IF DOJ Get's Their Way, How Will Realtors Get Paid?

Industry Professionals Who Appear in This Video

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Anthony Lamacchia is the Founder and CEO of Lamacchia Realty, a multi-state real estate company.

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Summary of 'If DOJ Get's Their Way, How Will Realtors Get Paid?'

In this video, Anthony Lamacchia discusses the potential ramifications if the Department of Justice (DOJ) succeeds in its efforts to change how real estate professionals are compensated, specifically targeting the traditional model of seller-paid buyer agent commissions. Anthony expresses concern over the DOJ’s statement of interest in a case, which suggests eliminating the offering of cooperating brokerage compensation entirely, not just within MLS listings but in all transactions. He doubts the feasibility of such a sweeping change but acknowledges that some form of change is likely.

Anthony criticizes a class action settlement notice sent to homeowners, mocking its design and the minimal compensation it promises to class members. He then shares statements from respected industry figures who oppose the DOJ’s stance, highlighting the potential negative impact on consumers, especially first-time and VA buyers.

The video delves into the practical implications for real estate agents working with buyers and sellers in a market where seller-paid commissions might be eliminated. Anthony discusses various payment options for buyer agents, including out-of-pocket payments by buyers and closing cost credits, and the challenges these pose, particularly for first-time buyers. He emphasizes the importance of transparency and fiduciary duties, advising agents to discuss compensation upfront with clients.

For sellers, Anthony predicts an increase in direct buyer inquiries and stresses the need for sellers and their agents to be well-versed in dual agency regulations. He warns of the legal risks to sellers when buyers lack representation and advises on how to handle offers that might include commission payment terms.

Anthony refutes accusations of steering by agents, defending the profession’s commitment to acting in clients’ best interests. He concludes by reiterating his belief that the DOJ will not be able to fully implement its desired changes due to what he views as overreach, and he expresses a willingness to discuss these issues with critics to find common ground.

Throughout the video, Anthony’s focus is on defending the real estate industry’s practices, advocating for the value agents provide, and cautioning against changes that could harm consumers, especially those entering the market for the first time.

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Read the Full Transcript For 'If DOJ Get's Their Way, How Will Realtors Get Paid?'

Anthony Lamacchia: If the DOJ gets their wish, how will you get paid? Many realtors across America are wondering that over the last 10 days, and I have heard from many. It’s a valid concern, it’s a valid thing to be thinking about. The Department of Justice literally came out with a statement in the Nozilek MLS PIN case, a statement of interest, stating that they want to end all offerings of cooperating brokerage compensation, not only in the MLSs, but they said at all.

They want to completely stop sellers from being able to do that. Can they do that? Can they actually put something like that in place? I don’t really think they can get it to that extent, but there’s no doubt there’s some type of change coming, likely at a minimum the mention of it in the MLS. What does that mean? What will you do? I’m going to tackle that in this video, if you’re working with a buyer, if you’re working with a seller.

First, I want to talk about some other things that are going on, like some very well-respected folks in the industry who have come out wholeheartedly against this over the last 10 days since the statement came out. A lot of their statements came out after my video, and they put out some good words that I’m going to read in a minute. First, who has heard of a client, a family member, a prospective seller receiving this postcard? This is obviously a copied version. You can totally tell this was made by lawyers because it couldn’t possibly be any uglier.

Nothing on this is eye-catching. It’s a whole bunch of text. Imagine receiving this in the mail. Residential real estate broker commissions antitrust settlement. Notice of proposed settlement. If you sold a home and paid a commission to a real estate agent, you may be part of class action settlements. You know what it should say, you may get $22. If you’re in Massachusetts where the MLS pin case is, you may get $5.87. Really.

Then they go on to name all the different real estate companies. I don’t even want to name them because I feel bad that they’re mentioned in here. That’s another wrinkle that’s coming up and another thing that realtors are getting hit with over the last couple of weeks. Now, let’s review some statements from some very well-respected folks, and then we’re going to get into what does it mean if you’re working with a buyer or seller.

Number one, National Association of Realtors statement about what the DOJ put out. I thought this was great. “The statement of interest confirms that the DOJ wants to regulate what sellers and their listing agents are allowed to do with their own money and homes. Prohibiting all offers of compensation will harm consumers.” That couldn’t be more accurate. They are right to put that out, and I’m glad the National Association took a hard stance on that.

