Real Estate JUST Changed FOREVER: Realtor Commission Settlement.

wow the game of Real Estate has just

changed forever in this video I'm going

to break down the full National

Association of realtor commission

settlement this is a huge game changer

for the industry and it's a really bad

type of change for one type of person

and a really good kind of change for

another in this video I'm going to break

down exactly whom that person is and it

might not be whom you're hoping it to be

anyway here's first a background on how

commission structures usually work this

is actually really important to

understand where do companies like

Zillow and red finin come in and how

does it compare to uh you know what is

normal and then how does today's ruling

change everything well let's talk about

that so America has a very unique system

it's a system we haven't really seen

anywhere else in the world and it's one

essentially where when a listing agent

goes to a seller of a house the listing

agent which keep in mind I've been a

broker for over 11 years or real estate

agent for over 13 years broker just

means I can employ agents in case you're

not familiar with that and then of

course we can join the MLS we'll talk

about that in just a moment that's how

you become a realtor realtor is

different from agent agent is State

licensed realtor is membership so when

you hear the phrase realtor just think

member member of the multiple listing

service C MLS All Right seller so

ordinarily when I go to a seller I I

would say say all right what we're going

to do the seller will say what are the

fees well your seller fees are usually

going to be one to one and a qu% and

those are going to be things for escrow

Title Insurance maybe a home warranty

plan if we decide to offer it then we're

going to have the listing side

commission that's usually 2 and 1 12% in

my market in some markets that's 2% in

some markets that's 3% usually you see

higher percentages when the prices of

properties are lower and so if you go

luxury like $2 million properties you

usually see a 2% listing commission but

these are all negotiable right so 25% to

the listing agent and we would usually

offer 25% to the buyer agent that's the

person representing the buyer and then

what we would say is hey if I happen to

represent you as the seller and the

buyer which is allowed in Most states in

the country though in some areas it's

not allowed uh we would offer a minus 1%

discount to that so the total commission

would be four instead of 5% this this

has been traditionally the structure we

would use of course another seller fee

would be any kind of repair costs uh

that the seller has during escrow for

credits or whatever it might be so

usually we would see fees between 6 and

6 and a/ qu% of that 5% would be

commissions now what's happened is

you've had companies like let's say

redin come in uh and these are what we

generally in the industry call the

discount agents they'll come in and say

you know what we will list your property

for 1% uh and then we'll still give 2

and a half% to the buyer agent because

we don't want to discourage buyers so

we're going to sell your property for

that three and a half total as oppos to

five uh you know total right two and a

half two and a half outside the escro

title number so that's an example of how

discount agents uh would would would try

to compete they would lower the fee they

charge lowering the fee you charge is

actually going to be a critical

component of this settlement and you'll

see exactly why in a moment uh now keep

in mind that often times and I don't

want this to be a video bagging on

discount agents most Full Service agents

will bag on discount agents saying well

they do discount work discount agents

respond and go no no no no we just do

the same work at a lower fee right of

course everybody's got their pitch and

their shtick okay fine so what does this

mean well right now this set

has said instead of the seller offering

22% to that buy side and whatever it is

to the listing side we're going to

remove the obligation of the seller to

offer anything to that buy side that has

just disappeared which means if I'm a

normal listing agent now I can go to a

seller and say Hey you no longer have to

pay 6 to 6 and a qu% for realtor escro

and tile instead we're going to go with

let's just call it to be a little more

competitive let's just call it 1% for

escro and tile right and then we're

going to add 2 and 1 half% to list it

we'll do 3 and 1 12% total to sell your

house obviously minus whatever repairs

get agreed to during the transaction now

the seller might say but who pays the

buyer's agent then because traditionally

the seller always paid the buyer's agent

and that has now flip-flopped to where

the seller can say

we aren't going to offer the buyer agent

anymore any money I don't care who pays

for the buyer's agent but it ain't going

to be me so who's going to have to pay

for that well the buyer is going to have

to pay for that now you might think wait

a minute if the seller can sell the

property for lower fees that might mean

sales prices might come down right well

let's think about this for a moment so

let's simplify this and let's say the

old guard for seller was 5% plus escro

tile repairs right now the new is as a

listing agent I could tell the seller

it's only

25% well that makes me much more

competitive as an agent right if I could

say hey it's actually much cheaper to

use me now I'm able to lock in my fee a

lot easier because I'm not also

advocating for the buyer agent anymore

so I actually think and this is an

important part right here a lot of

people like Kevin is is this actually

going to change anything yes I actually

think listing agents are very quickly

