Anthony Lamacchia: Realtors charge too much. Brokerages are ripping people off. Realtors charge billions of dollars a year. Folks, it’s been seven days since the terrible, wrongful verdict on the Sitzer-Burnett case, and I’m here to talk to you about some of the things that I’ve observed over the last seven days that I think all of us realtors, attorneys, title companies, mortgage professionals, the folks on the plaintiff’s side, I think we all need to be aware of, including members of the media. I do these videos for all audiences. Couple things that I’m going to go through with you. Number one, I’m going to go through this talk of our commissions is too high, and I’m actually going to discuss that a little bit. Number two, buyers drive the process. I’m going to get into that because I’m hearing way too much about realtors steer buyers to certain homes. Also going to talk about the media. I have some specific articles here. New York Times, Business Insider.
I even printed the transcript from a Good Morning America segment the other day that I want to pick apart and point some things out on. Wall Street Journal Podcast, and Bob Goldberg is no longer the CEO of NAR. That’s in the process of being switched over to Nykia Wright, and I hope she’s ready to do battle. I’m going to talk about that. Also, going to tell you, at the end, something that I think is going on here.
I think there’s a conspiracy going on here. There’s a much bigger picture. There are much larger players involved that are trying to decimate our business than just Michael Ketchmark who is suddenly now famous in the real estate community. They went out and hired him to– And sicced him on our industry. I’m going to get into that as well. First, let me start with my first note here, folks. Keep reading articles. I keep reading articles.
“Realtors charge 6% and they split the fees three and three.” We wish it was that easy, folks. All these articles, everywhere I look, New York Times, Washington Post, Wall Street Journal, “Realtors charge 6% and they split it three and three.” Yes, we wish it was that easy. It’s not that easy. We don’t always get what we want to get as realtors or brokerages. Depending on what you want to get, it varies across the country, but there are multiple different amounts that companies are charging. All over the road. Okay?
If their observation is that a lot of the commissions have ended up somewhere around 4%, 5%, 6%, 7%, okay, that’s their observation, that’s what they keep bringing up in court, but one of the things I want to point out is commissions like that, they’ve been charged for more than 100 years. It’s only buyer agency that is something new. That’s been around 20 to 25 years.
The idea of having two agents in a transaction that are splitting a commission or maybe one’s getting 60%, one’s getting 40%- When I say realtors I mean brokerages. -that’s not like it’s something new. The only new thing is buyer agency, and that’s part of what they are honing in on. Although the new lawsuit that Mr. Ketchmark filed right after the verdict of this one is actually from the buyer’s side.
They’re just attacking from all angles, and they’re trying to suck as money– Much money out of our industry as possible. I wanted to point that out. I also wanted to point out just an overall sense that I got from reading articles, reading transcripts, and more importantly, when I see Michael Ketchmark on the news. The guy’s clearly talented. I’ve thrown some shots at him, and I’m sure he’d love to throw some at me, but clearly, the guy’s a good trial attorney. Clearly he can talk and he can woo a jury.
He’s on the news last week with Bess Freedman, CEO of Brown Harris Stevens, and he’s just saying all kinds of things. “It’s a cartel.” That word drives me nuts as you all know, but he’s saying, “Well, yes, sure, I saw a training video where the trainer said commissions can only go up.” Big deal, you saw a training video. Folks, training on how to get more commission or how to get the commission you want exists because we get pushback, because it’s negotiable, because there are companies that are undercutting other companies just like every business in the world.
Think when Amazon came out. They didn’t have very many factories or things like that. They were undercutting everybody. That’s capitalism. That’s what’s allowed. That is why antitrust is in place. That’s why the Sherman Act came into play. What’s interesting is when they talk about it in the media, even on a live camera. It isn’t like just in print they’re honing in on the commission amounts, even on a live camera.
Michael Ketchmark didn’t get on live camera and explain deeply in the CNBC segment that I saw how we’re violating the Sherman Act. He talked about money, and he painted realtors with a broad picture of, “Making too much money.” Then he even made a comment which really frustrates me. “Well, it’s like you learn in first grade,” or maybe he said kindergarten. “When you take something that doesn’t belong to you, you should give it back.”
