 What's up? Hope you're doing super well today. I'm gonna play a podcast for you I want to watch this with you because this I watched this the other day is straight Gold, okay. This is Audria Whittington. She's from local logic. She's interviewing James Dwiggins He's the CEO of next home and this guy has a lot of inside information in the industry about these lawsuits What is gonna happen? I mean he gets very detailed in this podcast So I just I wanted to play it for you give you my commentary along the way If I feel like I need to speak up about anything But at the end of the day that the big punchline here is that he says without a doubt Okay, he is a hundred percent hundred and ten percent convinced that MLA that we're gonna be in a world Where they don't allow you to offer the buyer agent a commission in MLS So let me know in the comments if you think that's gonna come true or not I read every single comment. So I appreciate you guys for showing all the support to the channel Subscribe like all that good stuff. I'm gonna put a link below for my 2024 business planning session next Friday. Let's dive in But okay, so the verdict is in this is part due We want to talk about what's happening So first and foremost we're going to try and educate everybody who isn't a hundred percent sure because I actually did promote this to folks who are outside the industry Who really want to learn like what does this mean? How does this affect me because I think for the first time we have something happening in the industry that affects everybody In a real way and there's been a lot of sort of mainstream press in the times and the post about this So I am going to limit you to five minutes, but I would like a five minute maybe two Description of exactly what is happening here with the lawsuits And please feel free to wrap in the verdict, but let's keep it at the facts just so we set the table properly Yeah, so basically starting in 2019. There were multiple class action cases that will multiple suits that were filed that had gotten class action status and These suits were brought to These suits were brought by lawyers go figure what I mean by that is I don't think random sellers just came up with these ideas I think lawyers were definitely part of this process, but the crux of it is is that sellers are claiming that that they were essentially required to pay The commission for buyers agents so the way that this has worked in our industry for a very long time is The sellers agent would sit down with a seller and say I'm going to list your home for X and Part of the compensation is going to pay the buyers agent because the buyer is likely going to be very strapped for cash to be able to Fort a down payment and closing costs and all of these things now right there. I would say that When I go to it when I when I used to go to listing agreements listing appointments all the time, you know I would say okay, it's you know five six percent whatever it is and then The language with the buyer agent commission for me and you can let me know How you guys handle this verbiage wise, but it was always if there's a buyer agent involved, right? Therefore, I'm telling my seller, you know, this is the commission, right? This is what I get regardless if there's a buyer agent or not I think the problem with the narrative out there is that there's always I haven't heard anybody talk about Except for myself. I haven't heard anybody talk about The the situation where there's not a buyer agent involved. Okay, does that mean I get half of what I'm telling you here? No, I get all of it and so I think that's something that I've been trying to make really clear and and be very loud and vocal about is That this is what you agree to regardless if there's a buyer agent involved or not the way that James Just framed it was that get a list of appointments and say hey, here's my commission here So much is going to go to the buyer agent. It's like that's how much is going to go to the buyer agent if there's a buyer agent Evolved right and it comes out of what you've agreed to pay me regardless if there's a buyer agent or not Anyway, I just want to make that extremely clear here And this is part of the problem for me with this entire thing is that the seller You know was paying the listing agent the five or six percent Regardless if there's a buyer agent involved or not Would you rather them not be a buyer agent involved and pay me the full five percent? It's like we can't win for losing, you know, it's sold in two days. You made, you know 15 thousand dollars Do you want it to take 60 days? Would that make you feel better about how much I'm making? I'm trying to get you your money as quick as possible based on the deal that That we agreed to and you signed the paperwork of It's insane This whole thing is nuts to me But uh, let's carry on They're gonna have representation and in order to make sure that we have a transaction that doesn't end up with a bunch of problems You know, we're it's it's happened this way. You're gonna you're going to pay compensation The reason for that also is just to attract bring people to the table, etc so it's been this way for very very long time and Essentially these cases came together. I'm really summarizing here for two minutes But I got a class together and said that, you know, we didn't know it was that way We didn't we didn't understand what we were signing in the in the listing agreement That there's this collusion going on in the industry between the national association of realtors and the four key defendants To prop up compensation based upon three things and then i'll be done The national association governs the oversight of majority of mls's in the united states The mls has a rule in place where when you put a listing in the mls you have to offer Provide an offer of compensation on the other side that can be a dollar for clarity and then When the ccp rule was enacted by nr, which is clear cooperation policy Which basically states that when you are a member of the mls you have to put a listing in the mls within 24 hours What the plaintiffs are using is that these all these different things were benefiting organized real estate because if nr governs it you have to provide an offer of compensation on the other side of the deal, which is likely An agent obviously that's part of one of these big companies to some percentage and then ccp requiring you to put listings in the mls You're there by guaranteeing compensation. They're claiming you prop up Commissions in the marketplace and so They brought these cases forward. There are three of them. No select out on the east coast There's morrell out in chicago the illinois area, which is in 20 markets That's where it's based and then bernette, which is what this just went to trial Which is where we just lost And the verdict of 1.78 billion dollars the jury basically gave everything the plaintiffs were looking for The deliberation lasted under three hours and because it's an antitrust claim in federal court They have the ability the judge has the ability to do treble damages Three times the amount so roughly 5.3 billion is the potential damage amount from the case damn I'm good. I did that in turn. All right. I know you rock and you know what I realized I didn't even introduce you except that I make most people know who you are james doing this is the ceo Of next home one of the largest franchises in the country Among other things and somebody asked me like why james on talking about this And I gave you my answer a few minutes ago and i'm happy to give it but you know What you are speaking a lot on this um, so I want to take one minute on sort of You know how you think this is kind of how you become kind of a spokesperson if you'll forgive me I know you're you're agnostic, but a spokesperson on this issue Well, first is in college. I did a few years of business and criminal loss. I've always had a interest in the legal system