going to adopt to this change and

they're going to say you know what we're

just going to offer zero to the buyer

agent because it makes me more

competitive in that listing appointment

remember if you're not in the industry

that might seem confusing an agent who

goes to a seller is competing to get

that contract signed well if you can

compete to get that contract signed by

burning the other Buyer Agents because

now you could do that well why wouldn't

isue well may maybe you like your Buyer

Agents friend that's true but in a

capitalistic world the buyer agents are

going to get burned the sellers agents

are going to cut them out that way they

can increase the odds of them getting

the listing because the seller really

only cares about one thing that's the

house gets sold for the maximum possible

net and if your net sheet shows that

they get a bigger number you're more

likely to get the listing so again

listing agents are probably going to

start advocating and mass we don't have

to offer the buyers commission anymore

now that's where the changes in the past

if you offered if you took a listing

commission and you put a property in the

MLS you had to offer a buyer agent

commission now that buyer agent

commission could be as low as $1 but

because everybody in the area would

generally offer 2% 2 and A2 or

3% well everybody basically stuck to

that so people didn't really have to

offer 2 1.2% they just had to offer

something and because they had to offer

something and it was normal for

everybody to offer 2 and a half% in my

area let's say again it could be two or

three somewhere else people would do

that in fact what people used to do old

school this is going to blow your mind

listing agents and listing agents had to

sell the seller on doing this so the

listing agent would say give me 22% but

it's such a hard market like 2011 or

whatever let's offer the buyer agent 3%

that's called a buyer agent incentive

and it's basically trying to convince a

buyer's agent to go please bring more

clients to this property you will make

more money now I know it shouldn't be

that way right it should be best house

for the best buyer and matching fits

like that but this is capitalism that's

not how it works we could debate the

merits about being an agent or whatever

in a different video I'm just explaining

what's likely to happen here is the

listing agents are going to completely

remove themselves from the need to offer

a buyer commission at all okay so now we

have that bottom line secured listing

agents are going to make themselves more

competitive they're going to make

themselves more competitive by lowering

the total fees that they have to

negotiate for by cutting out the buyer's

agent which makes the seller look like

they're getting a bigger net as soon as

some agents start doing that in a

neighborhood it is going to spread

faster than the the first wave of covid

because the agents advocating for the

buyer agent aren't going to get listings

anymore and they're going to go dang it

I have to change my practices and then

all of a sudden before you know it

nobody's offering buyers agents

commissions anymore all right bottom

line secure buyers agents aren't getting

commissions anymore what does that mean

for buyers and home prices and who's the

big winner and loser in all of this

right let's analyze that okay so if

buyers now have to pay the buyer Comm

Mission what's going to happen is buyers

are going to do one of two things buyers

are going to well first of all on the

listing side you're still going to have

that 2 and a half% for the listing side

so the listing agents still going to get

their money they used to get the 2 and a

half% anyway right so that that part

doesn't really change it doesn't really

affect the sell's agent so listing

agents are pretty insulated here but

Buyer Agents used to basically rely on

the listing agents negotiating

negotiation for their commission well

now nobody's advocating for their 2 and

a half anymore so that buyer agent is

going to have to convince buyers

themselves to pay for that 2 and a half%

this is done through something known as

a buyer broker a buyer's broker is kind

of like a contract that a buyer enters

into with their realtor and the buyer

promises to pay their agent 2 1.2% now I

know a lot of people are thinking to

myself there's no way in hell I'm going

to do that well who is most likely to

need a buyer's agent most well frankly

it's firsttime home buyers home buyers

or new investors people who don't know

anything about Title Insurance Home

Inspections electrical panels sewer City

permit requirements City inspection

requirements zoning flood insurance best

insurance agent best vendors in the area

people who don't know these things

whether it's crime rates or which areas

have had the rebar taken out of it by

the Builder in a fraudulent Manner and

half of the neighborhood sucks and the

other half doesn't because one half is

basically having their foundations

crumble away who's going to tell a buyer

that well it's not going to be the

seller so the buyer has to hire their

own

representation now there are two types

of representation you can hire you could

hire a consultant or you could hire a

real estate agent that is paid on a

commission of you actually getting CL

like a deal closed so when an agent gets

a commission they're motivated to help

you get the deal closed they're

motivated to make sure that you fully

understand what you're getting into and

that problems get resolved every single

real estate transaction has problems and

it's usually between the seller uh the

sell's agent rather and the buyer's

agent in terms of how problems are

solved buyers and sellers directly

together like if we just did blockchain