Really, Michael? You’re an attorney. You went to college, what, in the late 80s, started your firm in ’95? When you went to college, I’m sure you learned about contract law. These sellers agreed to pay a certain fee to the listing brokerage. They were, I’m assuming, aware of a certain portion of that fee being shared with the listing brokerage. Whether it was from the seller from or from– I’m sorry, with the buyer brokerage.
Whether it was from the seller or from the listing agent, doesn’t really matter, but they were aware. That was in a contract. Sellers wanted that, sellers were okay with that. The argument that, “Oh, well, all these plaintiffs came together and they filed a class action suit,” that’s a bunch of crap, and we all know that. Ketchmark and his folks who do this for a living, they’re the ones that went out, rounded up these sellers, convinced them they were mistreated, although they probably don’t even think they were mistreated.
I’d like to know how many of those sellers sold over asking price in the last three, four, five, six years during that statute of limitations period which is all of them that they put together. I’d like to know how many sold over asking. I’d like to know how many of those sellers put out testimonials and things saying how great their realtor was, because I bet there’s droves of them. Was that brought up in court? I don’t know.
I wasn’t in the courtroom, but I wanted to point that stuff out because this is clearly going down more of a money road than it is a matter of law road. I’m sure in the courtroom they went into laws, but when they’re in the media, it’s money, money, money, money. Why aren’t other industries being attacked? What about lawyers that work on contingencies? What do lawyers that work on contingencies make? I’m saying that to the audience now.
If everybody puts comments on what they think lawyers on contingencies make, they’re all going to say about 33%. Hmm, interesting, they’re all following around the same number. What does that tell you? Maybe they’re getting together at their industry events. Maybe, when they get together, they’re all saying, “You hold the line, you hold the line.” Just like Ketchmark and the plaintiffs and the other case too, they’re trying to say that we do that at industry events?
I’ve never been to an industry event. I’ve never been to a realtor event where everybody’s talking about what they charge and, hey, hold the line, but hmm, maybe we should look into attorneys. Just maybe. Why are they all charging 33%? Do you follow my point here? Many industries have similarities with what they charge. I said this in my first or second video two weeks ago. Where do those similarities come from? They come from cost. There are certain costs that you can’t avoid.
Us, real estate brokerages, we have costs. We have costs involved in listing homes and marketing homes, paying staff, doing all these things that we do to market homes. Costs add up, companies want to make something on top of that, and that’s where pricing comes in line. That’s normal. That’s how business works. Now, let’s talk more about this specific topic which I’m dying to talk about.
I keep hearing in the media, Wall Street Journal Podcast I listened to this morning with two very good reporters, Nicole Friedman and Laura Kusisto. Well, they were pointing out what a lot of other media has pointed out. They said, well, if the buyer sees– If the realtor sees this house is paying X apples in commission and that house is paying Y apples, they’re going to be more attracted to the house that pays more.
Okay, well, I heard on the podcast they got a realtor on the line that said, yes, well, if you’re not paying me anything, I’m not going to it. Okay, there’s 1.6 million realtors. Might there be one or two or 100 or 5,000 that say the wrong thing or don’t say the right thing? Any industry, you’re going to find people who respond the wrong way, but let’s put realtors aside for a second. Who truly drives the process? The home buyer.
This isn’t 1985. Realtors can’t hide properties from buyers. They can’t do that. That is impossible. Buyers have every home they want at their fingertips. In addition to that, when a realtor has to break the news to a buyer and say, “Hey, just a heads up on this home, they’re not offering any compensation for me and my brokerage, so I just want to give you a heads up that on this home, you’ll have to come out of pocket and pay me”, and what’s the buyer naturally going to say?
“Well, what about the other two homes that I was interested in?” Are those ones willing to share their compensation with you? What’s a realtor going to say if they’re offering it? Yes. Realtor has to disclose. In addition to that, keep something else in mind. The process is much more transparent now. Zillow even shows what cooperating brokerage compensation is, so agents– Buyers can see it.
