KGCI: Real Estate on Air - Commission Lawsuit Update

Episode Date: January 24, 2025

And welcome to another edition of the Nerd Agent podcast. I'm your host, Luke Pedersen, with my brothers and fellow nerds, Josh and AJ. We haven't chatted about how you guys are doing at the beginning of the podcast lately. No, you just skip right over. Do you care even? Skip right over. What's going on? I think I drove for six hours this weekend and 75% of the houses I showed were in multiples.

Yeah, it's busy. That's fun. It's crazy. Yeah, it's getting wild out there, especially in the lower price. point in ranges. It's definitely gotten busy. I mean, we kind of predicted it a couple weeks ago, but had similar experiences were houses that I saw that I'm like, this is not good.

I was telling, multiple offers. I was telling AJ that I think there's a chance that we see a few houses that are as competitive as they were in 2022 when interest rates were 3%. It'd be pretty wild. We might see 20 offers on a house here. Get on that new construction. The new

construction is great. I had clients sign up new construction and we negotiated and everything and then just signed the paperwork and there was nobody else that even was coming in the door. Yeah, that's funny. Those will start getting busy again because the building had slowed down when the market was getting bad. So then your stupid cycles, you're in that middle of it, it kind of being a gross period.

I think when I said earlier was January would be crazy. And then the news would start getting out that the market is actually pretty good. And then maybe we'll start getting even more listings on that kind of balances out a little bit. But I don't, going to the spring will be busy. Is Josh going with the sweatpants tucked into the socks today? Yep. Going to look good. I'm right on camera.

I love that look. I love that look. Luke is big on the. that. I'm a big spread pants. Oh, the tuck. The tuck was an accident, but yeah, I have PT right after this. So I, I didn't want to be doing box jumps and, you know, fancy pants. I don't like a cop out. You know, fancy pants. I don't, I don't believe it. Well, you can't see on the video as my other pant leg is rolled up real high. I'm doing the L.O. Cool J.

Let's, uh, we have nothing to talk about today. So we're just going to talk randomly about random things. No. Today we are going to talk about the commission lawsuit, um, what that's looking like with NAR. And then specifically about the fact that there is this new NAR rival that has kind of only burst onto the scene in the last week from most of the research I've seen called the American Real Estate Association, who's essentially trying to create some competition within the Realtor Association industry. I love the plan words, though, how they call it area. Area, yeah, I'm not sure about the acronym.

Well, I mean, the guy Mario Yomansky owns the agency. The agency, he does. He probably likes these catching markets. And so the, he dance a little bit. So this guy, yeah, and I might not be pronouncing this perfectly, but Maricio, Maricio, Murysio, Umansky, uh, agent who is now a broker of the agency brokerage that apparently is one of the fastest boutique growing brokerages in the world, which I found out today. And Jason Haber, who's a compass agent, I believe from what I had seen have partnered together

to start this area real estate association for agents. They're in the very beginning stages, um, but it feels like they're mostly just trying to. create a little bit of competition for NAR just based on what's been going on lately. And I'm going to hit some of these as to why. And then we can kind of get your opinions, I think, is what I was thinking. Because I did a little bit more research on this one. So he had mentioned in there a couple things. One, the commission lawsuit didn't feel like NAR was taking that very seriously.

When it initially came out, then they obviously lost. And doesn't feel like they're necessarily taking the new lawsuits very seriously, which it was like the first couple weeks after NAR lost that. There was just a plethora. There's a good word there of lawsuits coming out against so many different things in so many different states. And he kind of feels like they're not taking that super seriously. And that's maybe time to create a little bit of competition or just a new way to do real

estate associations in general. The specific one he mentioned, there's a new mansion tax that was passed in L.A. For those agents who are listening that don't know, part of what NAR does as well is lobby for different laws that might be passed or different things that go in for real estate taxes or plenty of different items there to keep the real estate industry competitive to help the people that are working within the real estate industry. And it sounds like in LA there was this mansion tax that I believe if you sold your house over like $5 million, they hit you with actually a decently high tax or if you bought a house over $5 million. And he said his home city or home neighborhood

or what have you is actually their prices have gotten kind of crushed by it. which he was upset with the fact that they didn't lobby very well for that. At the moment, from what I have seen, it doesn't look like they have like a, there's no website. They have some pricing plans. There's some key features down here. They're looking to raise between $50 and $100 million from investors and then have rough anticipated dues of $400 to $500, I think, would be a year, which I'm not surprised to try to undercut what NAR is currently doing. It would make the most sense that they do that. But at the moment, he just kind of mentioned it feels like that there should be competition.

