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  • Writer's pictureChristy Murdock

After the Sitzer-Burnett ruling, what will the future of real estate look like?

The Sitzer-Burnett ruling handed down in Kansas City, Missouri, this week sent shockwaves through an already reeling real estate industry. The $5 billion judgment awarded to the plaintiffs did what even an explosive New York Times expose couldn't do: It ended up finally making legions of real estate professionals openly question the motives and tactics of NAR and ended in the "early retirement" of the trade group's CEO Bob Goldberg.

I want to make it abundantly clear that I don't have a dog in this fight. I have made my living as a real estate content creator for far longer than I was an agent. However, because I know and work for so many agents and brokers, it concerns me that many of them are just beginning to wake up to the case itself and to the ramifications this first decision will have.

I say "first" because there are other bombshell commission lawsuits in the pipeline, including a new one that was filed within hours of the jury's verdict in Sitzer-Burnett. While Sitzer took aim at the big dogs of real estate like Keller Williams and Anywhere, this new one draws a bead on smaller, regional real estate companies like Howard Hanna and Douglas Elliman along with newer companies like Compass and eXp.

There's a ton of armchair quarterbacking going on right now. Much of it is aimed at the way in which NAR and the other companies failed to adequately defend themselves, and, by extension, their agents and members. You can find lively debates on social media, in the comments sections of Inman's coverage, and anywhere else that real estate pros gather either virtually or in person.

Of course, the thing that people are talking about is less the ruling itself than who's going to pay for it. Many Realtors, already frustrated with NAR's practices and feeling that the organization is culpable for policy decisions that led us to these lawsuits, may be disinclined to continue their memberships, especially if they feel that the money is just going into the pockets of the attorneys on both sides.

Making predictions is the purview of fools and hucksters. I hope I am neither. However, I think I am well-positioned to make some early predictions on what will shake out in the days ahead and what you as a real estate agent need to be doing right now to create a path for the future of your business.

NAR will either radically change or an alternative will replace it

As part of their early and, it looks like now, prescient settlements, both Anywhere and RE/MAX got away with relatively modest monetary consequences. Both agreed to make NAR membership optional for their agents and brokers.

Prior to that, Redfin instructed its brokers to pull out of NAR in any states and markets where they were able to do so. There's probably going to be a lot of that happening in a lot of companies across the real estate landscape.

When it was announced on Thursday that Bob Goldberg would retire more than a year ahead of schedule, his interim replacement, Nykia Wright, was also announced. She's the former Chicago Sun-Times CEO and by all accounts tough, smart and no-nonsense. All of those qualities will be tested by an organization that is bad at optics and filled with nonsense, it would seem.

When Wright took over the Sun-Times, she whipped it into shape prior to navigating a deal to move the venerable newspaper into the ownership arms of Chicago Public Media where it became a non-profit.

As interim, Wright may be a placeholder or NAR may be waiting to see what rabbit she pulls out of the hat to turn this once powerful organization into something viable and ready to help its membership tackle the challenges of the industry's future.

It's hard to determine what might come up as an alternative to NAR. Maybe there will be more emphasis placed on local and state associations with a commensurate shrinking of the NAR national and corporate structures. Maybe there'll be a new trade group to take its place.

One thing seems to be clear, however. No longer will NAR membership be a no-brainer. Agents and brokers will have to determine what NAR can do for them before they decide to invest their hard-earned dollars there.

An alternative to the current buyer commission structure will need to be found

In light of the verdict in Sitzer-Burnett, there will need to be a new way to determine the amount of buyer commissions, define that amount per transaction, and ensure buyer agents get paid. I don't think buyer agency will go away. It shouldn't. If the madness of the last couple of years has taught us anything, it's that, given power, sellers will wield it in destructive ways. Buyers need an advocate.

That said, how will we ensure that buyer agents get paid? Even with a buyer broker agreement spelling out compensation, there's currently no way to collateralize the buyer agent's services other than having the funds come out of the sale of the home.

It would seem that the simplest solution is to have buyer agent commissions come out of the buyer's closing costs, but my guess is that this will just result in buyers asking for seller help at closing, which amounts to the same system we currently have, in practice if not in name.

