Discover the ins and outs of the recent seismic shift in real estate with Cody Jones from the Greater Tyler Association of Realtors, as he unpacks the implications of the National Association of Realtors’ massive $418 million legal settlement. This conversation illuminates the nuances of broker commissions, the value of buyer’s agents, and the potential stumbling blocks in current real estate transactions. With a settlement that could redefine the roles and rewards of realtors, Jones offers tips to buyers and sellers alike: stay informed, be represented and remain alert to the evolving landscape.
TRANSCRIPT
LANDESS:
While not admitting any wrongdoing, the National Association of Realtors agreed to pay a $418 million fine regarding broker commission policies. I’m Mike Landess. UT Tyler Radio Connects with Cody Jones of the Greater Tyler Association of Realtors to find out how this will affect East Texas. Can you give us a Cliffs-Notes synopsis of what this antitrust concern was?
JONES:
Well, this was ultimately a case about commission rates, and the allegation was that 6% was something that was wrong. It was something that was bad. If you look at how these things are typically broken down, though, you’re talking about that split between both the buyer’s side and the seller’s side. If 6% were the amount that we’re talking about, that is further broken down between the buyer’s side broker, the buyer’s side agent, the seller’s side broker and the seller’s side agent.
JONES:
How it’s going to affect consumers and sellers is, I think it’s going to confuse buyers to what the value of a buyer’s agent is, and I think we may be prone to seeing more buyers enter into the market without that proper representation because maybe they think now, “Oh, I don’t need a buyer’s agent anymore. I can save that money.”
JONES:
And that’s going to be a world of hurt for those buyers to not have a professional realtor by their side in what’s going to be one of the largest, if not the largest, financial transaction of their life. On the flip side, for the sellers, and this is really more so where it hurts, like our association and our MLS, because one of the requirements of this settlement is to remove the compensation fields from the MLS. It’s going to make it more difficult and a more timely process. There’s going to have to be more direct communication to where these realtors who are representing buyers are going to have to go. Where is the compensation coming from on some of these deals, and that’s just going to slow down the entire transaction process, which means that sellers aren’t going to be able to turn their houses quite as quickly as they can. And, depending on what their situation is, time is money.
LANDESS:
Well, what do Tyler realtors have to say about all this? Surely there’s a lot of discussion about how it’s going to affect their livelihoods.
JONES:
The vast majority of members that I speak with, they do not see this as a very substantive change because it’s, for starters, we’re in very much a holding period. This is simply a proposed settlement. It’s going to take about one or two months for this to go to the courts and for the courts to accept that. And from what I’m hearing out of contacts with the National Association of Realtors, is that we are going to be — we, the associations, are going to be given a very specific, far more detailed appendix than what’s currently available out there now of exactly what it is we have to comply with within the next 60 days
LANDESS: Guidelines.
JONES:
Correct. Where this gets even more complicated is that the U.S. Department of Justice can lean in at any point during all this, and they can object to the settlement, and that could throw a large wrench into how all of this turns out. So there’s a certain amount of caution on part of some of the larger brokerages, on part of myself, the association, of well, let’s just wait and see exactly how this is all going to turn out. But there’s a lot of practices that are, there’s a lot of things that are highlighted throughout the settlement that are now prohibited, that have already been sort of the standard practice everywhere. Same as I mentioned. There is no standard commission. There’s now going to be a requirement for buyer’s agreement.
JONES:
There’s a lot of realtors out there who are already practicing using those very agreements. Not all of them. I actually talked to a very experienced realtor just the other day in my office who traditionally did not operate using these buyer’s agreements. And he said, “I’m going to have to start doing this now and that’s OK.” So it’s not going to be any large substantive changes. Some of the reports that I’ve seen that we’re going to move to a British or an Australian style of commission structure, to where it’s, you know, 1 to 3% are averages that you see there. I don’t see anything like that because there’s a different amount of equity in the American housing market that we just don’t have anywhere else. And there’s different licensure requirements and a lot more professionalism baked into the licensed real estate agents and technologies. A lot of that is what feeds into why the American housing market is so strong and is so robust, and that’s what also equates to why those commissions may appear higher than in comparative markets.