That's kind of his big reason. It's like you shouldn't be the only player in that realm because when you are the only player, you tend to get passive and you're just not working as hard as you could be. Here's the question. Could you be a part of area and NAR at the same time? I don't even think they're that far. I don't think you could even be a part of area right now if you want it to be. They're like moving up the rollout.

But I wonder how that's going to play out, right? Like what if someone's like, I don't want to pick one. I just want to be a member of both of them. it'll be kind of interesting. And I think one thing that I talked to Jeff about this weekend at hockey, actually, is that Mar really only exists because NAR exists. And Marr runs, they own and run our local MLS here. A lot of MLSs across the country, which I didn't quite understand,

are more privately owned and they're not attached to the association. So, like, you could be a part of the MLS and not be a part of the association in those cases, whereas here you need to be a member of Mar or Spar. to get access to the MLS. I'm pretty sure. Does Mar do you need to, and you need to be a member of NAR to be a member of Mar?

I believe, I believe you have to, yeah, you have to kind of go through the whole thing. But is, is the Mar, is our local MLS platform only held by? Is NAR holding the back end?

Like, I don't think so. I think so. So Mar is. So Mar theoretically, if the whatever, I'm sure they have a contract with NAR. It theoretically, if that contract goes up,

They could say, well, we're now going to contract with area. Seemingly, yes. Or they could contract with nobody. Right. Like, they don't have to be tied to NAR. It depends who has the back end software. Yeah, I honestly don't know the answer to that question. I don't know if that's helpful for everybody, but I don't know the answer to that question.

And what's so interesting is I think in some other states, when the association's not tied to the MLS, they're more of like a, like an association that you'd be a part of. But there's not any platform behind it. There's a bunch of MLSs that you have to be a part of then, because there's a competition between the MLSs. So like you might go to, I mean, I don't know if this case here, but like Atlanta, Georgia, and there could be four MLSs you have to sign up for. And agents might post on two of them and not the other two. You know, like, so like the data's incomplete.

Just cutting in there. The big reason why being a part of the MLS is important was what you touched on at the end there. Typically the MLS is the one who has the service and the platform where the listings are placed. So in order to see the Minneapolis area listings, I need to be a part of MAR, because every Minneapolis Twin Cities agent posts them on there. Whereas if there were two different services, which we actually have a spar, St. Paul, but they cooperate.

Yes. If there were three different services and agents weren't a part of all of them, you might see some listings and not others. I think, yes. And then to take this to a more high level, right, I think in general this whole conversation speaks to the reality that a lot of agents are frustrated with the support they're getting from NAR. broadly speaking, I know when the commission lawsuit happened, the way that it was approached,

the way that it was run, the impact potentially is going to have, you know, we're paying dues for something, but we're not necessarily seeing a ton of benefit from those dues. So I think, I mean, while I don't have a lot of tears for Mauricio on the mansion tax, I do kind of agree with the general sentiment that the support and then the, you know, the chaos that seems to be going on at the corporate office with, you know, the news that has come out and the people getting fired and now people getting blackmailed. And, like, it's just, there's a lot of dysfunction that we're essentially paying for but not seeing benefit from. And so I think agents are smart to say we need to expect something from our associations if we're going to paying dues to those associations. And if we're not getting what we expect, we should at least have alternatives out there to theoretically provide us with more benefit than that.

that. Now, that is the question, though, to how the logistics all work and what we have to be a part of and don't have to be a part of and, you know, who owns which MLS is. That's a different question. So I think the biggest benefit of an association for agents is the MLS access, the creation of that, the ability to have a platform where you can put listings out and find listings, right? And schedule showing easily. Yeah, but let's not forget that the, well, on scheduling, showing easily is all because Zillow is allowing the cooperation with the MLS. integration through showing time. But showing time was already integrated prior to the whole purchasing. Let's not forget, though, that NAR, the R-PAC, Realtors Political Action Committee, five or six years ago, the tax bill that passed when Trump was president did include a provision that was going to change the rule for how long you have to live in your home to get a tax-free exemption when you sell it. And it was going to be three out of seven years.

