NAR Proposed Lawsuit Settlement Q&A - With CRMLS CEO, Art Carter

By: Lea Vatenmakher COMMUNICATIONS SPECIALIST

Orange County REALTORS® spoke with the Chief Executive Officer at the California Regional Multiple Listing Service (CRMLS), Art Carter, on March 22nd to discuss the proposed lawsuit settlement by the National Association of REALTORS® (NAR) and what it means for CRMLS.

Q: There’s been a proposed settlement, how does it impact CRMLS and its subscribers?

A: CRMLS is a covered organization. Obviously, Orange County REALTORS® is a covered organization as well, being part of the NAR system. We are covered because we are governed and ostensibly owned by our local association. We follow NAR rules, and we are covered underneath the settlement.

Q: Are you required to pay into the settlement, and are you going to raise subscriber fees?

A: No, there’s no requirement. This is a proposed settlement, and we’ve got to remember that. At this point, CRMLS will not be charged anything.

Q: Does this settlement change your strategic plan in any way? And what is your vision?

A: Strategically, we’ve been planning for this ever since the first lawsuit was filed in 2019. I’m a big believer in contingency planning and always being prepared as much as you possibly can. In all honesty, none of this is a surprise, we’ve been talking about some element of this happening for five years. We’ve been talking with the Board of Directors and preparing them to what a world without commission in the Multiple Listing Service would look like and what we would need to do to transition CRMLS into a viable brokerage entity for our members, our agents, and our local associations.

Q: Does the fact that you can’t offer compensation affect the overall value of a subscribership?

A: No, we’re going to be the only place that is involved in a real estate transaction where post-closing, we are going to be able to track the concessions that were made against a property. Those things are important from an appraisal and a loan standpoint. They’re important for communicating to both the buy and sell side. A man with experience is never at the mercy of a man with an argument. The argument now is that the buyers’ agency is dead. The buyer’s agency side in commercial, which mostly doesn’t have an MLS that you can go to, and you can look at compensation and be assured of compensation as a buyer’s agent. Depending on the market, buyers’ agencies do better than those on the sell side. That’s the experience we see on the commercial side, and we’re not heavily concerned that – communicated correctly – this is not going to be the case on the residential side.

Q: You see the headlines that this is going to drastically change commissions, that it’s going to drive home prices down. What affects home prices?

A: Never before these lawsuits did you ever hear the commissions were what are driving up home prices. Lack of inventory, high interest rates, high regulatory costs for new inventory, and the lack of new inventory coming on the market – especially in Orange County – those are the things that cause prices to continue to go up. Just because there’s service costs associated with buying and selling homes, nobody’s looked at the title side of things. Nobody’s looked at all the other thirdparty costs that are associated with a residential transaction. It’s all of a sudden just all on the agent and broker side. So, it’s a little bit disingenuous to say that it’s going to drive housing prices down, primarily because that’s not been the driver. As far as commissions being drastically cut, I don’t personally feel that that’s going to be the case. Obviously, there’s going to be some additional moving pieces that happen, especially some of the requirements for lending changes that are going to be out there on the FHA and VA side, but I think that we’re going to be okay. It is scary, and I do get that, but there is a path forward, and we feel confident on the CRMLS side that we’ve charted that.

Q: What happens to existing deals?

A: On July 14th, all of those offers that have been accepted underneath that platform will have that offer of compensation extended through the length of the escrow. On July 15th, if offers have not been accepted, obviously there needs to be that discussion about how the commission is going to get paid through the transaction. One of the main things that I want people to recognize is that even though this July 15th date may be the date that you have the buyer broker representation agreement signed, you may have a long-term relationship with somebody that bridges both arenas. So, you really need to start getting used to using buyer-broker representation agreements prior to the final settlement date. You just want to protect yourself, above and beyond everything else.

Q: What do you think is good about this settlement?

A: I think anything that provides greater transparency to the consumer about the real estate transaction is in the brokers’ and agents’ best interest. The fact that there’s a very distinct discussion that will have to occur before even entering any of the homes that a consumer may be interested in buying - about what you’re paid, how you’re paid, and the process of getting paid for you as an agent and a broker - I think it’s going to be a positive net experience. Those buyer brokerages that do a great job with offer submission and those relationship arenas –those buyers’ agents that are good at what they do and are good in the representations that they do and do a great job for their clients - are going to excel and succeed in these arenas. Buyers’ agents are going to have to communicate their value and do things a little bit differently along those lines.

Q: Do you have any words of wisdom or advice for agents about what they can do to ease their nerves with these changes?

A: They’ve been forced through a lot of change already. We statistically know that 65% of our agents have entered the business past 2008, and 2009, that are part of the CRMLS system. So, there’s a lot of people who have never been through a bad down market, so they’re having to adjust to that at the same time as adjusting to this. Real estate has gone through significant change over the last 40 years –changes that affected buyer-broker representation. Back in the ‘80s, every buyer agent was a fiduciary of the seller, and they didn’t have those obligations to represent the buyer in the same way. Change always seems scary, but at the end of the day, our members are entrepreneurs, and they are going to adjust and going to figure out ways to provide value to their clients and to get paid for that value.

Q: It seems there’s been very little recognition of the competition that already exists with broker models and pricing. If you want a fixed rate, if you want a per service rate, if you want a flat fee, those have already been in the market and available to consumers.

A: In real estate, it’s always been a relationship game. Those that effectively market and those that effectively keep those relationships alive are the ones that have always succeeded in this business, and the ones that will succeed post-settlement date. There’s life for dual representation post-judgement. There are some things that we don’t have all the answers to right now, but we’re going to fight to keep some of those elements in place and to educate our members as well as we possibly can.

Q: Can commissions be listed on brokers’ sites?

A: Just the commissions for their own brokerage, that’s the only place that can occur.

Q: What can subscribers look forward to in terms of features?

A: A lot more information. We’re going to double down on cooperation amongst our brokerage community. There’s a shift in the transition of the multiple listing service from a listing-centric database into a property-centric database. We’re so focused on the new listings coming in and tracking their lifespan within the MLS and then providing a history of what it did in the multiple listing service. Focusing now on the property, and all the activities that occur around that property and filling out that information to our brokers and agents is going to be the way that we’re going to differentiate ourselves moving forward. We’re going to be releasing a product in the next couple of months called Rayse. Rayse is an app that resides on your phone – it interacts with MLS data, it interacts with your clients’ data, and it’s going to give your buyers a 160-point checklist of all the things that you did for them during the process of buying their home. It’s going to continue to give you guys an opportunity to stay in front of your buyers as they move into a homeowner situation. One of the things that’s disappointing about this industry is how few of those buyers who become sellers later in their life cycle go back to the agents that they had originally used. So, trying to give our brokerage community the ability to be a lot stickier with their client base than they have been in the past is going to be some of the things that you’re going to see coming out of this.

Q: Will it be possible for a buyer’s agent to check the seller’s broker’s website to see what they’re offering?

A: It is possible. We have a concessions field right now that’s filled out after a property goes from active depending. That concessions field is going to go from that post-sale aspect to upfront on the input of your listing into the multiple listings service. The concessions are going to be for multiple things. It’s going to be for loan buy downs, repairs… A seller can communicate to buyers through that process that they are willing to pay concessions on that property. Then, obviously, the buyer’s agent has to negotiate with their buyer what dollar amount or what percentage amount of those concessions are going to go to them. There will be a communication process in the multiple listings service where sellers can delineate to buyers that they’re willing to pay their agent’s commission, it just can’t be a dollar amount that’s stated in the multiple listing service.