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This story was last updated Aug. 6, 2024.
An industry shift is upon us. The long-awaited change is coming and coming fast. Post Sitzer | Burnett, the ramp-up to Aug. 17, 2024, has been taking place at a furious pace. It has been a never-ending sea of trainings, webinars, coaching, scripts, dialogues, videos, meetings, rollouts of new forms, revisions and “expert predictions” of what may happen with a plethora of videos on social media and on we go.
While we got the basics down, so much uncertainty remains. We knew this industry was complicated, but I don’t think anyone was prepared for how complicated it is between umpteen nuances and particulars involved in working through this massive industry disruption.
There remains a plethora of issues to be sorted out, and some of these may not ever get resolved, at least in the near future. Here are thirteen questions agents should be asking right now:
1.How exactly will buyer agency 2.0 be monitored and enforced, if there will be such a thing?
Beyond the requirement of turning in a buyer’s agreement with offer and/or documentation into a brokerage’s transaction management platform, how will consistency of protocols and procedures be ensured across local marketplaces?
2. What will the protocol be for buyers who refuse to sign any kind of buyer agency agreement whether it is exclusive or non-exclusive, even limited to one property or one day?
Will they really be denied the ability to tour a home?
When a buyer who likes to dodge the “system” (and there is always a handful) signs multiple one-day and/or one-property buyer representation agreements and goes from house to house refusing to commit to any agent and has multiple agreements signed that they don’t know one from the other, can’t keep track of them, can’t conveniently “find” them, etc. — then what?
What if this buyer puts an offer on a home that they have signed more than one buyer agency agreement with? They can’t remember what they had signed or chose not to relay that and so they are on the hook for paying one or more buyer’s agents. Now what happens?
3. How will open houses be handled so that buyers won’t feel like they must put their hands up and walk slowly backwards towards the front door due to explanations and potential disclosures that must be provided?
Yes, there are all sorts of ways to explain what must be disclosed to potential buyers before they can tour the home as far as representation, but we really have no idea how this is going to go. Will “by appointment” open houses (like what happened during the pandemic) become a preferred practice? This allows an agent more time to address the change in buyer practices in a less chaotic environment.
How will all of this flow in real life? Buyers are an impatient bunch and thanks to the instant gratification of our society, used to being able to see what they want when they want.
4. How will referral fees be handled post-settlement?
There has been little discussion surrounding referral fees and how those will be handled because of the settlement. Referral fees are big business and a viable pipeline for brokerages. Referrals come from a multitude of channels, whether that is generated through a relocation company, broker-to-broker, affinity programs, lenders, lead generation platforms, portals, etc.
How does the new way of doing business impact referral fees if lesser amounts of compensation are paid to the buyer’s brokerage in a transaction that results in not being able to pay a referral fee?
What about those situations where the buyer must pay for all, or part of their agent’s compensation and the buyer cannot afford to pay it (and seller will not). Will buyers opt to find an agent who will not be attached to a referral fee from another source?
Referral sources need to be transparent with the buyer and seller leads they are generating in addressing the required practice changes because of the class action litigation, so they understand how this can potentially impact them, the agent they are working with and their buying and/or selling process.
More transparency is surely needed with this aspect of the business. The agent they are referred to should not have to be the sole explainer of the new way of doing business. All leads should be primed into the new normal and prepared on what to expect before being connected to an agent in the market where they need assistance.
5.What about the many variables and unknowns with the process for confirming compensation with listing agents other than by phone, email and text at this point, in addition to forms to solidify compensation and the process for them?
These are murky at best, depending on where you are located. Many what ifs about “bait and switch” compensation by listing agents and if compensation agreed to by a seller depends on what the buyer’s offer is and things along those lines.
In reality, will agents be forced to negotiate their compensation depending on what their buyer’s offer is? This is a big anxiety point among agents working with buyers. And just to point out, many agents fall on both sides of the buyer and seller aisle. Sellers become buyers and buyers become sellers.
6. What is the role of the Department of Justice with respect to brokerage, state and local Realtor association forms?
We’ve seen recent intervention with their formal inquiry into the California of Association of Realtors buyer representation agreement. Will they be making more inquiries? Are they quietly requiring these forms to be sent to them for review before the Aug. 17, 2024, settlement implementation date? Will there be more inquiries into the various forms and business practices as we go along? Will these change periodically based on continual Department of Justice input? NAR has said very little because of their meetings with the DOJ.
7. Who are all the players involved in the Consumer Federation of America (CFA), who makes up their staff, do they have a roster of consultants, how much are they paid and how do they get their funding?
Why have they taken such a vocal role against the real estate industry? What is the connection between the Department of Justice and all the attorneys involved in these class action lawsuits? Does NAR know more about this than they are sharing with us, their membership? Why aren’t we as an industry asking more questions about this group and demanding more transparency?
How are they obtaining the various real estate forms that they are critiquing, criticizing and contacting the Department of Justice about? So many questions arise about this organization that continually weighs in on a profession that they have never worked in. Their characterization of the real estate business, how agents service buyers and sellers, claims about representation, fees charged and how to negotiate with a consumer are completely misguided.
Their recent commentary regarding various forms comparing one brokerage’s buyer representation agreement to an actual state form that accounts for numerous details and situations and is extremely thorough is like comparing apples to oranges. Why so much focus on the real estate industry over other professions?
Editor’s note: The Consumer Federation of America investigates many other industries, including banking, energy, and food and agriculture.