I should say as a background number two is when these cases were filed When I read through them a friend of my name rob hawn who is a former Lawyer was like these are really serious things you take a look at he started writing about him A lot of people ignored him, but as I started to read through it and looking at his arguments I was like, well, this is actually a serious problem And if you take all of the pieces that plaintiff has laid out, which I kind of summarize very quickly They they had some pretty strong grounds for a conspiracy claim on Essentially, you know how we prop up compensation. I don't agree with it for clarity I do not agree with it They just took a lot of things that have been placed that have been put in place over time for different reasons And then mapped out this Case and needless to say You know, they uh convinced the jury, which I figured would happen It to me, of course, it's a jury trial and everybody's bought a home So you're gonna be impressed to be clear that all of the jurors couldn't be couldn't be part of the class So I want to make sure that's clear. None of those jurors bought a house in that time frame So there were stipulations to be I'm with you. I'm just for clarity There are stipulations to be a juror in that I don't disagree There's going to be bias because I love americans. I'm one but we're all greedy as shit and needless to say Let me say it a little nicer people vote their people vote their pocket the money, right? Yes, they just do So the point is I think these were very serious cases for a lot of reasons I could spend hours explaining more the details, but just was I was not surprised this verdict was going to happen Yeah, and I'm sure we'll dive into this but there is A lot of things that are likely to change now in our business Let's let's um, and I'll and I'll tell you that the answer I gave to somebody was look I do think you you were ahead of the curve on this and could as to rob if that came from rob originally I'm not surprised, but um, I think you've been really vocal about it And I think it's much like picking presidential elections or stock picks or a hedge fund manager I think you've been ahead of the game But to your point and you and I've talked but doesn't mean you'll be right moving forward It just means that you've been insightful about what what's happening here Frankly well before a lot of us including me. So let's talk about the The ramifications of the verdict, right? So the verdict is a lot of money. No, it doesn't have it. Let's face it You know, and there's potentially a number of other suits that are on the heels of it, right? So it in as with any antitrust case it opens the door, right? So I think we can ask answer any questions later about that, but let's talk about does The there's three segments to this really right does the industry understand the ramifications starting to panic to million articles now Does the consumer understand what's happening here? Not at all. Um, so let's break it into two segments here What should you rather tackle first you choose? I'm gonna choose the consumer because that's the part that interests me candidly more Is because I and for the exact reason that you just pointed out I am a consumer and I did sell my house in the last five years So, um, I have had more people I will tell you most people are like, I've no idea what you do for living in my world Like my personal world and this is the first time I've had a number of friends come up to me and and family and be like What is this? What is the ramifications? What's happening here? How does it affect me? So that's not happened before for me yeah, so basically I'll start here in the united states. We are somewhere between five to six million units short of housing in this country This is an important stat. I'm sharing with you For those of you who own a house that's benefited you Because when you have, you know limited inventory your prices go up and we've seen Basically prices of homes continue to skyrocket not only through the pandemic But even after that and even during a time where interest rates are high prices are fairly stable And that's because of just simple supply and demand economics Now why i'm sharing that with you is the single greatest crater of wealth in this country is owning a house period End of story It is the number one reason how people generate generational wealth in this country is through housing Housing also accounts for about 20 of our GDP. What I mean by that is not just the sale of a house It's the financing. It's home depot repairs. It's the contractor It's everything that touches the sale of a property has about 20 of the gross domestic product in this country so What we have unfortunately created in this country is massive wealth through real estate, but Also something that is incredibly expensive to to afford. It's also very complex. So in for example, california You know, it's not uncommon for disclosure packages based upon the laws and rules and regulations to be 100 to 200 pages deep Everything you need to know about this property every possible thing that could have gone wrong, etc So it is not this is the thing. I think everybody has to understand it is not a transaction that people do More than two to three times in their life It is also the single largest transaction a majority of americans when I say majority overwhelming majority of americans Will ever do in their lifetime. So it's not something you amazon. It's not something new artificial intelligence It's something that's emotional something you amazon it would be on amazon Sure and amazon ironically was thinking to get in the real estate space and they got out Actually googled that in and got out as well. Yeah, so it is it is a very complex transaction Where you're going to spend all of your money doing it now? Why I share all of this is because representation On the buy side is something that's very important in this country. It helps people understand what they're buying Not just the house, but what are the schools? What are the laws that are happening or the things that are in effect the property value because if you buy an asset And it doesn't appreciate that's a problem and people are used to having their house to do that So all that's to say the way the system operates because housing is so expensive Is that the seller would offer? Typically it's not required. It's always been negotiable forever and everybody That's the big revelation to the consumer right and that is to some degree the basis of the case I can tell you I have sold a number of properties. I did not know it was negotiable Awesome. Yeah, I mean it it is Every state has some different rules So I'm going to generalize here because the contracts in each state will be slightly different Typically in the listing agreement. There are always things that talk about compensation I'm not I'm going to generalize now. Nobody reads anything You don't read the privacy policy the terms of use when you buy a product on apple So like I don't buy the excuse that americans are just like well, I didn't know Well, it's because none of us know anything that we sign because we sign stuff all the time So in fairness, let's just go with the fact that it wasn't disclosed upfront. Okay, maybe that's an argument But the reality is the way that this has worked and it's worked this way for a very specific reason is that when you have a represented buyer When you have a represented seller There is less legal Problems that occur later because things were more clear and understood in advance It's like why you wouldn't go to court and defend yourself you hire a lawyer because you understand that there's a lot of complexity to it They'll know the rules and processes. Okay. That's a different thing though. Now you're justifying it and I will get to that I appreciate it. I am just the question question is james Will the industry change? So that because could you argue