Both Democrats and Republicans were agreeing on that, and they were going to pass it. and RPEC went in and said this is going to be extremely detrimental to regular consumers, and they got it quashed at the last second, and it's still two out of five like it was before. So there is some stuff that they do, and a lot of it, like Luke said, it is to support the agents, but a lot of it is supposed to be to support the general consumers as well. Like that's a lot of what it is. It's like this is bad for homeowners, then we need to go go in there and fight it. Yeah, because that specific law didn't really like real estate agents and just go make a bunch of money because of that

or continue to work more efficiently. It would have raised, it would have made a bunch of taxes change hands from regular people on their largest transaction that they do. Yeah. And I do think that part of it too is going to be, I mean, NAR's done a lot. They have for agents.

The current system is created because of what NAR's done. But how the world works today is kind of like, what have you done for me lately? They haven't done. What have they done for agents in the last five years since even that one, right? And that's what people are starting to look at. and that commission stuff comes out, and the agents even more so go, well, now you're negatively impacting me.

At what point? At what point does the whole structure change where the gating of things behind an MLS reality changes, right? Like Zillow's got showing time. Zillow has, you know, the access to these different services. So, I don't know, there's a lot of different pathways where you can see in the next five years where it just kind of opens up. And a lot of the benefit that we're getting that creates this reliance on these

multiple listing services. could theoretically change. So it's, it just, I don't know, there feels like there's a lot of different routes that this can all go. But more broadly speaking, it is a time of turmoil for, for the, for NAR for sure.

And it's a time of turmoil for agents in terms of how they're thinking about these things. I am curious to see in the next five years if NAR is still around. Yeah, I mean, a lot of it's going to depend on, I mean, we went to that thing with the former assistant attorney general of Minnesota who talked through the lawsuit

kind of what to expect, the agents reacted exactly as you would expect and thought he was attacking them somehow when he was just stating facts, which was really funny. How dare they? The best question of that meeting was, we add value and he's like, I'm not, I'm not. The best question was, I just don't understand how the jury could have decided that that was the outcome. And he was like, well, I'm not, you know, I wasn't in the room, but. No, he said, he said, well, they decided, you can understand they decided that because that was

the decision they made. I mean, it was like, it was, what do you mean? They made the decision. Yeah, he was like in a room full of sharks, which was really funny. But the biggest thing he said that I think was helpful was that now the judge actually puts out like briefs and stuff. And then eventually he makes a ruling. And he's going to decide what happens here. And he circled the number, you know, 5.1 billion, this treble, 5.3, whatever the number was, dollars.

And he's like, this is not even close to what the payout is going to be on this. that's what the jury like recommends kind of is what the damages should be and he's like there's no way that that's going to happen it just wouldn't it would not be it would bankrupt it would bankrupt them all of that they'd say yeah every brokerage would be toast yeah so yeah so he's like there's going to be something different that comes to this and the guy is going it's supposed to be soon where he like makes a ruling and says here's what has to change based on what happened in this court case like so they set a precedent for going forward agents have to you know, put in all bold and caps that all commissions are negotiated. Like there's going to be several things like that that I think are going to change. Just to be a licensed real estate agent, not necessarily a realtor, which by the way is a NAR created thing. So if you're not a part of NAR, you're not a realtor. But to be a licensed real estate agent to represent people, there's going to be some changes that are made. And I think these guys are just taking advantage of the opportunity that's presented in front of them.

Now, the key features thing is pretty cool here. I think having, you know, the national listing service, is something I always wondered why realtor's or real estate agents throughout the country didn't fight more to try to create because it would super streamline everything. And it would compete with a Zillow or Realtor.com or any of these portals more easily. Because like you can go on Zillow right now. I can look at houses in Hawaii for sale that are just pulling straight from their MLS. And I can't do that from mine.