Number two, Mr. Steve Murray, founder of RealTrends, now a part of HousingWire. I thought he put out a great statement. He said, “If the court and judge accept this, it is the worst possible outcome for the industry. It is also the worst possible outcome for millions of homebuyers.” That’s what I’ve been saying all along, including in the debate that I had about a month ago.

Number three, Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals. Great statement. “The DOJ and the other proponents of the decoupling of broker fees believe that the net result will be lower commissions and better consumer affordability. I think that is a fantasy, but I am certain of one thing. Homebuyers, especially first-time buyers, will be the biggest losers in this.” I’ve been saying that all along. I told the plaintiff’s attorney that in the debate. I said, first-time buyers, VA buyers will be mostly affected, and you’ll be the one that will be mainly or at least in part to blame for it, and I still feel that way.

Then we look at a statement put out by a group who is on the side of the DOJ and feels they’re right. This is Mr. Steven Brobeck from the Consumer Federation of America. For years, I’ve paid attention to them and statements that they’ve put out, and as I’ve said in past videos, they’ve done good work. They are dead wrong on this subject, and Steven doesn’t know the full extent of how things work or really what he’s talking about on this subject. Here’s a reason that I say that. “The Department of Justice opinion virtually guarantees that buyers will eventually be able to negotiate buyer-agent commissions that are currently fixed through industry collusion.”

Whew. That one gets me going. Then he goes on to say, and this is back to the legal side, but let me jump there for 30 seconds. “The industry will be foolish not to seek to consolidate the lawsuits, agree to pay affordable damages, and decouple buyer and seller compensation.” Of course he wants all the cases to get consolidated. All the lawyers out there, all the defendants’ lawyers that are out there watching these videos, because I hear many are making their way to you, though I’ve never spoken to any of you. I’d be happy to. Do not let these cases get consolidated to the Western District of Missouri. If all the cases go there, very unlikely anybody’s going to win. I just want to throw that out there.

Now let’s look at what the world would look like if this was to occur. You’re a realtor representing a buyer on a listing, okay. DOJ gets their wish. You log into the MLS. There’s no offering. Now, if there’s no offering of compensation on every listing across the board, effective on X date, then it’ll at least be an equal playing field, okay. Of course you’ll have to negotiate it, and I’m going to get into that in a minute. In the interim period, call it this unofficial transitional period, where we’re starting to see that on a couple of listings here and there. I’m going to get into that more in a minute about sellers. That’s where it’s a little more harmful to the seller.

The number one thing buyer agents have to remember is your fiduciary duties to clients. In most states, agents have fiduciary duties to clients. In some states, it’s mandatory to have a buyer agency agreement signed, and in some states, even if you don’t have it signed, there’s an implied agency agreement. Even if there’s not, I’ve said this before, even if you’re in a state, there’s very few, but even if you’re in a state that it’s like transactional brokeraging, what are you going to work with a buyer and not be straight with them, not tell them what’s going on?

The duty of loyalty literally says that you’re supposed to put the needs of the client above yours. Whether you have an agency agreement signed or not, if you’re working with someone to help them find a home, you’re obligated to disclose things to them, to tell them things, to explain how things work, to let them know how you would have to go about working it out with them to get paid if there’s no compensation being offered from the seller. You don’t wait until they find the home of their dreams and then say, “Oh, by the way, this house happens to be the one that isn’t offering compensation.”

You also don’t write the offer or the proposed purchase and sale agreement, submit it, get it accepted and go, “Oh, by the way, you owe me money out of pocket.” Whoa, can’t do that. Those fiduciary duties are above all. Speaking of buyer agency agreements, you should get them signed. Buyer agency agreements, buyer contracts, whatever it may be, whether you’re in a state that requires it or not, it is a good way to do business.

The thing that I like about them as a broker is it forces agents to have all of these conversations up front, expectations, fiduciary duties, what the agent is doing, what is expected from the buyer in return, anything

What options do buyers have? Well, obviously a buyer can pay out of pocket. They can actually come out of pocket at closing, write a check into the closing, and the buyer’s brokerage can be paid. In some cases, in some states, it could be said, and obviously check with your attorney and the attorney involved and all that. Buyers could even pay the brokerage directly as a service fee or buyer agent service fee, things like that. What about closing cost credits?