that one of the reasons it's not very well disclosed by a seller's Agents is because they want both sides and everybody wants dual agency, right? And if this goes away, will the seller's agents start to be more like hey, you don't have to pay You know if we've got you know, will it be will it change the rules of the game? Well, I think the outcome we are swapping and you're changing the conversation, but I think the outcome will be that Uh that essentially the seller will no longer collect compensation for the buyer's agent So I want to make sure everybody understands this to answer your first question So if let's just say I collected an amount whatever that is from the seller Typically, I'd split that amount and give it to the buyer's agent to help pay for the representation of the buyer To make a deal come together. That's gonna end I want to be very clear about it that is done and it's it's not done yet through the courts But it's done like it's going to end the seller is going to be paid The seller is going to pay the seller's agent only and in the future The buyer's agent is going to get paid by the buyer or the seller directly We'll come back to that in just a minute to answer your other question I do think you're going to see regulation put in place. I think you will see more. Okay. Listen to what he said right there He said without a doubt Without a doubt they're going to erase the the fact that listing agents can offer the buyer agent a commission in mls Okay, that's uh And this guy's an insider. So this this is this is I take I don't take this with a grain of salt What are you saying here or clear disclosures up front which has already happened in the northwest mls For sellers to understand that compensation is negotiable You don't have to offer compensation to the buyer's agent that all of these things are options And certainly sellers agents will have to be better about articulating all of that and to be clear I am okay with that I'm a hundred percent in favor of that because Transparency is always good for the consumer That being said, I don't think that is a smart move Or sellers to just go down the road of well, I'm no longer doing it It it is I have talked to insurance carriers about this. So I have a lot of data When you have unrepresented clients your chances of Ending up into legal liability goes up significantly And you know what else somebody brought up to me that I was talking to a few minutes ago before this was safety You know, I mean so They made the comment verbatim nobody's coming into my house without a licensed real estate agent Representation and it's interesting because there was a company can't remember their name a few years ago And I don't know if they're still around and they might be But they were offering a service where you would do a background check of anybody coming into an open house Yeah, and we see that already right it's more like you see more scheduling times So I do think that that's part of I think it's part of it It's may not be the primary but there's certainly a manager knowing that this person has been vetted by the agent So, um, you know, you are letting them into your house when you're not there Like there's there's there's things with that all of this stuff adds up into it To what degree and we'll debate this in a minute is is arguable But I think that it's important to remember that the reason why you were doing this is because this is the key point The buyer is going to spend every dollar they have to be able to afford your house Because your house has gone up massively in price It is very expensive to get financing today at 8 interest rates The buyer is strapped for cash and so to have the buyer have to choose Of whether I want to have representation Or not because I can't afford it anymore is the debate that we're going to have significantly And I think if if I and I'm in this not from a biased perspective, I've bought and sold houses. I own many Um, I'll use an agent locally I could do it on my own because I don't know the rules and laws and stuff of this particular area You know hundreds that and that's a just That right there's a point I want to really bring to light as well and I've talked about this me being a Professional agent here in my area. I've done over a thousand deals here commercial single family condos land everything I know this place like the back of my hand for me to buy something here local Do it with a breeze For me to do something in miami Or anywhere else. I'm not going to feel as comfortable and this is coming from somebody who has 21 years experience As an agent helping people buy and sell real estate who has a full Fully matured career doing this I wouldn't feel comfortable buying something in atlanta without having someone to consult with Through the process that has my best interest in mind. I want a fiduciary and I'm willing to pay for that Um, so I think that that's a very good point even even Professionals right like james said he would he uses an agent So I can't even imagine what goes on in the mind of a consumer when they go to buy or sell a home Uh with no experience even if it's in their local market. I mean you don't do this every day Um, you know think about that for a second So, you know, I gave you that analogy 100 and I gave you this analogy when we talked yesterday, which was I was a loan officer when Automated lending first came in years and years ago and everybody said it's the death of the loan officer You can get it through lending tree. Nobody's gonna pay a loan officer anymore. It didn't happen. Um, it didn't Mind you probably less Much like this industry you paid less It's more competitive. There's more fees But in truth, as I always say and I don't mind And count all this as long as people need having done 10 years of being this person As long as somebody need people need somebody to blame Or to hold their hands. I think it's blame But you know, then they're to your point. It's the largest transaction and they're always doing it. Yeah, but I'll also remember You know, you're you're buying to your comment to blame. I'll take that a step further You know when you're working with a real estate agent, you're also you've got errors and emissions policies there So like there's there are things in place That if something went wrong There's an ability for some of these things to be managed. I I worry Significantly in a world where and you can look at this in australia other countries In fact, I did a great interview with damien ailes the new co of realtor.com on my podcast and he was in from australia And he was like it was terrifying To buy a house where they do it in auction on the front lawn of a property by the way And we're always the lawyers are comparing us to other countries. I'm like you're stupid Like the countries don't opt. This is the best possible model developed in the world currently today Doesn't need to be refined sure But I would hate to be a buyer sitting on a front lawn with 40 other people trying to auction on a property Well, you don't know what questions to ask. I mean, come on. So There there's there change needs to happen We'll talk about that because some of my comments are controversial But I see a light at the end of this tunnel that isn't as bad as most Um, but I do think that consumers need to understand That it is smart to have a buyer represented It is smart to have somebody who understands the process and can explain it to them It is smart to have an agent help you understand what to disclose and what's going to happen Uh, will a model shift potentially we'll debate that I'm sure in a minute, but the the model's designed to limit liability to have clarity transparency And have somebody understand what they purchase because by the way, I'll make this last comment and then I'll get off my soapbox Dual agency is the worst idea possible I'm very vocal about it. The same agent representing both sides of the transaction. By