I know there was a company called Upstream that was trying to do this like, six, seven years ago and just never really got anywhere. But it'd be interesting if you could get everybody on the same page with something like that. Because it would be pretty useful. Now, the only thing about the National Listing Service, and that's the, that's the, essentially the MLS that this area is working with, I went to their website and it did, it mostly looked like a Zillow IDX kind of platform versus like a back end MLS if that makes sense. So I'm curious to see if that, I don't know if that changes.

I wonder if they could, if you could create some sort of a listing service that they somehow could aggregate the data from all of the local MLSs would be the best way to do that. But I don't know if, I guess that's just what an IDX. That's just Zillow. But you'd have to do it in a way that the backend works still because we have, there's certain things in the back end MLS that we can search for that the consumer doesn't know about like that I know. how to use that platform. And I always said it's like that's the last thing. The last thing holding Zillow back from really breaking through into the real estate industry is the fact that they need the feed and the feed from all the real estate MLSs so that they

have the actual data. Because without the data, they don't get the eyeballs. Like that's their last thing they're trying to solve for. So it's interesting that these guys are trying to create something that maybe is like the input and not necessarily an output like that. like that. They're trying to get Zillow to buy them. I don't know.

I mean, but just think about how long it would take to get everybody to sign on to a national listing service across the country. It'd be incredible. Yeah, outside of pulling through with an IDX, like all on one platform, it'd be intense. But broadly speaking, I mean,

what they're offering here in terms of their features, specifically number two, number three, the flexible commission rates and no mandatory cooperation. I mean, that's stuff that, I mean, flexible commission rates already exist, regardless of what people, think about that.

All pricing is flexible and negotiable, so that's been a thing forever, but it's the perceptions it's not. And then no mandatory cooperation, we've talked about that in this before, is I thought was a huge miss just in the creation of the cooler cooperation policy

when it was built in the first place. I think those two things are going to change with NAR regardless, right? In the very near future, those are the two biggest things that the lawsuit's going to, that's going to be reacted to when it comes to the law. lawsuit. So I'm glad they're getting ahead of it. They're kind of pushing the envelope here. But the question is it's like when NAR is forced to change those things anyways, these ideas don't become really original anymore. No, but you almost wonder, that's where I almost looked at these and I thought maybe they're just, he might just be doing this to troll NAR a little bit. And you like get into action, like do something. Because he said that. It was like, we don't have a plan in place. We don't have a rollout in place. I don't understand why NAR, who fun fact is the largest trade organization in the U.S., which I I didn't not know.

Wow. Has no competition. So they've just been twiddling their thumbs doing whatever because they are the, there's nobody that can compete with them from a real estate perspective. And I think that's a lot of ways doing. So I'm sure you just put flexible commission rates in there. It's like, well, we'll just force them to do it then. It's funny though, because it's,

they're going like the four things of the key features are just going after pretty much everything that is probably likely to happen or are issues that kind of led to this whole commission lawsuit, which is funny. I mean, they're going after all the hot button topics that NAR is facing right now, which if you look at, you know, two and three, like we talked about, are basically because of the commission lawsuit. And to Josh's point, you know, based on this ruling, are pretty likely to become a thing within NAR. And if you look at four, that is just basically responding to the fact that the president of NAR has changed hands like three times in the past six months. So they're saying like, we don't need to have a president and a vice president so we can have an organizational structure.

Is that got to be with having to pay their salary? do with the... I don't know. It's just... I mean, people are complaining, right? That we're spending all this money on our employees that we don't...

We're not getting anything, right? It's got to be part of that. That's the other complaint. It's just, yeah, it's interesting because it's just poking at the things that are not going well. He also basically named everything just like it's the NLS versus the MLS, right? Like there's like all these little... I like how it's American Real Estate Association and National Listing Service.

Sounds like it's a big deal. Yeah. Flags on everything. Before we finish up, Do you prediction time? Do you think that at some point in the next five years, we will pay, make a membership due to somebody other than NAR for a similar service that NAR provides?

