Home Sellers and Buyers Accuse Realtors of Blocking Lower Fees: The DIY Homebuyer Perspective| Ep. 26

DIY Homebuyer Podcast - NAR Settlement One Year Later

This past week I had the honor of contributing to a New York Times article by Debra Kamen titled "Home Sellers and Buyers Accuse Realtors of Blocking Lower Fees." The article explores what's changed one year after the settlement of the massive lawsuit against the National Association of Realtors (NAR). Spoiler alert: not a whole lot, unfortunately.

For this episode, I uploaded the article into Grok and asked it to generate questions that unrepresented buyers might have. Let's dive into the most important insights.

Key Insights for DIY Homebuyers

The "Cooperative Compensation" Problem

The sneakiest trick happens in the listing agreement between sellers and their agents. With "cooperative compensation," the seller agrees to pay the listing agent 6%, but if there's a buyer's agent, the listing agent splits their fee and gives the buyer's agent 3%.

The problem? When there's no buyer's agent, the listing agent keeps the entire 6% - whether they're a dual agent or the buyer is unrepresented. This automatically disadvantages self-represented buyers and keeps commissions artificially high.

Steering is Still Happening

Steering is when agents push buyers toward properties where they're guaranteed payment. Here's a common example: two similar houses are available - one at $500,000 offering 3% buyer agent commission, another at $475,000 with no commission offered. Your buyer's agent will likely steer you toward the more expensive home to ensure they get paid.

This is why representing yourself makes sense - you avoid these conflicts of interest and can truly see all available properties.

The DIY Success Story

One of my first DIY homebuyer clients needed a very specific property they couldn't find on the market. They got creative and found it on Airbnb! They contacted the hosts to ask if they'd be interested in selling, caught them at the perfect time, and put together an off-market deal. I guided them through paperwork, due diligence, and negotiations, but they handled all communications themselves, truly self-representing every step of the way.

Why Agents Aren't Like Lawyers

Realtors often compare themselves to attorneys, surgeons, and dentists, suggesting you'd be foolish to buy a home without representation. This comparison is absurd - the education, training, and professional standards for lawyers and doctors are vastly different from what's required for real estate agents.

Real estate transactions are largely standardized. The fundamentals don't change much from house to house, unlike court cases which have unique variables. In most states, hairstylists require more training than real estate agents!

The Future of DIY Homebuying

I believe the number of self-represented buyers will grow exponentially in coming years, similar to what happened in the travel industry. In the 1990s, booking your own vacation without a travel agent seemed unthinkable. Then platforms like Expedia and Airbnb emerged, giving consumers the power to handle everything themselves.

Travel agents still exist but serve a small segment of the market. I predict a similar transformation in real estate - in five years, the majority of homebuyers will likely be self-represented, with agents serving only those who truly feel they need the service.

The #1 Thing DIY Buyers Should Never Do

Never sign a buyer agency agreement if you want to remain self-represented! Some listing agents will claim you must sign one before touring a property - this is false. Once you sign, you have an agent who's entitled to compensation, and you lose your ability to advocate for yourself.

Instead, ask to sign a non-agency disclosure, which specifies that the listing agent represents the seller exclusively while you represent yourself.

If I Could Change One Thing...

If I could eliminate one thing, it would be cooperative compensation. I'd make it so listing agents and sellers have just one agreement about the agent's payment for marketing and selling the home - a fixed number that doesn't change whether there's a buyer's agent or not.

If there's a buyer agent, their compensation would be negotiated separately between the buyer and that agent. This would directly benefit self-represented buyers by removing an unnecessary cost from the transaction.