the way, can What's just really where this whole thing started? Let's face it to some degree and that's certainly where the doj will go next But by the way, I talked to my insurance provider does her, you know So the number one claim that happens the number one majority of claims for errors in emissions policy Is dual agency. It's when the agent represented both sides and someone felt they got screwed And then voila ends up in court and wait until there's unrepresented buyers right now. The number one reason is dual agency Wait till there's unrepresented buyers We'll see if that holds firm. So You know, well, let's um, let me let me cut in here. First of all, we have a raised hand We are not taking questions until the end and frankly only if we have time because I know This is a big old can of worms. So if you have any questions, I will try and get to them Please type them into the chat. We appreciate it. I will be trying to read questions and we'll try and leave time Okay, so the next thing I want to segue into is Um questions about like isn't this model of sort of this consider service Or moderating the fees on behalf of the consumer. Isn't it already out there, right? You and I talked about this yesterday It's out there already, right? So can we talk about some of the models that exist today? Because I do think you're right. There is this misperception a little bit that suddenly Nobody stressed this. Nobody has a model that caters to this new paradigm, right? Yeah. So can we talk about that for a second? Yeah, so let me Let me first start to frame this up and then I'll and I'll do it fast I know you want me to move through this quickly. So There's nothing that prohibits And it's unconstitutional and illegal. Okay. There's nothing that prohibits a buyer from instructing the buyer's agent In the purchase contract to put a stipulation in it that says the sellers to pay the buyer's agent's compensation Just for clarity. Now, there's going to be some rules around each individual state and some things to work through I'm generalizing my comments here because every state's a little different But there's in general a buyer can say I You know, I'm green to pay you x And I want you to make sure That the seller pays it as part of bar the sellers now pay Another thing that can happen the seller can offer a credit To the buyer and the buyer can then pay the buyer's agent And then the buyer can also pay the buyer's agent and I will just add this final comment And I'll talk about models is that you will see a day coming very soon. I promise you this is going to happen Where there'll be changes in ltv and we're working through fanny and freddy and n er's doing a lot of this stuff now Where the buyer will have the opportunity to finance Compensation or any variation of it could be that the the buyer goes I'm only going to pay whatever and the seller needs to pay the other portion This becomes a negotiation between the buyer's agent the buyer and the seller And the seller's inspection is like exactly by the way. This is how it's done in commercial real estate This isn't anything new so everyone needs to just like calm down Like there is plenty of ways that this can be done now. Let me go the other way So everyone's saying that oh, this is the end of buyer's agency. No Relax Americans don't wake up and be like, hey, I want to go buy a house and let's just go do it all on our own No one does that that doesn't happen. We have a it's a great stat. I love to remind people of 1960 dual income households was 30% now It's between 60 and 70% the point is mom and dad are both working If you've got kids I do like we're just trying to figure out how to get through our day We pay for convenience. In fact, a great example of this was open door Consumers were willing to pay premium and compensation They charge between seven to 10 at the time as a as a compensation And you take a haircut on selling the house all for closing seven days all cash The point is Americans are willing to pay for premium service the debate goes Buyer's agency goes away. No, that's just stupid. That's not going to happen. Buyer's agents are just not going to go away They're going to change the way they do things and then there's essentially three models that everyone's talking about the first is Well, maybe it'll go hourly like a lawyer Okay, well, let me break that down as to why that won't work if you read the irs statute for your independent contractor status It's literally on any ars website. You cannot charge hourly Just to be clear. It's item b of the statute. Go read it. Just look it up on any ars website So you can't charge hourly if you want to remain an independent contractor Which means you either need to become a w2 an employee under the brokerage. I promise you that is not happening Brokers are not going to go employ all their agents Redfin what I'll do some have some have I mean We're talking less than a percent of all brokers Have people as employees Um and look and I mean this but you're acting like it's never been done and it has It has it is a very difficult model to run It is usually teams that are very efficient in what they do with a pipeline to handle that And the best example of that model not working so far is redfin And I mean that in the most respectful way possible, but they are moving away from hourly Literally now in traditional base not touching that one You can read the headlines. I'm just stating the facts So, um, they're testing traditional based agents now in a couple markets and on the west coast So all that being said, I don't think that's the answer the big one probably is Dubaiers agents charge a flat rate Whatever I'm making up a number here $3,995 for all whatever And or is it a menu of services these models aren't New These I want to I'm sure someone's listening that does this. I'm not saying they don't have a place Factually speaking, it is a very small percentage of the market and has been for a very long time Most of the big companies that have come in to try those models. I'll name three just as an example Foxtons for those of you been in the industry as long as I have go way back purple bricks Rex all three of those companies had massive funding all three of them filed bankruptcy no longer exists in the u.s. market so It's a it's a question that is debatable and maybe somebody will have the new secret code for it And maybe the pressure on comp pushes that but I was going to say sometimes it's timing sometimes Sometimes models come into play Because there's no need like you think sometimes in business Something comes into the industry that you think you're going to redo the industry But the market is not there sometimes the market comes back and dick and dictates And I think it's a question of whether or not that's where we are today I'm not questioning that these things won't pop up. Maybe they gain markets market share this time Well, then we do one question, you know, we don't know The third one is menu of services and again not a new business model. So many you pay for specific things these actually The irony of this is the two companies that Were the biggest in this and actually were bigger and then have simply decreased in size over time was help you Sell an assist to sell they're a fraction of what they were and I mean that and Non disrespectful to anybody listening, but they were a lot bigger and and americans had chosen to go down a different route for A long time. So these companies barely exist today. So I think it maybe the market shifts that I don't think hourly is a realistic thing. I think that's not where we are if you have comp pressure Let's go down this path Audrey and say that there is pressure on compensation on the buy side agent Well, the last thing a broker is going to do is take on more expense with a decreasing pool of revenue So I think if anything those other two models might gain some some traction Well, I look I think the reality