LANDESS:
Well, I saw a quote that said, and this is the quote: “The NAR settlement moves the industry closer to the Amazonification of housing.” With virtual tours online and now AI evolving, are there realtors who are afraid that they’re going to become marginalized or even redundant?
JONES:
That’s something that we’ve been seeing for a long — or as far as a conversation piece, I’ve been hearing that for years and years now, from when Zillow first got out there in the world that, oh, the day is going to come where you can buy a house on a website one day. Well, similar to you know, Carvana was a thing, and that’s also not been the most successful thing. And there are a number of virtual real estate portals and other companies that they’ve attempted models, and they’ve not always been the most successful, or they’ve had to scale back what they’ve done. The most tried and true method is having a professional realtor.
JONES:
Now, relative to, like, artificial intelligence, and there are things that we’re looking at acquiring for our association and in our MLS to improve the listing process. This will particularly benefit sellers in the market, but it will also provide a little bit more information for the buyers, too. What I teach a lot of our members is you’re not going to be replaced by technology. You’re not going to be replaced by AI. What you might be replaced by is another realtor who is being more adaptive with technology, who is being more adaptive with AI, and it’s all a matter of, “This is a new tool. You either have to keep up with the times or possibly relegate yourself to what happens to the folks that don’t keep up with the times.”
LANDESS:
Back to the NAR settlement for a moment. We mentioned that the court hasn’t accepted it yet, but if they do, what’s your prediction as to what home buying might look like in East Texas going forward?
JONES:
I think in the short term, you’re going to see a little bit of uncertainty on both sides because there’s so many consumers out there. They see what’s reported, but they just truly don’t know what it means. So I believe there’ll be this pause where there’s this conversation with their realtor whether they’re on the buyer side or seller side, of what does this actually mean for me? And you may see some buyers who go, “Oh, I’m going to wait a couple of months and just see how this works out.” Same thing with sellers. Being a little bit more specific, the most realistic thing that I see changing is that you will see buyers’ agents having to express their value far more on the front end to secure those buyer representation agreements, because those are going to be required before you ever take a buyer to go tour for a home. And so that’s for, I had mentioned earlier, there are already some realtors who are that’s exactly how they’re already engaging in buyers, and they’re ready to go.
JONES:
And there’s other buyers’ agents that they’re good at communicating their value. They’re just going to have to get a little bit better, a little bit sharper on it. But the last component — there are going to be some of those buyers’ agents that are just going to struggle on discussing what their value proposition is, and that’s where really the association and their brokers step in. NAR offers a program called the “Accreditor Buyers Representation Course.” It’s a designation through the National Association of Realtors. It’s actually offered for free through the National Association of Realtors right now, and we’re looking at offerings partnering with the Texas Realtors to do the same for our members.
LANDESS:
So Tyler gets national recognition as one of the best places to live in America. We have the UT Tyler Medical School, bringing in new residents. Local businesses are expanding, new businesses are coming in. Interest rates are still a challenge, but what’s your prediction for an average home price in Tyler by this time next year?
JONES:
Anyone who can predict with any accuracy what the home prices are in the future is somebody who stands to make a lot of money and somebody far more intelligent than I am.
JONES:
Everything that, I have pretty regular conversations with, the National Association of Realtors chief economist his name is Lawrence Yoon. And then there are a number of other economists who specialize a little bit more in the East Texas market. Overall, I predict a gain. My biggest concern is, and this gets a little bit out of business news and possibly more political news, but I predict that, regardless of what one’s political stripe, is that the election season is going to be a time of uncertainty, and I think that’s going to have some real effect on the markets, and I think that’s going to have some continued effect on real estate prices. But once we get through whatever is going to necessarily come out of that, I believe you’re going to see a lot more. You’re going to continue to see some normalization of prices. The overall trend is upward, but you’re not going to see just the absolute blistering hot market that was COVID. That wasn’t an anomaly.