Buyers see a zero, and they think, oh, I’m going to have to come out of my pocket to pay my agent, buyers are going to say, “Hey, you know what? I’d rather go over here. I’d rather go to a different home.” Especially at this time of year when buyers have less motivation. I’m pointing that out because I want to correct the media, and I want media to realize, hold on, it’s not realtors that can just drive their buyer around and say, you’re seeing this, you’re not seeing this. That’s crap.
It violates our code of ethics, it violates our fiduciary duty, and also, even if there were people willing to do it, they’re not going to have any luck because things are listed online. Homes are exposed, unless they go with a discount brokerage like a Rex but, actually, Rex is out of business, so they can’t go with them, but there’s several others out there that they could go with.
Let me keep going. Bob Goldberg, CEO of the National Association of Realtors stepped down last week. Nykia Wright is now be– Moving into the CEO slot. Bob, I think us realtors owe Bob a great debt of gratitude for all his hard work. Guy was at the National Association of Realtors for 35 years, worked very hard. I’ve spoken to him directly about this case. He’s very passionate about it, very well-spoken about it, but it didn’t come down in our favor.
There was other drama in the summer, so he said, hey, I’ll move on and get out of the way. Now, is that warranted? Well, I’ll let other people debate that. Is it good to bring fresh blood in, fresh people in that can really tackle this? Fine by me, but I hope Nykia Wright is ready for battle because the enemy on the other side, they’re in this like, it’s a battle.
This isn’t just, oh, going to work, and we’re going to go through the motions and go through the paces with the case and, God forbid, we say anything wrong, and let’s listen to what the lawyers say. If you talk to the lawyers, the lawyers will tell you to say nothing when you’re a defendant. Can’t always listen to lawyers. You need to explain yourself, right? I hope that she’s ready to come in and do battle. I bet I’ll meet her next week at some point in California, and I wish her all the best in the new role.
Inman, I personally have had a good relationship with Inman and Brad Inman for several years. I will say I’m disappointed at how hard Brad is going at NAR. Am I frustrated with NAR, do I think NAR could have been a little bit more feisty, could have fought a little harder, could have went over the top and been more aggressive? Yes, I generally agree. I think our defense could have been better, but clearly so couldn’t have Berkshire Hathaway’s or KW’s.
The other thing is, honestly, it’s easy to Monday morning quarterback and say that, but I heard from several people in the courtroom, not just folks on our side, even people that were in the middle and didn’t care which way it went, that that jury was decided before they went in. I heard that from a lot of people. Whether that’s accurate or not, I don’t know, but I also heard the judge was much in their favor as well.
New York Times. I want to show something in an article that I saw in here. This is an article that came out over the weekend, “How the real estate brokerage business could change.” This is a statement that is totally inaccurate. Part of the article, “The structure enforced by the National Association of Realtors, which is about 1.5 million dues paying members, if a seller doesn’t agree to those terms, the listing isn’t shown on the multiple listing service.”
Well, if you go above, in the paragraph above, it says– I’m reading it. Again, I’m not talking commissions. I’m only citing what these articles say. “Right now, home sellers essentially pay fees for both their own agent and buyer’s agents with a typical commission around 5% to 6% split between two brokers.” Then below that, “If a seller doesn’t agree to those terms, the listing isn’t shown on multiple listing service.”
That’s not true. For several years, look at our MLS here in the Northeast, in Massachusetts, you can put $1 if you want. That’s being switched to $0 as if that’s going to make some huge difference, but just pointing it out. To say that you have to split the commission and you have to do this, you have to pay 5% and 6%, that is factually inaccurate, and I want to call them out for that.
Here’s another item. “Experts identified a range of potential shifts including making commission sharing optional.” It already is. It’s not like we haven’t had listing agreements that showed the set amount that’s being charged for commission and the cooperating amount for years. It’s not like sellers, there aren’t some sellers, that already say, “Wait, why do I have to pay that too?” We tell them, “You don’t have to pay anything. That’s why it’s in the agreement but here’s how it works,” blah, blah, blah.
I don’t see why that’s bad. My point is, it’s already in place. “Negotiating to have the home seller cover the buyer’s broker’s cost as part of the transaction price.” That’s already been happening in commercial for several years, that also happens in residential. Particularly, when homes aren’t selling and buyer agents write into the offer or the purchase and sale agreement that– As part of the offer they want to be paid X. Already happening.