of it is and one of the comments we have and is I think what we're saying just to sum up and then I want to kind of go and talk Circle back to what the industry is doing Is it's pretty clear number one that we're going to have You know some slough off of agents, right that that as consumers 20 to 40 percent That's you're predicting 20 40 percent. I'll leave it with you. I don't have a prediction 20 to 40 percent Less agents. What do you think about that? So 20 to 40 percent? What is that? Let's say there's 2 million agents out there, you know, there's like 1.4 something with Nar and then there's another how many ever that aren't a part of the national association realtors. So Let's say 2 million. All right. So 20 percent would be 400 000. He said 20 to 40. What did he say? Let's see what he said I think what we're saying just to sum up and then I want to kind of go and talk Circle back to what the industry is doing Is it's pretty clear number one that we're going to have You know some slough off of agents, right that that as consumers 20 to 40 percent 20 to 40 percent. So that's 400 to 800 thousand I mean it's close to half 40 percent is close to half. It's almost 50 So think about that for a second and this guy said it real fast with an incredible amount of confidence Now I've been talking about this You know for a couple weeks now Um, I feel like the future of this is less agents more market share per agent. The ones that are left are Good agents higher quality agents Um, and we have a different way that we do business. Maybe the buyers ask for the buyer agent fee to be paid in the contract Um, you know, there's a lot of uncertainty about exactly how we're going to operate But there's going to be a new way that we operate. I think that's clear Um, james here thinks that there won't be any buyer agent commission offered in mls And I do agree that there's going to be fewer agents in the industry. Let's get it That's you're predicting 20 40 percent. I'll leave it with you. I don't have a prediction But there's no question that I agree that there'll be some percentage of agents who are in the industry We all know the 80 20 rule that will not be in the industry anymore because They're just not going to get paid period and it's not going to be worth their time Did you want our two transactions a month or you know 10 a year? Okay, and and brokerages to some degree Will probably not be all that sad about that because they make the majority their income from high producing agents Right, although they make money on actually ancillary services services wait No, but you would know this better than me. So you go ahead and jump in Just don't make a majority of their money off the highest producers. Unfortunately Usually well because of the splits is that or however their comp is but usually the highest producers have the best deal And it attracts all of the level producers brokerages make most of money off the middle of the market Not the top fair enough. Okay fair enough I maybe and where I was going though and please tell me if you think I'm wrong is that They won't be necessarily crying a river over these over the low sort of low transaction producers I mean, it depends upon the model. So Sometimes they make a lot of money off training those people and selling What what we call in the industry body shops Yeah companies that make money off of just like a monthly fee per agent and or You know per transaction depending upon how their structure they'll see some of that pain Look, everyone's going to feel some pain from this. There's no way around it So you'll see if we lost 20 and I'll give you a couple stats I think that are important. So in 2010 we had about 1.4 million realtor I'm sorry 2008 about 1.4 million realtors by 2010 11 we were down to 1 million Now that was market conditions that caused 400 000 realtors to go away My 20 to 40 number will be fairly accurate if the market continues at the way it is and the industry doesn't figure out How to articulate its value better then you'll see a number between 20 to 40 percent But you'll see this by the way by december with mls dues and everything else We've already lost some between 50 to 60 000 agents already that number is only going to go up That to be clear is not related to these suits yet. That's just there's not enough deals going on in the united states That's true too, and one and probably they'll attribute it to the suits, but in truth the market is nothing to do with it yet This is aren't having an impact. Okay, so number one. We know we're probably going to see less agents We know there's going to be a variety of models including buyer agency, which will hold to what which will hold true So you're going to see let's face it the choice for consumers on how to address this issue period There's just no two ways. There always was but you'll see more of it. Sure. Okay people will become educated as to their choices We'll leave it with that. How's that? um, and then I think How does the industry deal with this? Let's circle back. I did the consumers now Let's talk about the industry We have a lot of industry people on the call. You know, um, how does the industry deal with this? How do we have lesses brokers? You know, there's a lot of talk. I mean What do you see as the ramifications for the industry? So I will just simply state that you asked the question why me earlier is I am talking to Extremely important sources that most people don't have access to I'm not going to name them. We'll just leave it at that So I think it's extremely important for everyone to understand a few things here This was the smaller of the cases That we just lost and And then this is and I'm going to lay out the ramifications. There's a little detail here, but here all this so So what has to happen now is we're waiting for the judge to decide essentially what the total damages are He'll make that ruling at some point here very shortly The plaintiffs will potentially file in for injunctive relief I have heard from multiple sources that the actually before he gets going on that we won't hear about this injunction Very soon. It's actually going to be April or may possibly april or may if the timeline works out the way that the courts have said Department of justice is working with the plaintiffs on that draft I've heard they were filing this week and I've heard potentially filing for injunctive relief A little detail here, but So what has to happen now is we're waiting for the judge to decide essentially what the total damages are He'll make that ruling at some point here very shortly The plaintiffs will Potentially file in for injunctive relief. I have heard from multiple sources that the department of justice is working with the plaintiffs on that draft I've heard they were filing this week. Then I've heard they're not so just there's a lot of back and forth That injunctive relief will likely include if they do it Um a outright request on ban of compensation in the mls I want to be very clear about my statement here This is coming It doesn't matter whether it's through this case Or whether it's through another or whether the doj does it or whether the wild card of the federal trade commission Which nobody's paying any attention to Um comes in and rewrite the rules a day is coming very quickly here where compensation is no longer Shared through the multiple listing service. We'll talk about that in a minute So what we're waiting for right now the sort is the next piece of this is what what is the plaintiff's going to Do next with their injunctive relief if they do and also What is the judge to decide on the amount? Then you're hearing ndr talk about appealing and obviously the other defendants appealing as well Look the the problem here is I can't speak for them, but i've seen the numbers I've looked at the finances none of these companies can afford these kinds of damages So in order to appeal they'd have to post a bond They have