I say it all the time, that’s why I’m here. Let me share how NAR is part of that rigged system. Most importantly, what you can do to beat the system no matter what this lawsuit brings?
Please excuse my Italian passionate side creeping in here, but I’m pissed. I’ve been pissed for a while and I’m pissed at the way that you guys are being treated in this lawsuit. You did nothing to address it. The way I see it is there are two ways to run any big service-based industry. There’s the right way and the other way, which unfortunately is the way that most of the capitalist big service companies operate because they’re too scared or too lazy to find a way to make profits the right way. How do you do it the right way?
The right way is to create an industry that rewards the best practitioners in their industry by elevating and promoting the businesses that provide the best training and customer service-focused practices. In doing that, they’ll be able to gain profits through excellence in what we call a free market. Back off. I’m not a Kami. This requires savvy leadership that is willing to have strict guidelines for businesses to even allow them the authority to operate within that service industry.
It takes strong, mindful leadership, willingness to govern with rules set for the consumer first and understanding that this fair, honest system will get those businesses notoriety and then the profits will follow. One great way is to require strict levels of entry into that serving of the public, higher levels of education and mandatory real strong testing and certification to become a licensed practitioner. This works in other industries already, stockbrokers, therapists, and unionized tradespeople. It’s out there.
The wrong way to develop a service industry entity and the way many capitalist industries operate is this wrong way. It’s simple. Play the numbers, game, consumers be damned, make a factory, undertrained service providers all licensed with loose regulations, advertising to the public is your licensed people and then you can have as many service providers as you want no matter their skill level, and they can go out and capture as many consumers as they can to increase your profits.
The wrong way is to make the threshold to be licensed ridiculously low. This means bigger odds in that numbers game, better odds for you, license anyone with a heartbeat and go after the largest amount of consumers. In my humble opinion, this is fraudulent because consumers assume some level of training in professionalism if you’re allowed to say, I am a licensed realtor, real estate industry has been doing this the wrong way, which is why I emphasize the importance of a unicorn support team to protect you against tyranny.
Here’s how it works and by the way, none of this problem is addressed in any of the class action suits or this blockbuster settlement that happened on March 15th that is supposed to correct the unfair practices in real estate. That’s super awesome. Let me explain to you how real estate brokers make their profits. What they do is they take their money in and then they divide it up in something we call a split of the commission.
The realtor gets paid their commission and then they split that money with the brand, the big mama, the real estate brokerage and the broker. Fees come in. Now when you are a new part-time low-producing agent, the way you split that fee is you give 50% to the brand, and the broker, and you keep 50% for yourself. The unicorn agents, the good ones, only have to pay an average of about 15% to the broker and sometimes they only have to pay a one-time annual fee and then they’re done for the year. Do you see what I’m getting at? Are you following the profit numbers game the brokers are playing and because it’s ludicrously easy to get your license with no strict regulations from NAR or the real estate brokers, they’re playing the quantity over quality game to maximize their profits? Consumers be damned.
A little side note there for for NAR or the National Association of Realtors, the more members equals more dues. I have forever been saying this, “NAR, how about you make it harder to get into your little club and earn the title of licensed realtor and then charge all of us more for the dues?” We are fine with that. Little summary on my crazy outrage moment here. The brokers in the industry concentrate on hiring as many people as they can rather than hiring quality, educated and trained professionals.
What does this have to do with the lawsuit and NAR? What does this have to do with you? Let me break it down for you. Math style so you can see where NAR and this lawsuit, which is taking NRA’s money is totally missing the actual problem that needs to be solved. Here’s the breakdown, also known as why if you don’t go out and use a unicorn realtor, you have an 87% chance of working with an agent that will quit the industry within the next five years.
As a broker and owner in this industry, let’s do some math. We have 100 buyers and sellers coming into their market and 100 potential customers. If the broker had 10 highly trained, diligently tested and properly certified licensed agents who earned the title of a licensed realtor, they could each handle 10 out of the 100, but the brokerage, business and brand would only make a 15% profit on the fees for those 100 deals.
The rest goes right to the realtors. Instead, the broker runs a numbers factory with a mix of realtors, like 50 quality agents, the 15% split combined with 50 untrained newbies and part-time agents, all at a 50% split to the broker. There’s a greater chance for the business to make more money. All the while you are consumers out there, you naturally assume that all the agents have equal licenses and NAR support. The 50 transactions go to the qualified agents with only 15% to the broker, and then the other 50 deals go to the massively un-trade, inexperienced. You got to heartbeat, “Here’s your license, people.” There the broker makes 50%.
The brokers make more money off of people with less experience, thus incentivizing less experience.
Incentivizing them to hire and force people with less experience.
I’m in. Sign me up. Let me be a realtor. I can do that.
All the agents that are propped up by this industry are equally licensed and qualified, yet these different agents are propped up by the industry, equally licensed and qualified sure technically they are all licensed. Do you as the consumer understand what that means to you? Of course not. The end result is this, 50 people get screwed by a numbers factory and 50 people get subpar service because they assumed and justifiably that the person serving them was legit because they’re a member of the National Association of Realtors. It sounds like a big thing. They should know what they’re doing. It’s like being a member of any large union.
We as consumers have come to expect the way that large associations work. Electricians, welders, and tradespeople have superior training. Typically they go through the old Renaissance way of doing things. You’re a journeyman, apprentice and finally a master. Think about doctors, lawyers and certified financial advisors. All of them have years of schooling or intense testing or residencies or junior positions being ultimately monitored with massive levels of oversight.
