In Part 10, the final part of the real estate commission lawsuit series, we’ll take a look at the winners and losers from the new rule changes and the new operating landscape.
Chicken Dinners – the winners are the plaintiff’s attorneys, listing agents, listing advertising platforms like Homes.com and alternate marketplaces like Opendoor. There may also be some surprise winners.
Plaintiff Attorneys – the big winners. They will get a minimum of 30% of the settlement amounts as contingency fees. That’s hundreds of millions of dollars and counting. It feels like the big gangsters (lawyers) gobbling up the smaller gangsters (Realtors).
Listing Agents – conventional wisdom has always been that listings are gold and listing agents control the transaction. That will be even more true going forward. If I was a new agent starting today, I’d be a listing agent.
Homes.com – the stock market jumped on Co-Star, the owners of Homes.com, as a big winner. Homes.com is pushing a listing advertising model targeting listing agents. Listing agents will have all the money and plenty of it will flow through to Homes.com.
Opendoor – Opendoor is tricky, as they generate buy side fees that may go away, but are also an alternate marketplace that can by-pass buyer agent commission anyway. Long-term they should be a winner.
Some Buyer Agents – it sounds contrary, but some really smart buyer agents will figure out how to become “buyer listing” appointment closing machines and tie up buyer in exclusive buyer agency agreements. Smart buyer agents may thrive.
Sellers – in theory a reduced listing commission will benefit sellers. In practice, sellers may continue to offer buyer agent commission (because it works) or the buyer will adjust the offer price to factor in buyer agent commission. We may end up at the same place.
A brand-new brokerage – isn’t this the time to start a brand new brokerage, free of the shadow of the commission lawsuits. How many agents would join just to put to the rest the uncertainty of being sued?
Who are the Losers? – there are plenty of losers who will be deeply wounded by the damages awards and new rule changes.
Buyer Agents – this could get really bad for buyer agents. Existential. Not for all buyer agents, as many will skill up and learn how to pitch their services to buyers. Forcing agents to execute buyer agent agreements before showing a house may be a boon for top buyer agents.
Listing Portals – most listing portals rely on revenue from the buy side of the real estate transaction. Zillow sells buyer leads to their premier agents. That’s a tough sell if buyer agents are forced out of business.
Commission claw backs – On a side note – should Zillow repay commission to agents? If Zillow took a percentage of the buyer agent commission, can the seller or buyer agent reclaim that commission from Zillow. Answer is probably not.
Zillow Reboot – How does Zillow adapt to the new environment? Do they pivot to listing ads like Homes.com. Is this finally the right time to become a national operating brokerage? They’re already licensed nationally as a brokerage. Shareholder pressure could get ugly.
NAR – NAR has got the most to lose. They could lose their membership base. They could lose their hold on the industry. They’ve certainly lost most of their cash reserves due to the $412 million settlement.
National Franchisors – the big franchisors have been hit the hardest. They just gave away most of their operating capital and cash reserves. The attorneys figured out how much cash they had and left them just enough to stay alive.
The $2 billion dollar club – the hundred or so brokerages with $2 billion in sales volume in 2022, are not covered by the NAR settlement and will need to negotiate their own settlements. The attorneys will take most of their cash reserves.
Brokerages – imagine being a broker owner and waking up to the news that 8 jurors in Missouri decided to take away everything you worked your whole life for! You did what you were mandated, followed NAR’s co-operation rule, and now you may lose everything.
Buyers – how is this a good thing for buyers? There is now uncertainty as to how or if buyers will be represented and how the buyer commission will be paid. How many buyers will rely on a listing agent (who represents the seller) to negotiate and execute a home purchase?
Buyer Lawsuits – we still need to deal with the buyer lawsuits. It could be round 2 in a few years.
And what about AI? – SkyNet Realty is just around the corner.