to basically get somebody to guarantee through assets These damage amounts in order to appeal because what they don't want to do the judge doesn't want to do is have The defendants spend all their money and then plaintiffs get nothing. So this is the process that it goes through I'm simplifying there's more more to This is good. This is good. So What ends up happening is if if any are appeals that appeal is this comment. You've been saying it'll take years to play out sort of Maybe if we appeal we can appeal the damages portion and that will take years Potentially could take a long time to go through that and make all the way up to the supreme court in theory the problem here Is and this is now i'm going to get a little bit deeper into this Is the plaintiffs have already filed another class action suit and not just now In missouri, but they've named seven other top brokerages across the us in all 50 states What's very interesting about this is they filed a class in all 50 states That opens up the class. So now it's the whole nation They're claiming damages of 200 to 600 billion dollars potentially Don't freak out. These numbers are really stupid. I'll explain why in a minute but Also strategically what's interesting is the class has been opened up nationally. So there could be a way to settle this Nationally I'll come back to that. So it's an advantage actually. Well, it's well, it's a disadvantage an advantage to pay him by your looking at it So, yeah, but they've signaled look the plaintiffs have signaled That they want to settle They already did it with remax and anywhere for 50% basically of their free cash So what's also interesting about this is the way this works is there's these three different class action suits all the lawyers For those three different suits got in the same room and negotiated a what i'm going to call global settlement settlement with remax and anywhere So they all agreed to share in the pot of money that was given to them at Every single person who's been following this Has been saying that like it's going to be billions of dollars and and candidly have been saying well That doesn't make any sense. They don't have that money. So you can't settle for something you don't have So the numbers came in low file suits bankrupt companies they want to make money And and I want to give a historical perspective here the largest class action suit in this country That's ever been filed was against the tobacco industry and it was for 206 billion dollars Now the tobacco industry has a lot more money than the real estate industry like a lot did at the time So, you know, when we hear 200 to 600 billion dollars with the damages, it's just nonsense That that's just a number. It doesn't mean anything. So even in this particular case where you've got You know, let's say it's 5.3 billion. Let's say the judge gives trouble damages and goes for the full amount The industry doesn't have it. So the choices are We can negotiate a settlement for what we can afford to do to live another day Or we'll just file chapter 11 and peace out. You're on your own So that the plaintiff doesn't want that and neither does the judge because the judge wants to find a middle road for the plaintiff Well, if they declare bankruptcy, the plaintiffs aren't going to get anything We all know there are many mainstream cases of that So so my point here and I'll move this along is you need to everyone needs to chill out on these numbers They're just posturing. Okay. We have to find a balance through it now The way this is going to go is compensation We'll end in the MLS I think you're going to see a lot of rules that were well we're outlining. They're important for people to understand These are the things that you should be expecting to happen So number one anybody who requires membership in the national association of realtors will need to be if you haven't already changed your rules So that it is an optional thing for agents to choose to do that is a requirement in the current settlements of remacks You took about brokers. You're taking about brokerages not requiring to be part of the Yeah, correct. Yeah, this will be a requirement for them to not to not require any R And that also means the code of ethics, which I want to make a comment which shows how stupid the plaintiffs lawyers are Because remember the code of ethics It only hurts consumers like you idiot. So I would love to say that by the way publicly So you can't the or fall the code of ethics, which is that's just harmful to consumers No requirement to make or accept offers You have to disclose to homeowners as we talked about compensation what it is that it's optional It's negotiable that you don't have to offer compensation to the buyer's agent You will sign it. They will sign a disclosure with very clear. It's going to be like respa. It's going to be like respa Yeah, and I think that you'd use an example earlier. I think that it's important is to Remember how the finance industry was changed after Dodd-Frank and so if you go back There was a lot of disclosures to help consumers understand what they were signing in the loan process It didn't get rid of loan officers. No, I still use loan officers Like just there's just more disclosure and again, I don't think that's a bad thing You can't say that your services are free if you're a buyer's agent You can't filter comp in the mls, which is a no-brainer that shouldn't be there. Anyway Um, you have to advise all of the agents that they have to show properties regardless of comp You know, all of these sort of things are going to be a standard process That'll be that everyone needs to plan for right now I'll stop there and I got a few more, but I want to see if you want to ask any questions. Audrey before I continue Um, we do have questions coming in, but I'd rather you finish and then maybe We'll you know, um, we'll go to what will happen next Here's the plan that's going to occur next So right now 12 states require buyer broker representation agreements At the very latest before an offer is submitted. That's already state law in 12 states I think you will see all states move to this because it protects the buyer It establishes fiduciary. You made a comment earlier It gets rid of looky lose going through a seller's property that aren't interested in actually buying a house There are advantages open houses may just go away completely I mean or you're represented and you've you've signed an agreement with somebody at the minimum So that's that's the first thing the second thing is I tell every every agent including, you know Almost the 6 000 in my company Uh, you need to treat every buyer like a seller you sit down you explain to them what you do You articulate your value you you talk about the process the complexities of buying a house You need to learn to tell to talk about your services and then Have an agreement in place what they're going to pay you and then explain to them this process Okay. Yeah, um, that is, you know, I do try and make this master class not an infomercial But I will submit my little Earn my salary plug here for local logic, which is that we are moving heavily into products Including our location assessment report that do nothing but support And are out there to help support the buyer's agent and the seller's agent But specifically really the buyer's agent in terms of understanding what expertise they bring to the market So if you want to learn more about that find me, that's my plug But I do think we're ahead of it as well and understand that that's where the market is going And in truth, I do think to your point the industry Look, I've been in the industry. My whole family's in real estate. I use an agent I mean, I always think if nobody's going to use an agent it's probably going to be you or me Right, we're definitely going to think we know better and I have I have a phenomenal agent So I and it's been incredibly worthwhile every time. So I