Who needs all that?
None of that is for a real estate license. Fifty people get screwed by the systemic greed of an industry and a national association that is knowingly, keenly aware of this, but rather than retool their broken system and upgrade education, training, and requirements to call themselves a licensed realtor, they blindly run an industry that effectively is offering up supremely unqualified people to be the advocates and representatives for you, the buyers, especially first-time homebuyers who happen to be trusting these people to guide them in making the biggest, most insane purchase of their lives and then NAR dares to advertise this way, “Buying a home is the foundation of your lifetime financial wellbeing. Use a realtor.”
Do you mean just any realtor?
Yes, just any realtors. Maybe they could be one of the 49% of the realtors who sold 1 or 0 homes in 2023. Maybe they could be one of the realtors that 87% of them are going to quit in the next 5 years. Maybe they could be one of the realtors, like my half-wit cousin who got his license so he can try to sell houses part-time because he passed one exam that was basically equal to a DMV test. As long as he pays his dues, he’s allowed to advertise as a licensed realtor.
Work Within The System To Beat The System
This lawsuit is the least of your worries when you are a first-time homebuyer. This settlement is not even touching on the real systemic issue that lives in real estate and that is the thing that’s going to cost you the biggest heartache and the most money when you’re trying to buy a home. I once again want to make sure that we talk calmly about this, and I want to make sure that you understand that my ranting and my raving is because you should have had somebody make a $418 million settlement to help you.
This lawsuit is the least of your worries when you are first-time homebuyer. This settlement is not even touching on the real systemic issue that lives in real estate.
Instead, we have this misinformed bogus lawsuit that’s all over the news now, and unfortunately, nothing changes for you. The good news is we’ve been finding a way around this for the last few years, and we’ll keep finding a way around it for the next five years. This lawsuit is yet to be settled in court, but let’s look at what you can do to protect yourself calmly as the industry makes some changes.
For many years in this show, I’ve been hoping to start a revolution to get you justice in the system. Unfortunately, this lawsuit’s not going to do it. It’s aimed at something different than the low problem. Don’t be fooled by the headlines. This is not going to tank the market. You’re still going to be fine with that, nor will it immediately mean that you’re going to have to pay 2% or 3% of the purchase price to your buyer’s agent because that sucks. That would be on top of your down payment, your closing costs. None of those things are going to happen, not from this lawsuit. Work within the system. Learn how to beat the system, find a quality unicorn support team who already run their business like professionals. This lawsuit isn’t going to affect them. We’ve been working around the system for years.
When you’re checking your social media or looking at your feeds and your news stories, CNN, Fox and MSNBC are going to talk about NAR, the National Association of Realtors and the huge changes coming into real estate. These headlines aren’t talking about that systemic problem. Nope. As with all real estate headlines, these headlines are geared for homeowners. Real estate news is for sellers, and this lawsuit is totally about the sellers.
Even though I popped an artery, this class action is not an uprising of the people. This is not a class-action suit brought on by hoards of screwed-over buyers. This is not even Erin Brockovich pointing out the fundamental flaws in big bad companies that put profits over people. This is one of those lawyer-driven class action attorney moneymaking schemes using the crappy reputation of many realtors so that they could invoke the words collusion and price fixing.
I don’t stress this lawsuit is nothing about the real consumer issue, the low bar of training and the education required to call yourself a licensed realtor. That’s not going to change, but for five years we’ve been figuring out how to get you around that. Almost all class action suits are solely for the attorneys to make money.
Good stories like Erin Brockovich’s are rare. Remember, attorneys make 33% of $418 billion. What’s left over? 10 million people get that $7.38t. The last thing on NAR, before we take an intermission, I’m going to give you guys a little bit of a break. Did you guys know that in the last year, NAR has been riddled with leadership and sexual harassment scandals?
Like you said, big organization. Doesn’t that come stuck?
Yes, it’s been a tornado of dysfunction and distraction. All of that forced multiple people to change in the leadership of the National Association of Realtors. There was a regime change promising a 180 shift in culture only to have that new president resign four months later in a blackmail scandal. NAR was ripe for the takedown. I’m still a member. I still pay my dues, but some people still need to sell their houses. That means there’s still going to be realtors out there.
NAR has got 1.5 million realtors in there, another 1.5 million license agents that aren’t in NAR. Let’s do the math, 3 million agents, but we only have 1 million homes for sale in the United States. Who knows? Maybe for the good of the people, this is going to weed out some of the bad agents. As for you, let’s focus on getting you the best representation. There are 282 unicorns. That’s an easy way for you to know that you can work with the top 0.01% of the 3 million and stay protected by a real advocate no matter what happens in the future with all these laws and the way things go.
his right here is exactly why I quit my broker. I started recording my rants in the middle of the night in my kitchen. I felt messed up in 2018, realizing that I put 15 years of my life into studying real estate and realized the whole thing was total BS. Me and the unicorns out there have been doing our best to give as many consumers the right level of service they deserve. This is a big machine out there running and we can’t help everyone unless we continue to grow this revolution.
Eventually, maybe NAR will focus on the real issues at hand instead of this BS lawsuit. I know that was a lot. I know that a lot of you guys a nice 45-minute chunks to go precisely with your workout. We’re going to stop right here. That’s going to be the end of part one. Part two is going to be a separate episode. Look for part two of the NAR Lawsuit.
This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!
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