Referral Fee Disclosures Are Coming!

Anthony Lamacchia:

Are you ready to start disclosing third party referral fees, whether they go to an outside company or even broker to broker? Well, that’s coming down the line. It’s not quite here yet. It was almost officially here as of yesterday, and then it got shot down by the delegate body after the board of directors meeting at the National Association of Realtors.

Annual conference down in Houston, Texas. I was there for meetings where this was discussed. I was in attendance at the executive committee meeting, and then yesterday I actually voted in the board of directors meeting. I was one of the, let me look at the exact amount of votes. I believe it’s 884. Uh, 880 members in favor of now requiring that.

Third party referral fees are disclosed. Now, I’ll be honest, did the businessman side of me like this, the capitalist side of me, eh, when I first heard it, I said, God, what are we gonna disclose? Everything? And I was joking with some people in the days before the board of [00:01:00] directors meeting, I said, okay, so if a painter receives a referral from a paint store that he buys paint from.

And the, the store owner says, Hey, I recommended Susie Q to you to paint their house, and he goes to paint their house and he continues to buy more paint or buys extra paint. Does he now have to disclose it? Does the store owner have to disclose it? I mean, we’re getting a little crazy here in the real estate space with all these disclosures and new forms and all kinds of things, particularly here in Massachusetts.

I still was convinced enough that I voted for it. However, there’s a delegate body, a body of delegates that gets together after the board of directors meeting. Not every time, only if there’s going to be a change to the Constitution or the code of ethics. Since this played exactly on Article six of the Code of Ethic, let’s pull that up on the screen.

You can see that it says realtors shall not accept any, it used to say commission. That’s gonna get changed to [00:02:00] compensation, rebate, or profit on expenditures made for their client without the client’s knowledge and consent. Okay? This is why you have affiliated business arrangement forms and disclosure.

Signed at a lot of, a lot of large companies that have ancillary businesses, right? So let me keep going here. When recommending real estate products or service services, eeg, homeowners insurance, warranty programs, mortgage financing, title insurance, et cetera, realtors sell shall disclose to the client or customer to whom the recommendation is made, any financial benefits or fees.

Now notice it says, other than. Including real estate now it’s gonna be changed to say including real estate referral fees. The realtor or realtor’s firm may receive as a result of. Such recommendation. Now I want to just point out, this was last altered. Okay. In 1999. So [00:03:00] we can get mad and we can scream and yell and say, oh my God.

Or we can say, well, that’s what made sense at that time. And the trade association was probably trying to protect its members as it should do, right? To some extent. Consumers first, members second. Okay. Um, and that’s why the wording changes are here. So this is another example. Of the leaders in the real estate industry trying to do what’s best, trying to adjust to this new paranoid environment since these lawyers sued our business.

Okay. And manufactured plaintiffs, and literally pulled off the biggest case of judicially sanctioned extortion that I’ve ever seen in my life. So realtors are trying to be proactive. There’s a new strategic plan. There’s all kinds of MLS guidelines that were reviewed and all kinds of changes that were proposed.

And it made it through the executive meeting. It made it through Board of Directors, but then the body of delegates voted it down. Now, here’s the funny thing. When you read the headlines and you think about some people talking about this, I [00:04:00] saw some smart people today posting about it. Oh my God, what are they doing?

Well, okay, settle down. 66.3% of the body of delegates voted for it. They need two thirds, technically two thirds is 66.67%. So if one more person voted for it, it would’ve passed. What does this tell me? It’s coming. Will it be in June at the midyear meetings? I don’t know. The latest will probably be in New Orleans next November, but this is coming.

And in the meantime, absolutely no one is stopping brokerages from starting to disclose this stuff in their forms. Should they so choose? Right? Should they So choose now something to think about. Yeah, these third party companies, relocation companies, relocation management companies, um, corporate clients, right?

Companies like us that work directly with some corporations handle affinity programs and things like that. Some of them may [00:05:00] not like that. What about Zillow Flex? They just got sued in September over this topic, right? And some attorney tried to say, well, the consumer doesn’t know this is stopping this consumer from negotiating.

Here’s the truth. That’s a bunch of bs. Okay. I mean, let’s be real. That’s not doing that. This just re this, this brings me back to two years ago after the, the, uh, wrongful verdict came down. Okay? The fees are not pumped up because of referral fees. Now, do I as a broker owner kind like it and say, well, when these third party companies know.

That these fees are going to be disclosed to the consumer, be it in MLS or in the forms, will they probably be a little less brazen and be a little more cautious about how much they push the envelope with how much they’re charging? Probably there’s been some third party companies that we work with, uh, that, uh, I can think of one in particular that a couple of years ago got a little crazy with their fee and we said, [00:06:00] no, thank you.

We’re not doing business. And they came back. They brought the feet down to earth. Okay, so what I’m getting at here is, this is coming down the line when exactly, I don’t know. Might there be special meetings? I don’t know. But I do know that there was a little bit of confusion on directly who this applies to.

And that was described here, um, in this article in Inman that Taylor wrote. I like what, um, president Kevin Sears, or now I can say past president, it’s almost three o’clock. The change did not pass the delegate body, so the change is not going into effect at this time. That’s what Mr. Sears said yesterday.

Now I also noticed that, um, here’s what I was gonna point out, that Taylor put in the article. It’s not immediately clear if the change w would’ve been applied to lead generating platforms like Zillow, Redfin, realtor.com, et cetera. I would [00:07:00] think it probably will be, but that is some of the area of confusion.

And I suspect, I don’t know, I’m not part of the body of delegates. But I suspect that lack of clarity and specificity is the reason that they didn’t get enough people to vote for this. And you know, we can all criticize and say, oh, that was stupid of them to do that. But then again, if it went through fast.

Without a lot of careful thought. Then there would be some other lawsuit and people would say, well, they were stupid to rush that through over a weekend in Houston, without any people really truly being aware of this in advance. Right? So the leaders at the National Association can’t win. That’s just how it goes.

And I say that as someone who’s no longer a leader there. I was broker liaison last year. My term ended either this morning or yesterday, and I’m done. But I’m just telling you all how it is. So if you’re a broker owner, team leader, realtor, whoever you are, whatever you do, be prepared that at some point here, down the line, [00:08:00] we’re gonna be disclosing these things.

I’m, I’m willing to bet that we’re going, I should say, when I say we we’re gonna be required to disclose these kinds of things, whether it’s from NAR and or MLSs, et cetera, Northwest MLS and the Pacific Northwest already started. But I will say this, I don’t think you’ll see it in a large fashion until a higher authority says it.

Because any brokerages that go out and do this on their own, they might run into a little friction with those third party companies or others that send them referrals, even if it’s broker to broker referrals. Hope that makes sense. Hope that clarifies for everybody. We’re still doing business. You’re still doing business.

Let’s move on and make things happen, and continue to serve home buyers and home sellers and put their best interests. Out there first. Thank you.

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