think yeah, you're right the onus is on How do we make sure so really one person said what's the future or the future really is that The industry has to be a little more equitable the industry has to be more careful about articulating the value There will be some new models. Some people will take advantage of those models But those models will still include compensation in one form in some type of form. Yeah, exactly And by the way, that doesn't mean that there won't be people that don't want to use an agent They could already do that today currently in the market right now roughly 8 to 10 of buyers Are for sale by owners. They don't I'm sorry or there are are unrepresented in the process Remember that half of those are people that are buying a neighbor's house or someone from the family So like it's that's an interesting question though. So let me ask you a question before I turn it over to our questions, which is Will this and this was in my head yesterday. Will this and will this increase pocket listings? Will this I mean, it's already a trend, right? I mean the last sort of ripple of the industry Was a few years ago with, you know, outlying pocket listings. So do you think it will affect that? Well, this is a really great question. This is my curveball Well, it's not a curveball. It's actually a fantastic question There's a lot of debate right now on whether the department of justice wants the clear cooperation policy rescinded So the the requirement of if you take a listing that you put it in the mls There by marketing it to the greatest exposure possible, which is the world The reason why that was enacted was agents were telling sellers. I have my own buyers I'll list it and then I'll bring my own buyer to it and then essentially I'll cut my comp and we'll do an off-market deal It has been proven statistically. This is a fact That when you do deals like that the general market will give you about a 15 lift on price Then if you do it off-market that is a literally statistical fact proven over and over and over again So ccp was put in place to stop that because we wanted the seller to understand that putting it in the mls Getting it out on zillow and all of these other portals and realtor and all the rest of them Including the agent etc and making all agents aware of this property in the mls will get you the highest price possible so the big question is The in the department of justice has been investigating this policy The question is do they want to rescind it? I would argue that's actually going to harm sellers if you rescind that policy I think there's a lot of implementation issues with ccp. I've been vocal about that But I think the rule itself is designed to protect consumers the reason why it's an issue with the department of justice is because of This requirement of offering compensation to the buyer's agent And if you have to if you take a listing you're required to put in the mls Thereby guaranteeing That's the issue, but if that's gone which I believe will happen Then in my opinion clear cooperation policy is a great rule because it's not requiring compensation But you're protecting the seller. There's a very big debate going on. I know Both at the federal agencies as well as in the industry about how that plays out Um, I do think the biggest target next This will be the big thing the doj goes after is dual agency. I do think they want to see it go away I'm again. I'm vocal. I also agree. I think it's not good for consumers only in very Ah, I figured out a plug only in the case of like if you're taylor swift Then you want to sell a house to not put it out on the open market. That was a joke earlier um, so To me it's for you there is a there is a there's a time and place for it But it's a very small case use case Yeah, I'm not even sure you're I know you were you're we were dying to like throw in swifty But I don't even sure that that that applies. Let me ask we have 15 minutes left Um, let me kind of throw in some questions One of the questions I have is I'm just going to read it off because I don't I don't like to do a good job of synergizing it thoughts of how this impacts referral sources on the buy side Even in states that require disclosure of referral fees most times it was uh, that was paid via the seller through buyer agent comp if Buyers have to bring more money to closing to pay their agent and a referral fee is disclosed for shown in the settlement statement The buyers may have a problem with that Yes Okay, next question. No, I think look look I I I want to I'm being a little bit of a smart ass. Um There are going to be a lot of things that have to be worked out in this new world. Um, you know For example, when we talk about Financing you can't you can't do it with VA currently at all like you can't have that done through a VA loan Um, you know, we've got a 3 cap on conventional. There's a lot of things are going to have to be worked out Both at the state levels from a disclosure perspective I'm not downplaying the fact that there's a lot of things we're going to have to maneuver as an industry I just don't think these are insurmountable Things like this how we disclose Stuff and whether it becomes an issue. Yeah, and I I go back to this comment that We're going to have to learn how to articulate value very clearly to a buyer And they are going to choose whether they want to pay you whatever you're asking or not and it becomes a negotiation and then You know, you're going to have to figure out how to get the seller to put some in or get them to finance or discount I I don't know. We're gonna this is going to be the game that's going to be played next I think as I've been very clear about I think very good agents will not have a problem commanding what they want to be paid I just yeah, and then we look forward to giving them the tools to do it and there'll be other companies to give them the tools to do it Um Another question Was on baton one and baton two What are my thoughts on them? Yeah, I think so Well, we kind of covered this a little bit earlier. So the national class that's been opened up in this this recent case is a It's it basically opens up the amount of damages So remember it's a four-year statute of limitations on these cases So it's anybody they who sold a house within that four-year time frame could join the class Well, technically everybody's entered into the class. You actually remove yourself from a class, but uh, you know The thing to to keep in mind sylvia. Um, I think that's actually one of my people. Um, okay is The numbers that they're talking about Or it because if let's just say that they got 200 billion dollars Where is anyone? Where is anyone in the real estate industry gonna come up with that money in the worst real estate market in the history of Real estate right now the only options are The plaintiffs can get some type of number that the defendants can afford to pay or The other options we talked about is we just go bankrupt and I I truly I would say that that is a very not Saying this because I'm in the industry. It would be a very bad thing for consumers In a very complicated world in a very litigious Transaction to not have representation and how all that works out. So Right now. I understand the question and I do think you've probably answered it before it wouldn't got asked But let me ask another one then Um, how can we make being a member of NAR optional when our local MLS is board owned and requires We'd be members before we can make a be a member of the MLS your MLS has the ability to change that Is the Okay, well, it's never been to be clear. It has never been NAR's policies That is a local policy that's decided down at your local level. It always has been for a long long time So, okay, remember listen to that She he he's saying That you don't that the the reason you have to be a part of NAR To have access to your MLS is not NAR's decision or NAR's rule It's your local board's rule. Now. Isn't