Another article, Business Insider. This is interesting to me. Here’s another misstatement. “Here’s how it works. When you list your home for sale on an MLS, you’re required to offer a commission to the buyer’s agent. Okay, well, do you call a dollar a requirement? No, I don’t think so. “Technically, that could be as little as a penny,” it says here, “and NAR says commissions are always negotiable. In fact, the organization recently changed its interpretation of the rule so that someone could put zero and still comply.”
As I said last week, oh, do we all feel more safe now? Before a dollar could be offered now it’s zero. Who cares? “Some sellers may not know they have the choice to negotiate.” That is absolutely incorrect. Tons of sellers push back on commissions, tons of sellers ask questions about it. Just like consumers do in various other industries. My brother runs– He’s the president of a family landscaping company. He prices things. People say, “Is that negotiable?”
Sometimes say, “It’s $10,000. I’ll do it if you do it for $9,000.” Big deal. This Stephen Brobeck, this is an interesting person to me. I’ve spoken to him before. Kind man, polite guy. I have no relationship with him, but this is interesting. “This is so clearly a case of antitrust violations.” For nearly a century, the industry has been able to maintain high and uniform commission rates. The decision indicates that this is going to be much more difficult for them to do in the future.”
Stephen, I couldn’t disagree with you more. I really couldn’t. Number one, let me pick this apart, this is so clearly a case of antitrust violations. Stephen, just because a jury of people that have no understanding of how this worked came around and said guilty doesn’t mean it’s guilty. There was a jury in LA in the ’90s that said OJ wasn’t guilty. There was a jury that said Casey Anthony wasn’t guilty. There’s juries that make mistakes and now this is going to go to judges in the appellate court.
They’re going to make it– The decisions on laws. Ketchmark’s not going to be able to convince them and make them feel bad to the same extent he could a juror, but that’s wrong. “For nearly a century, the industry has been able to main high in uniform commission rates.” He’s wrong with uniform. There’s tons of brokerages that do things at discounted rates. When he says “maintain high”, well, that’s a matter of opinion, but I want to point something out that I said earlier.
Prices of things get set based on costs. If there is somewhat of a typical commission amount over the years, he says a hundred years, well, that’s because there’s costs involved. In agents, sharing of commissions when one handles a buyer and one handles a seller, well, if the one handling the buyer’s doing half the work and the one handling the seller is doing half the work, and they want to split it 50/50, great. Sometimes that’s the way it goes. Sometimes it’s 60/40. Sometimes it’s different than that.
Sometimes listing brokerages offer nothing. I’ve seen listings that do that for 20 years. This is wrong. His statements are wrong, and I disagree with him. This is another point. “Current regulations do not allow a buyer to roll their commissions into the purchase price,” or on top of the purchase price I guess I should say. “Buyers would be incentivized to bargain the fees down.” Every consumer is incentivized to bring fees down.
Here’s another one. This is correct. “I think there’s going to be a lot of terrible unintended consequences that are going to come out of this one.” I don’t know who said that, but that is completely correct. Buyers are going to get punished here, particularly first-time buyers, because when they hear, oh, now you have to come out of pocket, or– When this changes. Remember the judge still hasn’t certified it. The judge still hasn’t said this is the ruling, it’s official.
The jury verdict ruled, but it’s not official official from the judge. If the judge comes out and says no more co-broking, we’re going to have several weeks of disarray. It’s going to be hard to pay co-brokes. Who knows? That would be a worst-case scenario, but in the end, no one gets hurt here more than buyers and first-time buyers. I’ve mentioned that before.
Good Morning America. They stated, “It keeps commissions artificially high.” What do they mean by “artificially”? Do we say that about cars? Oh, the price of a Lamborghini is artificially high. No, no one’s saying that, but they are here. Then there’s another statement on GMA. I literally had the transcript printed. “For people, if you’re in this process trying to sell a house right now, the only way to get your home listed on MLS, which is the thing that everyone looks at. Zillow, takes information from there, and they also pay the buyers in.