Folks, closing cost credits are another option. They’re often a handy option if there is a small difference in commission missing, maybe 1% between what you, the buyer’s agent/brokerage want and what the listing brokerage/seller is offering. If you use the closing cost credit for that whole amount, now they have no money to go towards their closing costs. Who does this affect most? First-time buyers. Second-time buyers, people that are moving up, people that are experienced buyers, they’re often putting 20% down. They’re paying their own closing costs. They can usually handle it. The first-time buyers, they’re going to get affected most.

The other thing you could do is you could ask the seller to pay it within the closing. As I said last week, I give the DOJ credit for putting that option in. At least that was their signal of, “Hey, we’re not trying to say buyer agents and their brokerages shouldn’t be paid. If they want to put it into their offer and propose it in their offer, fine. You can certainly do that.”

Let’s say it’s a multiple-offer situation. Those first-time buyers are at a big disadvantage. There was an open house this weekend somewhere here in Massachusetts. There were 120 cars at the open house. Why? Excessively low inventory, extremely competitive situations. We’re in the winter. That’s not easy to navigate if you’re a buyer as it is. Now if you’re a buyer that can’t come out of pocket and you have to ask the seller to pay it, now there’s two negotiations going on. Puts buyers at a disadvantage. As I said in the last video, truth be told, buyers are somewhat paying everything anyway. They’re the ones actually bringing all the money to the table through their financing.

Now, here are some things you can’t do. You can’t just take your commission and add it on top like just, “Hey, take it and plop it on there.” That doesn’t work under the current mortgage financing rules, Fannie Mae, Freddie Mac, FHA, VA. All of those institutions and private institutions, they’re not going to allow that. Folks, a mortgage is asset-based lending. They’re lending against an asset. You can’t just say, “Hey, instead of a $400,000 mortgage, could we get a–” I’m throwing out hypothetical numbers, “but could you get a mortgage for $410,000 so that I, the realtor, can get my fee?” That doesn’t sound good. That doesn’t look good. It’s not going to be allowed.

Now, some folks on the other side have said, “Well, the guidelines will change, the regulations will change.” Oh, yes, that’s easy. That’s real easy. Number one, I don’t think they’ll change. I don’t see mortgage lenders, whether portfolio-based lenders, private lenders, or the GSEs, they’re not going to just allow commissions to go on top because they do asset-based lending. It also is a strange look, puts realtors in a tough spot.

The other thing that is more complicated than the other side is making it sound is with respect to down payment assistance. That came up at the end of the debate a few weeks ago. The other side, oh, well, they should use down payment assistance. Down payment assistance explicitly says that it cannot be used for paying real estate commissions. It only can be used for the down payment. Down payment assistance programs, I want them, I applaud those that can do it, but they have lots of limits. They have total amount limits. They often are limited to various gateway cities in specific states. They have income limits.

Let’s take a look, for example, at a program here in Massachusetts. It says that in Worcester, to use down payment assistance– I’m not going to name the program because I don’t want to harm any programs, and we debated about that, but I don’t want to. One of them says you can only have a maximum income of $75,000. It’s actually 74 and change, but call it 75. It can only be a max purchase price of $270,000. Oh, really, $270,000.

Folks, when’s the last time there was a house for sale for $270,000 in Worcester? We looked this morning. There was nothing for sale. In the last six months, there’s been a few that have sold for under $270,000. They were all dilapidated homes that needed substantial work, homes that you couldn’t get financing on, homes that wouldn’t qualify for down payment assistance because the down payment assistance specifically says that the house has to be in proper order, blah, blah, blah functional, et cetera. It’s complicated, and it doesn’t work.

Folks on the other side, I hope you hear me say this, and I hope you hear some of the examples. If you want to reach out to me, we’re happy to show you the guidelines and send you specific examples. I even threw that offer out to the Department of Justice last video, and I’ll throw it out today. Happy to connect with you all directly if you would like to. Bottom line, more buyers will go it alone. They will not want representation because they’ll think, “Well, how are they going to get paid?” It will create all kinds of problems, and it will deter many buyers, specifically first-time buyers, from seeking representation. It’s clear that they still want it.