that interesting? Do you think the MLS as well? I do. I think there's going to see a lot of changes I didn't really cover that. I think you're going to see a lot of changes around The there's going to be a lot of discussion about whether NAR governs MLS's I really caution people from moving away from that because if you think about it this way right now We have a uniform set of policies that apply across a majority of MLS's across the U.S If all of a sudden every MLS is different It could be a wild wild west some degree, you know One MLS has one policy the board is another and then it's completely different, you know Well, it's happened before and I'm not sure I was this way before and I've been in this industry my entire life. I'm third gen I've seen the days I can actually speak to this where there was no MLS where it was a book Wait a minute. Wait a minute. You just gave me the time to say my perfect sound effect Right, that's the dot matrix printer. I was just explaining the history of the MLS to somebody the other day I remember when it was Boris it was a DOS based system for those who know what that means So my point is These things there are a lot of policies in place to protect consumers. We have to make sure we understand that It's also to protect the industry as well That doesn't mean there's these policies don't need change or modification But I do worry about a world where Everything is uncoupled to the what I'm referring to is not comp just how it's attached in our How it's governed what those policies are it can be a very significant problem and the best example I can give you where I live here in the bay area. We I literally border three multiple listing services And if you if you lived in my area, you would have to join A few years ago, you'd have to join all three MLS's So if if they if there wasn't a unified feed which there is now and everybody did their own thing again It actually just makes no data sharing. Yeah, it's a mess So there's a lot of these rules that need to be thought about but the answer is I do think if you're going to see consolidation amongst agents, which you will And certainly pressure on compensation on the buy side, which you will I think that it's you're going to see some you're going to have to see consolidation amongst MLS's and associations as well That's going to happen. Well, and that's already happening. Let me let me bring up a couple other things that Um I really am very fond of john who joins But look the question here isn't the nar policy That if the broker is a member then the agents need to be can the broker allow agents to decide? Well, I think to my comment earlier, which is important All of that is going to be optional now Okay, that's already part of that's to be clear. This is already part of the settlement for the franchisors With the remax and anywhere settlement that there's no requirement to join nar these are all going to be Negotiations in in all of this stuff on what those requirements are. It is very clear to me Again, I'm a spectator here. I'm not currently a defendant. God forbid But it's very clear to me that this lawyer and this firm wants to see, you know nar's structure and Strength diminished Significantly and in their world they want people to make a choice on whether they want to join nar or not Um, I will I will add one other comment to this It is extraordinarily important for our industry to understand despite all of nar's issues And there are many which we don't need to get into on this podcast The one thing that they're very good at is lobbying This is a comment. I think it's extremely important for both buyers sellers and agents What nar does exceptionally well despite all the headlines that you're reading They are a protectionist company or organization for private property rights in this country I cannot begin to tell you how many bills have been squashed by nar written by stupid politicians That have really bad ideas that would destroy equity home ownership, etc And that doesn't mean they get them all right, but I can tell you that without the organization's strength We would look very differently in this country from private property rights equity development, etc So I caution everyone as you are making these choices To what you want to do and everybody has to make their own choices talk to your own lawyer, whatever I can tell you internally for me Is that I'm continuing to emphasize that our people Should be a member of that. I'm not saying it's a requirement, but certainly I will advocate that Internally in our own organization. So I think that's I think we can wrap it up there too because I really like that I do think it's important. I did not know until like about a year or so ago that nar is actually The number one and I live in washington dc So this is a powerful saving because I know who lives here Now nar is the largest lobbying organization In the country, and that includes over let's just for perspective. That's more than health care Like all the the big pharma All the cars the unions you name it. It is number one And it is not only because there are a million plus agents nationwide It is because of all the things and I think maybe it's interesting Maybe we end this on nar needs to do A better job, right of articulating the value it brings to the industry too. So maybe it My my friend always says the fish. It stinks. It stinks from the head. So maybe if If any are cloud unit, I'll tell you later who said it But the nar maybe is where Is is has an increased responsibility, right? Not just a mention in a modern family episode of real tour versus, right? I don't disagree with you. I've been and well, we'll end it here But I've been very vocal about the fact that I think nar needs to have a pretty significant change in its pr Strategy and this isn't a dig on anybody there. I know a lot of people there But nobody really cares what the word realtor means if you ask consumers, they don't care Not only do they not care or do they don't know they don't know and I think more than anything is it's We they do need to do a better job of articulating value I think the issues in which they solve should be more front and center But also I'll say this our industry needs to do a better job of educating itself Because I can't tell you how many people I've spoken to in the past like two weeks Didn't even know these lawsuits were happening and I'm like This is like you can't you can't be in a world of business where this has been going on for Three years or longer and then just be aware of it. Like you need to educate yourself too Spend time researching what an organization does before you draw conclusions And then it's a fair debate. It's like, well, I I don't like what they do this And this but I'm like I said there's a lot of things I don't like that any hard does A lot of things I do like that they do and I think that you cap to You have to separate those two and figure out sort of what you want to support and not and You know, we also have to be facing the fact that these changes are coming I do want to answer this one thing and we'll call it. I think it's very important to pay close attention over the next Few months on these cases because I am very much out in the public saying I think a settlement is It is the right approach for our industry And and getting ahead of it now and trying to figure out what this new world looks like and and then get past this Now, I don't know about you, but that was some incredible perspective for me I really appreciated james's commentary and insight if you know james dwiggins the ceo of home Next home if you're part of next home, and you know him, please reach out and tell him I would love to have him on my show. I send my messages on instagram Haven't heard anything back Anyway, let me know your thoughts on all of this. Everything is still up in the air But this gives us some real insight of a real insider. All right until next time