“The only way.” It’s not true. Not true. There’s entry-only companies that charge an upfront fee of $500 or $1,000 and they put homes in MLS. That’s not accurate. Factually incorrect. Misstatement by Good Morning America. Let me keep going here. Remember this is two news anchors talking. “They could see better properties without steering.” First of all, there’s not even any extra properties right now, so the argument that people are steering buyers away from the one home that’s for sale in the middle of January in Watertown, Massachusetts is a bunch of crap. That’s not possible.
“The biggest thing here, George is,” and that was the anchor
talking to George Stephanopoulos, “is that the way steering works right now inside that– And the biggest thing here, George, is that the way steering works right now inside the MLS, if you’re a buyer’s agent, you can see what commission you’ll make.” Buyers can see what commissions are made now. Those are on Zillow as well. “You could ultimately see, steer your clients into properties with higher commissions.” I don’t know what buyers these news agencies are talking about, but buyers that I worked in my career and buyers that work with our agents, they can’t steer them. They want to see the properties that they want to see. “The most important thing you should do is try to negotiate.” Well, okay, I know news agencies, news anchors, they will tell audiences to negotiate with cars, services that come to their house, et cetera.
Whatever, but I find it very interesting that there seems to be some sort of interesting coalition going on here in the media to negotiate, negotiate. Realtors are charging too much. Realtors are charging too much. It’s strange to me. All right, now, last media piece I want to talk about, the Wall Street Journal Podcast with this gentleman John Anderson that they brought in. He’s the one in Colorado, seems like a nice guy, who listed his home with Rex Real Estate.
When Rex answers the phone in the recording, “Oh, we don’t list our homes on MLS.” He was frustrated his home didn’t sell, he didn’t list it on MLS. He’d listed it with a discount company, his home didn’t sell. Now, he’s selling a new home and he’s listing it with a brokerage. He said, I came begging back for forgiveness. Listen, why is that bad? He tried to do a discount way, his home didn’t sell for as much as it should.
When homes are exposed to large audiences, like any other product in the world, they sell for more. When you limit the audience for that home, of the amount of buyers a home is exposed to, you’re going to sell for less. Why is that a secret? Why is that bad? All right, enough about the media. Last piece. They’re saying that we’re conspiring. There’s no question in my mind they are conspiring.
Michael Ketchmark didn’t wake up one day and say, “I want to go after the real estate industry.” Michael Ketchmark’s office didn’t receive a phone call from three or four random home sellers saying, “I’m mad. I’m mad that I sold my home $27,000 over asking price but I feel like I got screwed because I had to pay the buyer’s agent.” No. Something bigger is going on here. What, I don’t know, but there is some big money behind this that it’s after our industry. It’s after our industry.
Is it hedge funds? Is it Jack Ryan and Rex Real Estate who failed in the United States? Other people brought up. Is it CoStar, is it Zillow? I don’t know, but there’s no doubt in my mind some big money, some big players, are behind this, they found Ketchmark, and they sicced him on our industry. I hope that we turn up the volume with how we’re willing to fight on– With these people.
I hope that our defense is much stronger when we get to the appellate court and pointing out the great things about our industry, the great things about the way our industry is done, how transparent our industry is. I hope all those sellers that were so wrong, I hope they dig into them, and I hope they look at that now. When they see this, they’re probably going to take the testimonials down, but I’ll bet you there was a lot of happy cases.
Let’s look at the sold statistics. Where were those homes listed? What did they sell for? I keep hearing about, oh, the prices will come down. Okay, well, that might benefit buyers, but that also hurts sellers. Are we here to try to hurt sellers? It’s free open market capitalism. Whatever homes sell for, they sell for. They’re worth as much as a buyer is willing to pay. When we dictate to a buyer, that’s the part that kills me with this case.
Michael Ketchmark goes on TV, “I’m for the buyers.” Okay, yes, you’re for the buyers, and now you’re telling buyers, you have to come out of your pocket to pay. It doesn’t make any sense to me, and it’s crazy to me. That concludes my update for this week. I will see you again in a week or two. All depends when more details come out, how the judge comes down to certify the case, et cetera. Stay tuned in to Crush It in Real Estate or follow me on Instagram @ajlamacchia. Good luck, everyone, thank you.