Look at the last six months with all the crap media that the real estate industry has received. There are still buyers, thousands upon thousands a day, logging on to Zillow, homes.com, realtor.com, and various other websites and clicking contact agent. Still clicking contact agent. Buyers and sellers are still using realtors all over the place because they want to work with a realtor.

Steve, I hope you hear this part, for those consumer advocates in the 90s who were all about buyers receiving representation so that an agent would have a fiduciary duty to them. Remember, prior to the mid-90s, everybody was representing sellers. Doesn’t mean there wasn’t two agents involved, but everybody was working for the seller. That was when buyer agency was born. Fiduciary duties to buyers was born. Realtors take that very serious. Now that’s going to be cut at least in half, at least in half.

For those of you that think, “Oh, good, that’ll save money.” No, it won’t. Commissions aren’t going to just fall apart because of that, because now the listing broker is going to be doing both sides in more and more transactions, and that’s what I want to talk about next. What happens if you are representing a seller? We just talked about buyers. Let’s talk about sellers.

If you’re representing a seller, get ready for more transactions where the buyers come directly. Make sure you are sharp on your skills for what dual agency actually is and what it actually isn’t, when it is actually a dual agency and when it is not. I’m not getting into that here, but you need to be sharp on that because many times agents put themselves into that scenario when it actually isn’t. You need to be more sharp on that. You need to be prepared to have these conversations with your sellers. You can decide what you want to do with your commission. Everybody does that on their own with their own brokerages.

I know that many, most experienced real estate agents, experienced realtors, they’re not going to just say, “Oh, yes, I’ll do double the work, but I’ll only get paid half.” That’s not going to go the way that these people who don’t know what they’re talking about think. There is also more legal risk to sellers. Now sellers are exposing themselves to more legal risk when buyers don’t have representation. There is definitely a higher percentage of legal issues when buyers come directly to sellers. Buyers end up feeling like they got shorted. Buyers end up feeling like they didn’t have representation because many times they didn’t.

When you go directly, if you have no prior relationship with the listing agent, that listing agent isn’t representing you, they’re representing seller. If they’re doing their job the right way, you’re signing a mandatory agency disclosure right up front that says they’re representing seller. Most buyers, they don’t know any better, so they sign it, which they should, but my point is, buyers in that scenario they go along with it, not getting representation. Many of them get mad later. They say things weren’t disclosed correctly, et cetera, et cetera.

You also have to make sure that you are sharp on your forms, what forms to use, how to use them. Be prepared to receive offers that very well may have mentions of sellers paying commissions in them. Make sure that you understand the language. Make sure that you understand how to navigate that and inform the attorneys, the title companies, et cetera. You obviously need to receive all offers, whether they’re from a buyer directly with you or a buyer, five buyers from other brokerages, who knows you need to present all buyer offers to your seller. That can get a little bit complicated, especially with these changes and postcards coming into mailboxes and things, but it can be done.

What I’m noticing is now that the majority of sellers and realtors are still doing things the way that it’s done in most cases, cooperating brokerage compensation being offered in the MLS, et cetera, the homes that are not offering them, well, they’re not selling in most cases because they’re probably poorly marketed. They might be listed with an agent who doesn’t quite understand this or maybe is hearing these things in the news and saying, “Oh, I’m going to offer that to a seller. I’m going to say, ‘hey, you don’t have to pay that side. You don’t have to.'”

The truth is they don’t have to anyway, and any agent that knows what they’re doing and explain things correctly to a seller knows that they didn’t have to all along. Now we’re hearing some stories of sellers saying, “Well, I heard in the news that I shouldn’t have to pay this, so I don’t want to pay it.” Okay, don’t pay it. When a buyer hears from their agent that, “Hey, we’re going to have to work out how I can get paid.” Most buyers in many cases are going to say, nah, I’ll see another house. That’s just how it is. Remember, the buyer agent has an obligation to warn the buyer of that on the front end.

Brobeck actually mentions this, so I want to use this because it’s a little bit contradicting. “It is critically important that buyers negotiate buyer-agent commissions before their agents search for properties.” To some extent, he’s right about that. Conversations with respect to compensation should happen before. If a buyer agent is representing a buyer and the buyer says, “I want to see home A, B, C, and D,” and the buyer agent pulls all those properties and notices that home C is not offering any compensation, the buyer’s agent is obligated, has a fiduciary duty to explain that to the buyer up front, not after they see the property, not after they make an offer. Mr. Brobeck, I’m glad you agree with that because you say it right here.