If we're forced into a situation where buyer agents have to provide their services with a lick and a promise from the buyers that they'll pay when everything's done, we're going to end up with a lot fewer buyer agents and a lot more unrepresented buyers. If the buyer decides not to pay, what's the buyer agent going to do? Put a lien on that nice, new house? (Well, maybe...)

Agents (and their brokers) are going to have to get a lot more informed and a lot more professional, fast

I work with many agents and brokers all over North America. Most of the people I work with are smart, savvy and incredibly well-informed. However, the low barrier to entry for real estate means that there are many more agents who get into the industry on a whim, hang out for a while, then exit as quietly as they arrived.

I am constantly amazed at the real estate agents online who don't know the difference between an agent and a Realtor. Who don't read anything about the industry or even the economy. Who don't understand investing or even the basics of transactions and negotiations. Who don't understand marketing and can't accurately analyze price for their markets.

When I started writing about the buyer commission lawsuits I had agents and brokers reaching out to thank me because they had just started talking about this in their brokerages and team meetings. This has been coming down the pike for a long time, yet many agents are just now hearing about it for the first time. It's honestly sad and pretty frightening.

The licensure process tells you a lot about vocabulary and legalities but it tells you nothing about running a real estate business. There are so many ways to fail as a real estate agent and without solid mentoring or a background in the business, say through a family member or friend, most new agents have very little idea of what an uphill battle they're facing.

Some estimates put the number of agents who'll leave the industry in the days ahead at about a million, a workforce reduction of around 66 percent. There are a lot of people who have no business in the real estate industry and are not really qualified to provide fiduciary-level service to clients.

For those who stay, there needs to be ongoing education and professional enrichment at a far higher level than the continuing ed that's currently required. Those who are seriously planning to hang in there and make a go of the brave new world of real estate that lies ahead need to be reading professional publications, attending professional events, and staying on top the complexities of the future real estate landscape.

It's not just about NAR or commissions. It's also about AI. It's also about demographics. It's also about affordability and mortgage rates and proptech. There are a million moving parts that are affecting the industry right now. This is no time for amateurishness.

Ever since I got into the industry, there have been "existential" crises coming for agents. It's kind of comical if it weren't so stressful. There was the rise of technology, the iBuyer, the pandemic and, now, the bombshell lawsuits.

However, what I've always found, and what I've built my business on, is the fact that people want someone to hold their hand and keep them informed during the most impactful financial and personal decision most of them will ever make. Agents who know how to communicate effectively (or who hire a writer to help them do so) will always find their audience.

If you don't have a broker you can talk to about all of this, you need to think about finding a new broker. If you don't have a mentor or coach, you need one. If everyone around you is telling you that you can still be successful while maintaining the status quo and doing business as usual, you need to start surrounding yourself with better, smarter real estate colleagues.

This is the time to start filling in the gaps in your knowledge. Maybe you need to take a class or find someone to help you step up your marketing game. Maybe you need to just get up every morning and make yourself sit down and read something serious and challenging that gives you some perspective. Obviously, I love Inman. I've read it (and written for it) for years. Maybe you need to read The New York Times or The Washington Post or The Wall Street Journal to get some basic economic insights.

I love Morning Brew for a quick everyday read first thing in the morning. I write The Ketchup for an industry-specific catch-up (get it?); it comes out every Sunday morning.

I wrote this article last year for Inman. It has a ton of great resources ot help you get smarter about the economy.

Not gonna lie, this is a scary time, but the smart and brave will thrive, just like always. That's you: You're smart and brave. So get busy.

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1 comentario

Vanessa Saunders
Vanessa Saunders
05 nov 2023

I've read your comprehensive piece on the aftermath of the Sitzer-Burnett ruling and its ripple effects on the real estate industry with great interest. It's a thoughtful, thorough examination of an industry at a pivotal crossroads, and I appreciate your efforts to bring this to light.

There is an elephant in the room that many in our profession are not only reluctant to acknowledge but are also in denial about. The ruling, significant as it is, did not come as a surprise to thosThere is an elephant in the room that many in our profession are not only reluctant to acknowledge but are also in denial about. The ruling, significant as it is, did not come as a surprise to…

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