RIP Realtor Business Model

[svelte]

National Association of Realtors found liable for $1.8 billion in damages in conspiracy to keep commissions high | CNN Business

[evolusdv2]

Figured this would pop up here – what’s your take sdr?

 

[svelte]

He’s part ostrich.  He’ll call it fake news.

[sdrealtor]

My take is NAR did an extremely poor job defending the industry. There is IMO a fair bit of cooperation/collusion to keep the commission scales in place because the industry cannot survive without them. Yes the business model is far from perfect. But no sustainable and viable alternative has ever emerged to replace it.

If I had to guess there will be appeals that drag on for longer than Im around. But either way it doesnt impact me much. Ive diversified my income over the last few years. Real estate sales are an insignificant portion of my cash flow today and going forward by design. Im always a year or two ahead of the industry so I saw this and more coming. Ive been preparing for this the last 20 years.

If it does have an impact I suspect it will be felt most acutely by buyers that will have a greatly reduced opportunity for quality representation. Sellers wont save much, prices wont change because of this and buyers will get increasingly screwed over.

Sorry svelte but its not fake news to me. Its merely theatre

Speaking of which its time for a Redfin update. My original post was once again prescient. The stock was in double digits (around $14) when I first posted and has been dropping the 3 months since. It is now under $5. I profited handsomely from this all. Tomorrow is their earnings release and I am expecting a very sad ugly report. They are down over 1500 agents in the last year with lots more cuts coming. Last week they announced the official pilot of Redfin Max which is the swan song for their employed agents. You should reach out to your friend and suggest brushing up that resume

[sdrealtor]

I really like Logan and think he does a nice job understanding things as they really are in real estate

[JPJones]

He’s part ostrich.  He’ll call it fake news.

Nailed it!

[svelte]

“The 6% commission on buying or selling a home is gone after Realtors association agrees to seismic settlement”

https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

“The NAR…agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries…”

The broker commission field must be removed from MLS listings and MLS will no longer be permitted to offer to pay commissions to agents representing potential homebuyers through the service.

“By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.”

Immediate effect on stocks: Zillow -13%, Compass -13, Redfin -5% (sits at $6.01 right now),  Lennar +2.4%, Pulte +1.1%, Toll Brothers +1.8%

I guess everything but home builders are falling in anticipation of lower commissions.

Lower commissions mean lower income for realtors per sale.

Personally I think Zillow has an easier path to adapting to new models so I would not be surprised to see them as the big winner in the long run.  Time will tell.

[sdrealtor]

Just saw this and looked back on my prediction and most of it remains in place.

I expected NAR to fight more but they rolled over and settled. Got that one wrong

Doesnt impact me much. Still the same. Its just theater to me at this point in my career

Impact will be felt mostly by buyers who will have a tougher go at getting quality representation. Still to TBD but Im still firm on this and them being among the losers

Sellers wont save much and prices wont change because of this. Still TBD but Im still firm on this. The big winners will be listing agent side that will increasingly be dual agents. With it tougher on buyers prices are less prone to being bid up for sellers. But no seller is gonna drop their price by 10 to 20% or anything because they are saving a percent or two on the commission. Prices will largely stagnate IMO as a stand off continues.

Redfin is more toast than ever as their business is primarily on the buyers side. At some point it should be an aquisition target for one of the big national brokerages.

Zillow is also in trouble as their primary business is selling buyer leads that will increasingly drop in value. They need a major shift in strategy and quickly! MLS associations across the country could become an endangered species and a national MLSlike database is one of their biggest opportunities

Compass will do well as a brokerage as they are on the listing side primarily but the stock isnt going anywhere. Real estate brokerage continues to be a low margin business and the tech company masquerade is over for them along with Redfin.

The size of the agent population will get crushed. There are tons of aging realtors hanging on for one last deal. Most will finally hang it up as not worth the hassle. The young high flying agents who thought this was easy? Decaf non fat latte please! The established dorsal finned agents with strong listing businesses will thrive more than ever. Consolidation is coming and half the agents currently out there could and should be gone in the next 2 to 3 years.

Did I leave anyone out?

Oh, property values will be just fine around here. There will be ebbs and flows but there is just too much going on around here. The cost of living has chased a higher number of residents out the last year but eventually things come back into balance and they will come back in droves. There is just too much to love about here and so many aspire to be here.

Cheers all!

 

[svelte]

New rules take effect today.

Here is a good summary of how the changes may be implemented and the effects they may have:

 

https://www.cnn.com/2024/08/17/business/nar-realtor-settlement-what-changes-wellness/index.html

 

[Author]

Posts