Real Estate it it probably wouldn't work

mostly because because you look you

could blockchain title insurance and

certain like fees title insurance is

going to go to blockchain that for sure

but the actual emotional transaction of

real estate is extremely difficult

because there's so much involved and

people are extremely emotional in real

estate and there's so much of people are

just unaware of that it's actually a

very hard transaction people bag on real

estate agents all the time because they

say well when I bought my house it was

easy that's the norm after a deal closes

and it's an easy deal agents are usually

like

did did that just happen like usually

deals aren't easy now again I'm not here

to advocate for you having an agent or

not I'm just saying a commissioned agent

is Mo really motivated to get the deal

done because they don't get paid until

they close the deal a consultant might

charge a buyer hourly now again I don't

care which one you choose obviously

hourly if you look at 10 homes you're

going to pay a lot more money than if

you look at one home maybe that's the

fair model maybe that's the future right

but who ultimately gets screwed by this

and do home prices come down well let's

Analyze This okay so the listing agent

is still making their 2 and a half% so

we know it's not the listing agent

that's getting

screwed at least before we talk about

home price let's ask ourselves is the

seller getting screwed by paying lower

fees no of course not again we're going

to talk prices in a moment but it's not

the listing agent who gets screwed and

it's certainly not the buyer or

certainly not not the seller who gets

screwed again on a fees point of view

then you've got buyers and Buyer Agents

well do buyers agents get

screwed in part yes because now Buyer

Agents need to prove their value upfront

and actually convince a buyer to marry

their basically real estate agent and no

matter what property they buy they have

to use that agent now that's the right

thing to do anyway so maybe that's not

that big of a deal so I'm going to say

this is a about um maybe a half loss for

the buyer's agent so so let's say half

of the pain is carried by the buyer's

agent okay who carries the other half

the buyers absolutely the buyers get

screwed here what kind of buyers get

screwed well let me ask you this I run a

real estate startup I've been doing this

again for like 11 13 years 11 years as a

broker 13 years as over 13 years as an

agent property manager am I going to get

screwed so if I have my real estate

startup and we're buying real estate

which by the way you can invest in it if

you wanted to it's house act.com 2024

we're also creating ways to make it so

that you could 1031 into a public

security that you could just swipe up on

Robin Hood and sell so you defer taxes

up to that point which is pretty

incredible you can learn more about that

by emailing us at IR house.com but

anyway let me ask you this somebody

who's sophisticated who has their own

real estate license are they going to

get screwed no somebody who has their

own real estate license who uh knows how

to play the game who knows what they're

doing who's a sophisticated investor

who's done this many times before

they're not going to get screwed look

for example house hack by the way uh I

just licensed my real estate startup so

like here it is house hack here's our

license ID number Status license so we

are going to be just fine and any

investor who knows what they're doing is

going to be just fine in fact if we want

to go buy real estate what do we do we

just pick up the phone and call the

listing a and we could write paperwork

ourselves we don't even have to charge

ourselves but that's very unique we're a

buyer that's licensed and is a member of

the Realtor Association we're not going

to get screwed who gets screwed well

it's not this kind of buyer it's the

firsttime home buyer it's the firsttime

home buyer and the non-licensed brand

new investor who's trying to get started

they're the ones who get screwed now why

do they get screwed because they Kevin

Kevin they could just they could still

have an agent they could pay for the

agent themselves

really okay let's think about that for a

moment most buyers when they get started

they put down

32% to 5% that's their down payment

let's assume they're going to put down

5% now a buyer agent says by the way I'm

so glad you just came up with

$25,000 to put 5,000 or 5% down on your

$500,000 house but we're now going to

need you to come up with another 50% of

your down payment or

$12,500 so that I can help you buy this

home uh buyers and first-time investors

are usually cash strapped you just

shifted a massive burden to the Buyer

Agents buyers okay so the buyers get

screwed here because they have to come

up with the cash now wait a second

they're already cash strap because

they're financing most of the deal the

homeowners are selling most of the time

with equity and if they're not financing

their sale with equity and paying their

fees with Equity they're going to a bank

and short selling and then the bank is

paying the fees so shifting this to

buyers with loan low down payments

really sucks so then you might say Okay

Kevin but why don't they just ask for a

credit back so what we'll do is we'll go

ahead and say the house price is going

to be 512 500 and the buyer is going to

ask for a credit back of 125 now as long

as the property appraises for uh uh

5125 we can give the buyer a credit back

for $112,500 which can then go to pay

the buyer's agent that's great but what

did you just kill you just killed the

fact that most buyers are limited to 3%

in credits or the down payment right

that's usually where you're limited

unless you're VA then you can get like

