5 Myth Busters! Debunking the NAR Settlement

What's going on with the NAR settlement? That seems to be on everyone's mind. Well, we've got fact or fiction, reality versus false news, or fake news. And it's stemming from a lot of different places now, almost like somebody has an agenda. But I want to talk to you, the American people. I want to talk to you, the consumer, and the real estate agent. I want to talk about truths, and I want to talk about opinions.  

I have five myths that I want to debunk. At the end of the article, I will list some of the sources I used to debunk these myths. Please take a look at it at your leisure. 

‍

Myth #1: Americans negotiated...

‍

In the ever-changing world of real estate, distinguishing fact from fiction has become increasingly difficult. It is easy to feel lost in the chaos of the news, where the truth is frequently entangled with misinformation. It is as if an undercurrent is pushing certain narratives, possibly with hidden agendas at work. But here's where I come in, not as a spectator, but as an active participant eager to dissect and debate the realities and myths that pervade the American real estate market. My goal? To engage directly with you, the informed consumer, the curious reader, and the dedicated real estate agent, and to embark on a journey toward the truth.

‍

It begins with a recent claim made by President Biden, a statement regarding real estate that, upon closer examination, unravels quickly. Despite my deep respect for the presidency, the claim that a new era of negotiation power for Americans in real estate transactions has begun is misleading. The President said...

‍

"In addition, last week the National Association of Realtors agreed for the first time that Americans can negotiate lower commissions when they buy or sell their home. On a typical home purchase, that alone could save folks an average of $10,000 on the sale or purchase. I’m calling on Realtors to follow through on lowering their commissions to protect homebuyers."

‍

Obviously, that's a lie, right? Myth busted from what we know, because it's a fact.

‍

However, the truth is more nuanced than this broad stroke might suggest.

‍

Negotiation, a staple of the real estate process, has always been present. The capacity to negotiate commission rates, fees, and terms has been an intrinsic part of buying and selling properties long before this announcement. This leads us to question the narrative being pushed, highlighting the importance of scrutinizing statements, even those from the highest offices.

‍

To gain further clarity, I reached out to Lance Lambert, a friend and former Fortune Magazine data analyst who now heads Resi Club, a data-centric real estate analysis firm. Lance's insights shed light on a crucial aspect overshadowed by the focus on commission negotiations: housing affordability. He pointed out the stark reality that housing affordability is currently at its tightest in decades, a situation exacerbated not by commission rates but by broader economic pressures, including mortgage rates, incomes, and the overarching housing prices. This scenario, as Lambert explained, has led to political scapegoating, where real estate agents and certain market practices are blamed for wider economic issues—an oversimplification that detracts from the more complex, systemic challenges at play.

‍

 Myth #2: The Settlement Will Transform Housing Costs

‍

The narrative takes another turn, with sensational headlines suggesting that a recent settlement involving the National Association of Realtors would drastically reduce housing costs. This notion, while appealing, crumbles under scrutiny. The settlement's purported impact on the market—heralded by some as a watershed moment—does not align with the economic principles governing real estate transactions. As I dove deeper, it became apparent that market dynamics, driven by supply and demand, have a far more significant role in determining housing prices than the commission percentages doled out in the real estate process.

‍

If you go back in history, we have The Wealth of Nations, which Adam Smith wrote in 1776, correct? Yes, it has faults; I was going over them, but if we look at the idea here, it's the whole title an inquiry into the nature and causes of The Wealth of Nations. The core of Smith's thesis was that humans' natural tendency for self-interest or, in modern terms, to look out for themselves in terms of results or prosperity, and then it talks about demand. It talks about supply. And you know what you always see? That a seller, a seller of a product or of a home, will never let go of their home if they know they can get a better price. So when you use logic in this, you understand that the truths were being told by the media, in this case, the New York Times.  Debra Kamen wrote the article "Powerful realtor group agrees to slash commissions to settle lawsuits."

Look at the narrative on this one. And this isn't the first article that she's written that makes no sense, because she doesn't have her facts right, but read it with me.

The National Association of Realtors will pay $418 million in damages and will amend several rules—yes, several rules—that housing experts say will drive down housing costs. In what world? In the United States? Because that's not how the economy works. And so the fact that she's also, when you read this article, very vague about who these housing experts are. 

And if you dig deeper, you understand that these housing experts aren't really housing experts. 

Let's read this. Housing experts said the deal and the expected savings for homeowners could trigger one of the most significant jolts in the US housing market in 100 years, sensationalizing it. 

This will blow up the market and force a new business model, said Norm Miller, a professor emeritus of real estate at the University of San Diego. 

That's not too bad. And then economists estimate that commissions could now be reduced by 30%. Is that true? Yeah, you know what? Maybe. On the buyer side, could be. Especially as we start seeing new companies come out and offer a set fee, a lower fee on the buyer side. 

But here's the fake part. Driving down home prices across the board? Across the board of what? In what country? The last time I checked, prices were set by supply and demand and interest rates, not by real estate agents charging a commission on that price. There's no way sellers are going to drop that difference in price just because a real agent isn't making the commission. 

