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Beyond the Sitzer/Burnett trial: The burning crises coming for your job

With live court action, it is hard to consider other burning fires, but several are coming for the real estate industry but are being ignored.

The gavel banged in a U.S. district courtroom Tuesday morning, kickstarting the opening statements of both sides of the hotly contested Sitzer/Burnett trial which focuses on allegations a “conspiracy” to inflate buyer-broker commissions.

If you’re not up to speed, here is our takedown of the allegations, alongside the long-held understanding by people inside the industry (but not always outside of the industry) that all commissions are negotiable (hence the birth of discount brokerages and the like).

It’s getting salacious

Everyone has a dog in this fight. Everyone. Even a random renter in Philly that has never heard of Sitzer, let alone of NAR. In that vein, Inman is doing live updates, and is doing a daily roundup.

For months, we’ve had fascinating conversations with hundreds of Realtors, brokers, and consumers as we lead up to this historic battle, and here is the pulse we’ve gathered:

  • Agents (and brokers) who have practiced for under 10 years typically believe that the most pressing issue in the industry that impacts their practice is a belt buckle (not to minimize what has happened, that’s just industry shorthand for it as of today).
  • Agents (and brokers) who have practiced for more than 10 years tend to focus on two things – unprofessionalism which remains rife among Realtors, but more importantly, affordability. And they’re frustrated when others are focused on more titillating topics.
  • Consumers typically say that by their power to choose their agent, they know they can go with a cheaper or more expensive practitioner, thereby, they know commissions are not set at any given rate. They also seem pretty apathetic about the entire lawsuit.
  • Association executives typically confide in us that this is the most pressing issue before them, but not because of what the courts may decide, but because of public (consumer) perception.
  • PropTech firms are responding in countless directions with no consensus readily available, either telling us they see huge opportunity in this moment (since their genetics are typically disruption), or that it doesn’t impact them at all.
  • Redfin leadership (and others that are following their recycled battle cry) see this as a moment of weakness for associations who are being pulled in various directions by various lawsuits, and have already begun picking old scabs to see what bleeds.

That’s quite a spread of sentiment towards this lawsuit where NAR legal is currently arguing agains conspiracy allegations.

“People can’t see the forest for the trees”

We recently asked in our private (and very rowdy) Facebook Group, what the biggest fire in real estate was. There were several comments and even more DMs, but the focus wasn’t (and hasn’t been) on this lawsuit.

One broker told me privately, “people can’t see the forest for the trees,” asserting that what’s happening economically could wipe out a swatch of practitioners while they’re blindly popping popcorn and subscribing to drooling sensationalism.

“It almost feels like someone is wagging the dog,” an agent said to us yesterday. “Lending is becoming difficult, the economy continues to struggle, and people that want to buy have been squeezed out of the market slowly for years, but people are worried about this lawsuit? Come on.”

Coral Gundlach, Realtor at Compass in Arlington, VA said the biggest fire the real estate industry right now is simply “Affordability.”

NAR’s Dr. Lawrence Yun has been sounding the alarm on affordability for years now, but it’s never quite as sexy as other headlines and is often overlooked.

Two concepts currently being missed that WILL be referenced going forward

Gundlach added, “It will get worse if buyers have to pay commission which looks like where we are heading. Furthering the divide between have and have nots. Also, getting rid of the imperfect Code of Ethics for a large chunk of transactions, isn’t going to help anyone.”

Her final note references the brokers threatening to leave NAR, following Redfin’s rehashed rally cry. A concise and astute way to summarize how many feel but haven’t yet found the words for – you’ll see this idea referenced more in weeks to come, I guarantee it.

Katie Minkus, Owner and CEO, Principal Broker at Hawai’i Brokers noted, “In all the talk about affordability and buyers having to pay commissions is this – mortgages need to change to include the ability for buyers to finance the commissions. Right now it’s “built in” to the purchase price. But it could be separate if the mortgage industry (and regulators agree) are able to treat buyer side commissions like closing costs.”

This is another concept we believe will be referenced frequently in the future that is currently being overlooked in lieu of sexier headlines.

So what does one do with this information?

Because you’re reading The Real Daily, it means you’re not a lemming and you wouldn’t think what I suggest you should anyhow, because you’re an independent thinker.

But what I DO encourage folks to consider is the following: There is admittedly a lot on fire in the real estate industry (and I don’t know that the National Association of Realtors has ever faced this many lawsuits simultaneously), but well-informed practitioners are growing weary of the popcorn popping.

Especially when we can’t see the forest fire, but we sure as hell can smell the smoke coming towards us all.

Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.


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