3% with zero down it's kind of crazy but

anyway if you now blew that potential to

get a credit on a commission you're not

able to use that credit to finance

upgrades on the home like oh no the

panel's broken let's replace the panel

or the sewer or whatever you're now

limiting credits that buyers can get

because lenders put a Max on the amount

of credits you can get when a buyer

finances a home which most buyers

especially first-time home buyers and

investors obviously they finance their

homes who doesn't finance homes cash

buyers cash buyers sophisticated

investors investors who have their

licenses they don't care about this this

doesn't matter these are sophisticated

people who could just call the the

listing agent and have faith that the

agent's maybe not going to do much for

them anyway and they'll just represent

themselves like a big boy or big girl

okay well again that's great for

sophisticated people but who does It

screw home buyers and early investors

and then of course in part Buyer Agents

so I think the and then we're going to

talk prices in just a moment who

benefits here sellers listing agents

who's hurt buyers and buyers agents if

you're going to be a real estate agent

you want to be really really successful

in the long term you probably got to

focus solely on listings now that's not

to say if there's a buyer who really

wants to work with you they won't pay

you your fee that will happen it's going

to be a lot harder to negotiate that

especially amongst cash strap buyers

maybe you'll open up a whole new breed

of Consultants I don't know about that

now we have to talk home prices with a

quick note about the MLS some people are

suggesting this is the death of the MLS

no being a member of the MLS is critical

my real estate startup we're a member of

almost all the mls's that we work in we

do that on purpose so we could get the

best data and we can get the California

Association of realtor legal contracts

or if we're buying in Utah we could get

the Utah Legal contracts whatever

wherever we're buying we could use the

standard forms in some of the best

contracts that exist the California

Association of Realtors as an example

they're really good they have some of

the best paperwork that exists you want

to be a realtor to be able to use those

forms and you want the best data

available on the MLS is it possible that

that best data is going to end up at you

know places like Zillow maybe probably

not in the near term because I don't

think this ruling changes anything for

people being part of the MLS or not what

this changes is buyers and buyers agents

that's it that's where the problem is

what about prices some people say well

if a seller can now save 22% or 2% or 3%

on the value of their home will they

sell their home for

Less no I do not think that home prices

are going to go down as a result of this

I understand it seems logical that if a

seller can sell their home for Less

because they have lower fees that prices

might come down and maybe buyer

purchasing power will fall a little bit

because now they have to pay for all

these fees or maybe they don't

right that's not how the market works

though the real estate market is based

on sales compared comparisons if 10

homes in the last 6 months in one

neighborhood sold for 500 Grand just

because fees just went away doesn't mean

the seller is not also going to expect

$500,000 and the appraisers probably

aren't going to look at that as well so

I don't actually see Home Ownership

getting more affordable as a result of

this I actually think what you did is

you just made and I'm not saying this

this ruling shouldn't have happened I'm

not anti- the ruling like let's be real

the reason the California Association of

Realtors and the National Association of

Realtors and different realtor

associations throughout the country

advocated for a buyer agent commission

was actually to help buyers get into

deals to make it so that look here's an

agent for you you don't even have to pay

for them we already got that handled for

you I understand why courts are like

yeah well we can't mandate that I

totally get it but yet just fed

firsttime home buyers and homeowners who

were moving and early investors I'm

convinced by that you just made those

transaction a lot harder now I want to

give some respect here to some public

comments that I saw so let's take a look

at some of these public comments here

somebody says I have 40 years of

experience at practicing real estate as

an attorney it seems to be that most of

these comments on Reddit are made by

people who do not know what's involved

in the sale and purchase of a home

having worked with many real estate

agents and Brokers I could say most of

them not all like all other Industries

there are a small percentage of people

who give everyone a bad name are very

hardworking individuals in order to make

make a living as an agent you're working

247 365 the phone rings you answer it

whether it's at 11:00 p.m. or whatever

yes in a sell's market being a listing

agent is relatively easy but

representing a buyer is very difficult

when houses sell fast buyers need help

getting their offer put together and

present it as fast as possible or they

will not have a chance at getting their

contract signed this is true you got to

be fast and you need to know how to talk

to the listing agent and you need to

know the questions to ask and you need

to know how to present the offer and you

need to know how to follow up it is a

job to get an offer accepted it's really

really hard okay but anyway when houses

okay we talked about that likewise when

it's a buyer's market a knowledgeable

listing agent can be invaluable in

getting your home sold there's so much

more involved than what's seen on HGTV