It's stupid, and it's fake news.  

Myth #3: The Revolutionary Impact of Legal Settlements on Real Estate

‍

Another compelling chapter of this narrative revolves around the alleged revolutionary impact of legal settlements on the real estate landscape. The claim that these settlements would usher in a new era of lower buyer costs and transform the market is enticing. Yet, a thorough analysis reveals a different story. The actual changes, while notable, are not as groundbreaking as some narratives suggest. Many of the proclaimed shifts either have been part of the industry for years or are unlikely to have the transformative effect advertised.

‍

When you look at what the New York Times wrote out, it continues to feed us, the consumer and everyone else lies. We go through this at the bottom and look, and it gets it a little bit better.

Some experts said the shift in commission structure and the billions of dollars that would flow into the housing market as a result could spark a recovery in the housing market. Going so far as to say that it could be as significant as a 1930s New Deal. A flurry of legislation and executive orders signed by Franklin D. Roosevelt were designed to stabilize and rebuild the nation's economic recovery following the Great Depression. But here's the catch: look at where they're going with this. This included the Better Housing Program, which was designed to make housing and mortgages more accessible and led to the creation of the Federal Housing Administration. Now, if you think about where we're going with this article, she's saying that, hey, prices are going to come down. This is going to create such an amazing opportunity for buyers and sellers. And right there, we're being sold a bag of garbage. That is not true. That is not how our world works. So you have to think. Think about what's actually going to happen. And I've been through this in the last video, where we dug deeper into what's happening with first-time homebuyers. And first-time homebuyers. Why? Because affordability is a real issue.

‍

Myth #4 Sellers believe they don't have to pay buyer commission anymore. 

It's crazy. This is an amazing new rule that was not around before. In fact, it's going to prohibit us sellers from paying a buyer's agent.

No, it's false.

First of all, you didn't have to pay a buyer's agent. You didn't have to. You could have just gone directly to get a buyer through an agent. Or you know what? You never had to hire a real estate agent. You could have done it on your own. There's a good percentage of homes that are sold off market, off the MLS, without a real estate agent. You're not required, and you never have been required, to use a real estate agent. You can do this on your own.  

The other piece to this is that the amount of money being thrown at real estate agents for some reason was fixed, like CNN had written earlier, which is also fake news.

It's not 6%. Never was. It was always negotiable. So when you start looking at this, the amount of money that's being offered to agents, simply can't go onto the MLS, which is a service that agents go to to look at where homes are, what homes are available, what's listed, what the price is, all the details, just can't be listed there. You can negotiate it either before you submit the offer or in other ways, and when you look at that, you start looking at reality. 

‍

Myth #5 You can no longer pay another agent. 

‍

And when you look at this deeper, I think the key to this is that this settlement is going to change some things for sure. But a lot of the things that are said to be changed are not what's being said or what the actual truth is. And that's the challenge. I want you to read past all the headlines. I want you to dig through and find out what's really happening, who is actually going to benefit, and who is actually going to hurt. And when you start realizing the truths, you start realizing that nothing really changed too much, but the things that changed, or are going to change, because it's a proposed settlement, the things that are going to change, could be, in some ways, detrimental to some parts of the way real estate works. The fact is, we don't know. We don't know where we're headed.

And here's the truth. If you take a look at the article in the Daily News (see sources), which I also put in the link, it says, assuming legal fees consume one third of the settlement, that leaves just under $300 million for home sellers, or just over $13 a piece. And if it extends to a higher amount, to $2 billion,

It's going to be $63 per seller. And you look at what the firm is getting, which represents the sellers. Here we go, so you can understand what reality is - the firms for Sitzer, Burnett, and Mueller's plaintiffs with proposed settlements from anywhere, REMAX and Keller Williams, are asking the federal court for $82 million. If there's additional money that's collected by way of judgment or additional settlements, the law allows us to make additional fee applications. When you look at the whole picture, you start seeing the reality of what's going on. Don't just fall for the headlines. Go a little deeper.

‍

As I reflect on this journey, I'm reminded of the power of informed discourse and the responsibility we share in separating fact from fiction. The real estate market, with its intricacies and stakeholder interests, demands a nuanced understanding that goes beyond surface-level analysis. It's through this deeper engagement with the facts, the data, and the economic principles at play that we can navigate the maze of myths and emerge with a clearer vision of the realities shaping the American real estate landscape.

‍

Sources

‍

White House Video with Joe Biden

• President Biden Delivers Remarks on L...  

‍

White House Script: https://www.whitehouse.gov/briefing-r...

‍

Fox News Video with Lance Lambert: https://www.foxbusiness.com/video/634...

‍

New York Times Article On Settlement: https://www.nytimes.com/2024/03/15/re...

‍

Wealth Of Nations Quote: https://www.investopedia.com/updates/...

‍

Milton Friedman Quote: https://www.scientificamerican.com/ar...

‍

Myth Buster Article: https://www.heraldtribune.com/story/o...

‍