The Existential Threat to Real Estate As We Know It...

As brokers and agents, we often get tangled in the day-to-day grind of running our businesses. Between chasing listings, pacifying clients, and pushing paperwork, who has time to keep up with the latest industry gossip and legal squabbles?

But this is my warning call - we can no longer afford to ignore what's brewing with the two multibillion-dollar lawsuits targeting MLS practices.

The potential fallout threatens the future of real estate as we know it.

I'm sounding the alarm today because every broker and agent needs to understand what's at stake. These cases have significant implications for our income, our value proposition, and our future viability in this business. The time is now to pay attention and prepare for impact.

➡️ A Refresher - What's This MLS Lawsuit All About?

I know most of us glaze over at the first whiff of legal jargon, so let me break down the essential context. Two major class action lawsuits were filed a few years back targeting policies of the National Association of Realtors and MLS databases nationwide.

In a nutshell, the suits allege that requiring home sellers to pay the commissions of buyers' agents to list on the MLS results in inflated fees and limits negotiation. By mandating this "cooperative compensation" to access the MLS, the plaintiffs argue sellers are forced to agree to pay exorbitant commissions.

The two lawsuits - Sitzer v. NAR and Moehrl v. NAR - together represent millions of home sellers totaling nearly $50 billion in damages.

The core objective of these suits is "decoupling" - breaking the link between seller-paid commissions for their listing agent and buyers' agents. If successful, buyers would pay their agent directly instead of the current model where seller commissions fund both sides.

Since 87% of buyers utilize an agent (compared to just 5-20% in other countries), the plaintiffs contend this opaque MLS compensation system removes incentives to negotiate commissions and ultimately costs consumers billions in inflated fees.

➡️ Why I am Calling This an Existential Threat to the Industry:

Now you may be thinking - just another frivolous lawsuit trying to cash in. Why panic over legal wrangling that likely drags on? Here are the stark realities we must confront:

➠ Potentially massive judgments against NAR and large brokerages like Re/Max, Anywhere, and Keller Williams. Massive. We're talking billions in damages.

➠ Rolling back MLS compensation rules and severing cooperation between listing and buyer agents.

➠ Buyers potentially having to pay their agent fees upfront instead of at closing.

➠ Buyers being incentivized to forgo agents altogether.

➠ Real Estate Commissions becoming fully negotiable and transparent on both sides.

➠ Downward pressure on fees resulting in lower broker/agent incomes.

➠ Fewer agents in the business as lower commissions squeeze out part-timers.

➠ Maintaining legitimacy and value in the eyes of the consumer.

This issue has the potential to upend how we do business fundamentally. And that's scary. But burying our heads could prove fatal if we're not proactive.

This threat is coming faster than we realize. The Sitzer case heads to trial in October. A verdict could arrive before year-end. Appeals will likely follow, but change could be here quicker than expected.

Moehrl follows in early 2024, driving the stakes even higher. A settlement to avert trial is possible but no guarantee.

➡️ The Time to Pivot is Now!

While the forces driving this threat are largely outside our individual control, the response is not. Here are my recommended priorities for brokers and agents:

1️⃣ Get smart on the issue. Read up on the lawsuits, implications, and potential outcomes. Knowledge is power, so get beyond the hype.

2️⃣ Evaluate your finances and runway. Model out commission scenarios between 3-6%. How long could you operate on lower commissions before adapting? Build your reserves.

3️⃣ Revisit your value proposition. Beyond transactions, how can you deliver value before, during, and after a sale? Consultative services, local expertise, concierge support - build your client appeal.

4️⃣ Consider untraditional models. Could you charge monthly retainers? Offer fee-for-service? Build a portfolio of income streams? Diversify beyond sales.

5️⃣ Expand your skills. To stay competitive, what new competencies do you need? Could you specialize? Pursue advanced designations and certifications. Become invaluable.

6️⃣ Collaborate with other agents. Brainstorm innovative services, efficiencies, and cross-referrals you could implement together. A rising tide lifts all boats.

7️⃣ Make your voice heard. Contact NAR and your MLS to express constructive concerns and ideas around reforming rules. Change happens when people speak up.

8️⃣ Focus relentlessly on service. Referrals and repeat business from satisfied clients will be more crucial than ever. Deliver such value they can't imagine not having you at their side.

This is our wake-up call - our industry is changing with or without us. So let's lead the change. The brokers and agents who start positioning themselves today will write the new playbook.

Use this mastermind as a sounding board.


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