What Does This Lawsuit Mean for the Real Estate Industry?
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this new series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
CapForge Founder and Owner Matt Remuzzi shares his thoughts on how the real estate industry might change after recent events.
Video Transcript:
Business Advice Video:
The real estate industry is going to change forever starting in July. What is already a business where 80% of agents fail is probably going to increase and get significantly harder of all the agents that are licensed right now. I would expect probably half will drop out of the business within a year and a half with sellers no longer being required to pay the buyers agent. You are going to see a lot of people who are in the business for short-term gains drop out immediately because if a house was listed for $1 million previously the seller was gonna pay 2 or 3% of the purchase price to the buyer’s agent and that is no longer going to happen. So every single agent
who is just there to open doors and answer phone calls not do any negotiations, they are going to find it extremely difficult to be successful in this business. And they will absolutely be dropping out but the agents who still provide value have a large client base will probably continue to thrive.
Matt’s Review:
Okay, well yeah so what he’s referring to is there is a series of lawsuits actually suggesting that realtors and real estate agents were colluding and that buyers didn’t have any opportunity to negotiate. The sellers were basically pre-agreeing to split with the buyer’s agents an amount and the buyers had no say in that or no control over how much commission they were paying.
And that somehow this was driving up the cost of real estate and homes and so the realtors association and local realty companies all got involved in this big class action lawsuit and the ultimate ruling was is yes they were colluding and no they had to you know couldn’t do that. They had to change their practices somewhat and now what he’s suggesting is that this is the end of buyer’s agents. I don’t know if it’s gonna be that extreme. I think there’ve always been people trying to cut down on the 5 or 6% real estate fees that are sort of traditional in the industry. But if you ever bought a house it’s a little bit intimidating, and it’s a little bit complicated. And although you probably could get through it on your own I think a lot of people like the comfort of having somebody to rely on to help them with the process. So maybe that 5 or 6% isn’t right anymore as houses get more and more expensive, that no longer equates to a fair amount to pay for the value of that aid in the transaction. But I would be surprised if the process totally goes away or all of a sudden buyers are just fine to you know act as their own agents or not have an agent at all in the process. I think there’s just too much going on and that’s gonna be intimidating. So what fills the space remains to be seen or exactly how much this shakes out remains to be seen but I don’t think it’s gonna completely go away. It may transform a little, prices may come down a little. But I don’t think it’s suddenly the case that you know all these hundreds of thousands of real estate agents are gonna suddenly starve to death because they don’t have a business anymore.