that's true that's a nice one about

agents okay what over here when I bought

my first home I was a very very busy

woman I worked with a realtor who

presented who presented well and I liked

her but I expected her to do the work of

me the right home I was too busy and I

knew that she stood to receive thousands

of dollars once I purchased I expected

her to work for that money and she

didn't when I was considering a condo I

wanted her to get a hold of the info uh

for the homeowners association and

research how healthy the HOA was

financially and what plans there were

and she just didn't do it another time

basically an agent tried to sell her

home cheap and it sold with multiple

offers blah blah blah this is very

common you get these sort of feelings

very frequently from uh buyers who are

like you know I'm paying you and even

though the seller was paying them I'm

paying you therefore you better find my

home for me or whatever like you you do

get that kind of attitude and I

understand where that expectation comes

from uh it used to be in like the 80s

that Buyer Agents would be like hey

let's go look at these five homes I

think these have your name on it well

now with the Internet it's actually much

easier for people to spend 5 minutes a

day and go any homes come up in my

neighborhood and then where the buyer

agent really comes in isn't necessarily

finding the home unless it's off Market

it's negotiating the deal presenting the

offer winning the offer and then of

course closing the deal that's mostly

where I would say most of the buyer

agent pay comes in now again actually

winning the contract not so much finding

the home or unlocking the door some

people do say that they're like oh

they're overpaid door

unlockers uh cost just got significantly

less for the I buyers and private Equity

behemoths uh good luck USA get your rent

checks ready for Blackstone this will

have no impact on pricing yep I think

this person literally just nailed it uh

costs did just get significantly lower

for big companies and they're right I

buyers basically companies who are are

flipping Like An Open Door cost just got

a lot cheaper for them because they

don't have to offer that buyer agent

commission anymore which gives them

potentially more of a spread but they're

able to get less of a spread UPF front

remember when Open Door goes and buys a

home they're like hey we're only going

to charge you you know whatever our fee

is versus is what you would be paying

Realtors well they're going to pay for

that fee upfront so I actually don't

think the I buyers win as much as people

think really again it's sellers who win

sellers are going to be able to demand

more dollah Halas for their properties

uh somebody here says feels like a mixed

blessing blah blah blah okay uh so there

there's a lot of commentary around this

uh somebody here is talking about oh the

association of realtor sets a code of

ethics blah blah blah Okay so

very bottom line out of all of this what

would I do if I'm a an investor well i'

just have my own license and write my

own forms but that's what I do and

that's what I do with my real estate

startup uh what would I do if I'm an

investor or wanting to become an

investor well the first thing that I

would do is I would make sure to sign up

for my event on June 21st to June 23rd

in Vegas we are going to hold a 3-day

event where we talk Finance Innovation

and a lot of real estate I'm going to

teach you how to go from zero to

millionaire in real estate and and

actually how to compete in this day and

age how to get your offers accepted how

to manage real estate how to actually

find a good deal we're going to go

through all of that and we've got other

speakers coming as well for different

parts of the event so stay tuned go to

meetkevin.com to sign up get your ticket

now the prices will be going up over

time now what about if you're not going

to go run out and get your license and

you're just a home buyer well if you

want the best representation possible

you have two potential choices you could

find the best possible real estate agent

that maybe you've used before and you're

just going to have to sign the buyer's

broker maybe they'll sell your home too

if you're moving up that's the way it is

alternatively you could try to negotiate

a Consulting agreement where hey you're

going to end up saying I'm going to work

with the listing agent but I want to run

the deal by you and maybe ask somebody

to come look at it can I pay you a few

thousand and that'll buy me you know

maybe three phone calls for advice and a

visit to the property whatever it is

right maybe that's too much okay maybe

that's 10 phone calls right in visit

property I don't know whatever it is I'd

probably think about that especially if

I'm a first-time home buyer as a

first-time home buyer I think you really

out reamed here I really really feel bad

for first-time home buyers because

first-time home buyers are going to be

like I don't have any more money for all

of these

fees what the hell and so now with

mortgage rates at 7% and you're you know

it's being hard to save up for down

payment now you to pay even more just to

get representation whereas the listing

agent has representation built in that

sucks so really do feel bad for those

first-time home buyers and uh I'll

probably just try to hold more of these

events or or put more content out on

YouTube to really help first- time home

buyers because I do think that buying

real estate is the greatest and fastest

way to real wealth and it's

non-speculative that's my opinion but uh

and I'm not looking for clients right

I've got a big client that's called

House hack it's myig baby and that's all

I focus on but as far as first time home

BS I'm sorry