For example, what about the mortgage industry with closing costs and fees? Those fees are not negotiable. Lenders may push loan products that yield them the best commission, not always what is in the best interest of the customer.
Furthermore, many lenders are concerned about clawbacks, whereby they may have to pay back the commission earned on the loan if the consumer refinances within a year, which may affect the kind of advice and loans they are suggesting. This is a little-discussed secret in the lending world.
The title insurance industry is another one whereby the costs of title insurance are not negotiable and little legwork is being done on a closing until a file has been sent to the title or escrow company. Yes, sometimes closings fall through, but that pales in comparison to the time and effort that a real estate agent has put in with their buyer or seller, particularly if they are unrealistic, complicated, difficult and indecisive, which seems to be many real estate consumers given the current climate.
Any professional services business has a services/fee agreement whether you are hiring a general contractor, interior designer, accountant, attorney, home improvement company and the list goes on. Are those fee agreements scrutinized and analyzed for “fairness” to the consumer? What about the builder contracts buyers must sign when purchasing a new home? Those are unilateral and always in favor of the builder. Talk about needing an attorney to review before a consumer signs those.
However, it really won’t matter because builder contracts are typically non-negotiable, and the builder’s answer to agent questions and concerns on behalf of their buyers, as well as buyer questions and concerns, is whether it is their way or the highway. Why is this organization not taking more issue with these kinds of things?
8.What about the plethora of cases and post-settlement lawsuits by buyers and sellers?
Several cases are ongoing against the original defendants in the Sitzer Burnett case as well as other cases. Issues range from allegations that buyers paid too much when buying a home because sellers had to pay a real estate commission, to more seller plaintiffs’ claims that the current settlement amounts from the Sitzer | Burnett case are not enough.
Will any of this ever get resolved or will it pave the way for even more lawsuits to continually be hanging over the industry like a hurricane that won’t move, but continues to gain steam?
9.When all is said and done, how much do the attorneys in all of these lawsuits (including copycats) get vs. the amount paid out per seller that opts into the class action?
What about the lead plaintiffs in the Sitzer Burnett case? Various numbers have been bantered about over the last few months, but we should demand a full accounting of what ends up being paid, the exact amounts and to what parties and the number of sellers that opted in. What about those sellers that do not opt-in? Will they still receive something?
It is not unusual with large class action lawsuits to receive a surprise check in the mail or notice you are eligible for some obscure amount of money, even when the consumer didn’t opt into the lawsuit in the first place.
10.Will dual agency, transaction brokerage or whatever term is used in various markets that allow one agent to represent a buyer and seller in the same transaction no longer be permitted in states where it is currently allowed?
Will state governments make that call and pass legislation prohibiting this or will that be something done at the Federal level?
11. So what happens after 7 years or because of staff changes at the DOJ from an election or otherwise?
Will the settlement be dissolved, amended or extended after seven years? Will a different administration or changes in staff result in different priorities for the Department of Justice other than the real estate industry?
Will they be open to feedback because of the practice changes that took place and any adjustments that need to be made? Or will the way real estate is done continually change depending on the administration and the Department of Justice?
Will the forms used in buyer and seller representation and associated with the purchase of real estate be subject to DOJ approval each time changes are made?
That sounds like an awful lot to administer and keep track of.
12. Will buyer representation eventually become required and administered at the Federal level?
Although some states already require it and other states may be planning to make it mandatory, what about the states that just rely on the NAR settlement? For buyer agency to have more significance and to reinforce the profession to be taken more seriously, should it be required by the United States government? Is it time for a United States Department of Real Estate vs. funneling all through the Department of Justice for approval and all the stress that ensues from that, not knowing what will and won’t be taken issue with?
The countries that were cited in the Sitzer | Burnett case, although they have vastly different real estate systems vs. the United States, require buyer agency in their respective governments. That is very different from a complicated patchwork across all the states in the United States of America with different rules and requirements.
13. Where do we go from here as far as pre-, post-licensing, continuing and license renewal education?
What will the content of future coursework be like? Do entirely new training classes need to be developed beyond buyer agency to essentially revamp and retrain agents across the country? Perhaps real estate 3.0?
While the fundamentals haven’t changed, there are so many new ways of interacting and connecting with the consumer who has access to more information than ever. At the same time, the industry has access to more big data than ever. How can we effectively utilize this data in a responsible manner to reinforce our professionalism, knowledge, savvy and insight to help become even better advocates for the buyers and sellers we represent?
Will stricter licensing requirements eventually ensue because of the lawsuits? Will it require more education, training and mentoring before a new agent can work with a buyer or seller on their own? Sure, agents are supposed to be legally supervised by their manager or broker, but as we know, the range of that varies widely from brokerage to brokerage.
The class action litigation and issues arising from all of this are far from over. There are still many unknowns and confusion to work through and the outcome of pending cases could impact practice changes.
Conflict will likely arise as the implementation goes into effect. There won’t be a buyer agent “articulation of value problem,” there will be an “industry confusion problem,” over processes, procedures, various buyer agency situations, compliance, enforcement and working with consumers in a clear, confident and consistent manner that has been effectively communicated by all agents in the respective marketplaces they work.
We are going to need more than “Good Luck” and “Godspeed” to move through the turbulence ahead. Make sure your seatbelts are fastened low and tight and brace for potential impact.
Editor’s note: An earlier version of this story implied that the CFA is heavily focused on real estate, but real estate is just one of the many industries the CFA handles.
Cara Ameer is a bi-coastal agent licensed in California and Florida with Coldwell Banker. You can follow her on Facebook or on X, formerly known as Twitter.