Folks, the bottom line is this. You have to continue to do what is best for your clients. One of the things I teach our agents, both here in our company and our training across North America, how about treat a client the way you’d like to be treated? You’d like to hear things up front, right? I just went through the conversations that a buyer agent should have with a buyer on the front end. Same with a seller. You’ve got a listing agent, just to close out the seller portion. Listing agent has a duty to a seller. Once you are working with them and there’s an implied, even implied relationship or implied seller representation, your job is to tell them everything in their best interest.

Before this actually changes and it’s across the board, because if we get to a place that it changes, it’s across the board as of X date, cooperating brokerage compensation can no longer be offered, well, once it’s everybody, it won’t hurt a specific seller as much. In this interim period, if you as a listing agent are telling a seller, “Hey, don’t offer it. You’ll be fine. Good for you. Let’s not do it.”That’s your opinion. You’re entitled to tell your seller your opinion. I would disagree with you, because your house is going to stick out like a sore thumb to a buyer and they’re going to say, “You’re my agent, I have to pay you.” It’s going to because havoc.

Lastly, let’s review what steering actually is. For those that are out there that are confused on what it actually is, or trying to make claims on what is actually steering. The DOJ identified three things that they feel is steering. Talking about agents, they can decide which properties to show. They can attempt to but they’re not going to and they’re not going to be able to hide a property from buyer.

Let me read number two and I’ll go through the whole thing. They can discourage bids on particular properties. They can decide how vigorously to pursue a property on behalf of a client. Let’s take that further. Number one, I’ll say the same thing that I’ve said many, many videos, you cannot hide a property that’s on the open market from a buyer, those days are over. Realtors do not hoard the data. They don’t hoard the information anymore.

When I was in that debate, the plaintiff’s attorney held up an MLS book from the ’80s. It says, “You can’t see that unless you’re in the club.” That’s a bunch of crap. That was the system 30, 40 years ago to some extent. Now everything’s online. Everything’s shared online. There’s no ability to hide things from buyers. They can reach properties at their fingertips at any time. They can decide how vigorously to pursue a property on behalf of a client.

Folks, this is again where fiduciary duties and this notion of steering collide. They collide. For those of you that only obsess about steering,lawyers who only focus on that, back off that for a second and think about fiduciary duties. If an agent is having a conversation with their buyer, and their buyer says, “Yes, I like house C, but if I’m going to have to bring money to the table, whatever, I already have to bring X and Y amounts of money plus pay you, I don’t know that that’s the best decision for me.”

I had countless buyers over the years. Myself, I can think of one in particular that I looked at properties with them. I said, “Listen, this property is over your head, okay. It needs way too much work. You don’t have enough money to do this based on how much you’ve told me you have. I don’t think this is the one for you.” It had nothing to do with commissions. The notice notion of that is absurd. It’s offensive. Okay, it’s offensive. We have a job. Realtors have a job, you’re supposed to tell your clients what is in their best interest, the duty of loyalty, put their best interest above yours.

In closing, I just want to repeat something I touched on earlier. I don’t think the DOJ is going to be able to stop it at all. Remember, they use that phrase “at all.” They’re not going to be able to. I don’t see lawmakers on any side of the aisle agreeing to that massive amount of what I would refer to as government overreach. How can you take away a right? Just like the NAR statement said, “How can you take away a right of a seller, homeowner to offer compensation?” Maybe they’re going to make some changes in MLS sounds like something’s going to change. That’s why you all have to be prepared for it.

That’s all my friends, stay tuned, more videos to come. If you didn’t see the prior one on the Department of Justice statement, go back and watch it. That one’s been going crazy. It’s been the most viral video that we’ve done in the last couple of months. It’ll teach you a lot about the statement. I hope what I went over with today makes realtors more comfortable. I hope for those of you on the other side, I hope I opened your eyes to some different things. As much as I am frustrated with some of you and frustrated about the media that’s coming out from many of you, I’d be happy to sit down at a table with any of you and go over these things, because I bet deep down, you don’t want to screw up everything for buyers either. Thank you