Like area. Like, will we be paying $400 to $500 to area in the next five years as to be members of their platform or somebody else? Because I'm sure somebody else's a good question. So much can happen in five years. I mean, it could be completely different. in five years. I think,

do you think it's a higher likelihood than not? That we're paying other membership dues or NAR isn't a thing or paying somebody else? I don't know if I can answer the question. Like in the next six months we'll probably know a lot more of it. Yeah, that's probably going to be the thing, I think. I wouldn't be surprised in the next five years if we're either not paying NAR or we're

paying somebody else. Both or both. I don't think it's going to be how it is today. It's not a one. No, it definitely won't say the same. That's not a wild prediction. We're either going to be paying NAR or we're going to be paying something else or

we're going to be paying both. or they're just going to merge. He might just be trying to get a little merger with NAR too. Yeah, it's really going to be interesting. I think the biggest thing is, right, it's the crazy reality that anytime there's a lot of gatekeeping in anything, right? Like, NAR is kind of gatekeeping a lot of things. They built a structure to try to maintain power and maintain control.

At some point that comes back to bite you. And so what we're seeing right now is like the years and years and years of gatekeeping listings, of making agents work together, of making sellers and buyers do certain things, it's coming back to haunt them and people are kind of fed up with it. Agents are fed up with it in terms of what we have to go through, dues we have to pay, things that we're getting for those dues. But in reality, buyers and sellers are fed up with it, and that's where the commission lawsuit came from, is like there was too much control over the behaviors that were happening

in the industry, and buyers and sellers finally were fed up and decided to sue. And so that's where I think the biggest mistake in any organization is, is if you try to gatekeep too much at some point, everyone's going to rise up against it. But in this case, especially with technology today, like there's just going to be more transparency and more openness as we continue forward. So I think any sort of solution that pushes towards that is where we probably end up with. But I'm hesitant to say that we're going to be paying dues to somebody else because that kind of just reinforces the old model of gatekeeping in a way that I don't think will exist. five, ten, 15 years into the future. Yeah,

I mean, the thing about NAR is, and I don't know if this has ever come up, but it has reached the level of being somewhat of a natural monopoly. Yep, for sure is.

It is, you know, you could break it up by creating other options like these guys are trying to do. And natural monopolies are really good

for some stuff and then they end up being really bad for other reasons. They're good because everything's in one place. I mean, like you look at

like RHVAC guy, not RHVAC guy, like a plumbing guy in Minnesota. Well, Minneapolis has their own plumbing association trade thing, right? And if you don't pay them and go to their classes and do it, I don't know all the ends and outs of it. Like you can't do licensed plumbing work in Minneapolis, even though you're a licensed plumber. That's not necessarily helpful because now you have less options. Not for the end consumer.

It's not really helpful because it's more expensive. It's also not helpful for the plumber because they can't go to Minneapolis and do any work there. So then the natural monopoly of having one is helpful for that because everybody signs up for one thing and everything is on there. Now, if this whole thing breaks up and I'm going to have to sign up for seven different MLSs, I'm going to be kind of pissed off about that because that's going to kind of suck. Well, then the end consumer also doesn't get necessarily all the benefit because maybe some of them decide we're not going to integrate with Zillow. We're not going to integrate with this. Now there's incomplete information everywhere. But then to your point, everything gets held in one place.

Then you can also have problems like we're having now. So these natural monopoly type companies, I don't know if NAR's ever been called that, but it creates some benefits and some negatives. And now we're just seeing some of the negatives come out that some bad stuff is happening. Like if you want to bury your power lines, for example, it's not fun. Nope. You got to do it through XL energy and they're going to charge you four times more than last year because somebody in the government decided that that was fair. But if you, since if you want to get Xfinity cable, they'll. bury the line for free if you decided to go with their platform.

But just the cable line, not the power lines. Yeah, but Xfinity has competition and XL has zero competition. I got to call them to bury my line for me too. But yeah, I'm guessing they're going to be free. It's interesting though. Xfinity does it for, they did it at our house for free, but it's because we could have called CenturyLink. You literally can't call anybody other than XL.

No. There isn't another option. Nope. Isn't that crazy? That one is wild. It's because the, that's a whole other podcast. The infrastructure is too expensive. Yeah.

That's a whole other podcast. That we'll get into another time. That's all we have this week. We'll play Monopoly while talking about monopolies. Exactly. That's all we have this week on the nerdy agent podcast. We're going to have hopefully a recap in like three to six months breaking down kind of what the judge says about that lawsuit specifically. But as always, remember, be better.