Ira Zlotowitz on the National Association of Realtors Settlement - What it means for you

sh and I was asked by the Lakewood Scoop to explain what happened on Friday with the N the National Association of Realtors settlement for $400 million and how that affect everybody I'm sorry for reporting this so late and doing this video just that I was away for shabas and I had to speak to different Brokers I wanted to speak to first to get the perspective on all different sides of the coin so this way when I'm sharing this information I'll be able to sprinkle in different perspectives as well so the simple the the real change to read up you go read up on it the National Association of Realtors read up what you want what the history is was it Justified was there problem was this the fix to the problem let's thr about really what the core what changed up until now when someone was selling a home they went to a real estate broker let's call them a listing agent and they went to the listing agent and they typically paid somewhere between a 4% if the price of the house is very high up to 6% and that's what they' agreed to pay the listing broker would then post that house on the on the MLS multiple listing service or the Zillow of the world and then they would post how much of their commission they were willing to share and then a buyer broker would be or a buyer direct would Mo most cases a buyer's broker would go online on behalf of their buyers and try to find the property for them and then they'll know how much they're going to get paid so ultimately who paid the buyers broker was paid by the seller through the listing broker now not necessarily it have to be 50/50 split it could have been that the listing broker was getting a 6% commission and only promising 2% sometimes they would fear they were getting a 6% and splitting it and then the allocation of work was between the two of them today what's changed going forward is that in theory that could happen but they're not allowed to post how much they're selling how much they're paying the buyer's broker the listing agent can't post it anymore but more importantly and I see this every time there's a change the real fundamental change is that when a seller is negotiating with a listing broker the conversation is no longer what if I have to pay the buyer no it's clear the seller pays the selling broker listing broker and the buyers pay the buyers broker you have to realize this how Works in Israel for example and in many countries the seller pays the seller and has the the the the selling broker and has and the selling broker has the the listing broker who the selling broker has the best interest of a seller in mind and the buyer's broker gets paid by the buyer and they have their best interest in mind so the biggest fear and change is just change right now how is this going to work who's going to benefit from it so I just want to work put through a few different sides of the spectrum of where the industry thinks it's going to be a pro and a con clearly to the seller it's probably going to be a win cuz right off the bat their starting point is not going to be let's go with 5% average they're not going to be talking about paying 5% they're paying 2 and a half% so if you take a home the industry calls an average home 400,000 let's for the purpose here use a million doll home if you want to say on a higher end that's a $20,000 for year $25,000 fee as opposed to a $4 or $50,000 fee so right off the bat the seller is going to save number one number two is that the listing broker in theory if you were a listing broker that was just like sitting back getting a listing and then posting the MLS and make the buyers broker do all the work and paying and you greedy that person is losing out the most that for sure is an issue but if you're a very good listing broker then you're really fine you should be able to make the same kind of money some people think become a listing broker is the key going forward it's much easier just knock it out get those listings and you make the money there are other people saying no if you if there's going to be now a discussion about with a listing broker negotiating for the to get the listing there's be a lot more room for the industry to change because people are going to say what exactly am I paying you for to post them the MLS I could post it myself what am I going to pay you for you're not the one bringing the buyer there's a buyer broker bringing the buyer you're going to just negotiate on my behalf I should pay you a different type of fee so some people think that's going to happen that way and other people say think no it's going to stay easy at 2 and a half% and everyone's fine this is pure speculation and it's very important for those of you that know me from my G parency business I'm a commercial mortgage broker so I deal on the commercial side I appreciate the commercial sales side and the commercial Finance side I'm a huge huge fan of paying a real estate broker to sell you the sell a building sell a home because the broker created the value from scratch they created a price they created a negotiation to create the right buyer it's only in the mortgage case where I believe there's a value to a broker but potentially that value should be capped there should be a number of fixed number you pay a broker so let's going back here on listing broker that's the big debate who's going to benefit as far as the listing broker is it good for listing broker is a bad if you are a broker now should you focus on being a listing broker or better yet be a buyers broker the negative and the positive the buyers broker where I think again the consumer the buyer is going to win is now you're going to have Brokers come to a buyer and really negotiate with them and explain to them the value they bringing to the table cuz the buyer is paying so they're going to turn to the buyer and say listen you're going to have to pay me and let me tell you why you should pay me and let me tell you what I'm going to do for you so you're going to see much more competition which is a win for the the the consumer the buyer is this good for a broker would a broker have to work harder probably yes but you know what I realized in all my research even now when the lawsuit first started and speaking about over the last few years it was always the good Brokers always felt that the that certain Brokers able to squeeze their way in do nothing and make money but a good quality broker will always make money so yes are there going to be many Brokers leaving the industry CU they can't make money in this new new world it's a tougher world to make money in without a DE but those that are going to stay in this industry I think are going to thrive but here's the big talk that's talking about as far as the buy side should you take a buyer broker who's going to benefit so some people say the more affluent people appreciate it and they'll pay the buyers broker the more affluent people more knowledgeable they know how to negotiate they don't even need a broker potentially but they'll they'll they won't lose out who's going to lose out the first-time home buyer the person who knows nothing the person who's knows nothing about real estate business and negotiation and what's going to happen on the property they'll lose out because many cases the first-time home buyer is scraping together their 3 to 5% down payment you have to tell them to put another 3% on top so I happen to think that that's not the case I believe that what's going to end up happening is become industry standard and people know a buyer pays and a seller pays and I believe that the banks Fanny May and Freddy Mack or all lenders will end up adjusting they will allow the buyer's commission to be able to put in so let's use an example so I could explain it what they're trying to explain which is a negative to first-time buyers as is an issue as follows let's take the house of a $400,000 house let's take the commission of a 6% commission so until now there was a $400,000 house where the seller would pay 24,000 6% will pay the the seller pay to the listing broker and the listing broker will split that 12 24,000 12,000 to themselves and potentially 12,000 to the buyer broker the buyer bottom line got a mortgage let's say it was 95% got a 95% mortgage of the 400,000 everything is great keeping the numbers round now the fair is what's going to happen is is that the seller is only paying 12% so in this $400,000 house potentially potentially potentially this house now is going to go sell potentially there's a big debate is it still going to sell for 400,000 or now it's sell for 388 let's say you want to go with the Assumption it's going to go for 388 now the buyer is going to have to buy this house and come up another $112,000 I think what's going to happen is that the buyer is going to be able to to be able to put into the closing cost that they have a closing course of 12,000 banks are going to allow to be the same 400,000 they'll get 95% of 400,000 all this is speculative what how it's going to finally shake out history has always shown when there's Clarity transparency the consumer always wins so I believe net net overall the consumers are going to win the top tier Brokers are going to be fine and maybe even Thrive because they fail some the shake out in general our Brokers net can be making less money on a per transaction basis yes and they can't have dual agency I think is tougher it's a whole new LW they can't get paid on both sides the loophole till now was is that the seller was paying and they could split the commission over here now it's very clear that there's a buy side and there's a sell side and the buyer paying and the seller's paying so how is that low going to shake out I do not know but at least you have the broader picture I hope this was clear and I hope that it only came out in a positive light I'm an internal Optimist see a you know the cup see every a cup half full and God willing that whatever s of this coin you're on you will net be able to make the money that you're making and you're supposed to make God runs the world and you have to do your status you have to do your inputs and he'll take care of the outputs best of luck I'll I'll update more as it becomes a little clearer it's the settlement was done it's supposed to take effect sometime in July have a wonderful week and best of luck