LANDESS:
Where is the next generation of home buyers going to come from? I mean, research says many millennials have given up on the idea of buying a home. And right now, it seems like there are more apartments are going up these days than private homes. That’s my observation. Feel free to disabuse me of that notion if I’m wrong.
JONES:
Well, one thing is there is a strong, and I mean just an incredibly strong, desire for housing. Everybody wants a piece of the American dream, and that’s a little bit what gets us into this supply and demand. It’s what gets us a little bit into these rising home prices. There is far more demand than the supply currently allows. There are a lot of things that feed in that.
JONES:
Home building has always historically — and it makes sense if you look at it from a builder’s standpoint — building always lags a little bit behind demand, because you never want to overbuild because then obviously you can’t sell something. But when we got into the financial crash of ’08, there was just a stoppage of building that didn’t happen. And it took years to get — we’re still not caught up to that point. That, added to the fact that there are labor constraints — you hear about this all the time that we have shortage of certain trades. That affects how fast we can get things done. And when it gets back to keeping houses affordable, roughly depending on the market that you’re in, roughly 26 to about 36% of the cost of new home construction is regulatory, and the vast majority of that, two-thirds of that, is state and local regulations. Things like saying that if you build something in this county — not Smith County, in particular — but I’m just using a hypothetical county — If you build something in a particular county, that it has to be built all out of brick siding, well, a brick house is a very nice house.
JONES:
I grew up in a brick house. I currently live in a brick house in Flint. I love living in a brick house.
JONES:
But it’s a more expensive building material. And those kinds of sometimes frivolous requirements, whether they’re from HOAs or whether they’re from local government, they drive up what type of houses can be built on that land, and land is a finite resource that’s getting more and more expensive by the day as well. That’s what’s ultimately driving up some of these affordable housing issues. So it’s a mixture between regulatory inflation and also this supply and demand issue that we have. But going back to your original question of where these home buyers are going to come from. I think, as you see a transition from what’s called the boomer generation starting to retire, and new economic opportunity opening up for some younger folks. As those younger millennial generations get a little bit further in their career, their earnings power increase where traditionally we’ve wanted to see these folks become home buyers and, you know, get out from mom and dad, become home buyers in their early 20s, when they’re out of college.
LANDESS:
Get out of my basement.
JONES:
Yeah, get out of my basement. You’re seeing that happening a little bit more in their early 30s to mid-30s and you know, Realtors Association would love to see, you know, more buyers at an early age. But the way the economy is working out, that’s just, you know, that’s just what it is.
LANDESS:
Any final thoughts to share, Cody, about the real estate market as you see it for the future here in Tyler?
JONES:
The biggest thing that I see staying consistent, that’s always stayed consistent, while there is always uncertainty, if you’re a seller and you’re concerned on getting top dollar for your house so you can make whatever that next stage of life decision it is you’re making.
JONES:
Or if you’re a buyer entering the market for the very first time, and you think that, “Well, maybe not now, maybe I need to wait later.” If you are looking at an opportunity to buy before it gets any more expensive, to start building that equity now — right now is still the best time to do it. And the best way to do it is to get the services of a professional realtor right here in the Greater Tyler area who has the local market competency, surrounds themselves with the best affiliates — several of them who are members, whether it’s in the lending profession, inspectors, whatever — or if there’s any sort of work that has to go on that house to make it move-in ready, they know who those people are. Building that team around you, starting with that chosen realtor professional who is licensed, who is Code-of-Ethics bound to serve your best interests, not their best interests, and who practices all these things to serve at the most expert level that they could. That is the best time to buy or sell a house now, if that’s the decision that you’re looking at, and the best way to do it is with a professional realtor — that has not changed.
LANDESS:
Thanks for listening as UT Tyler Radio Connects with Cody Jones of the Greater Tyler Association of Realtors. For UT Tyler Radio News, I’m Mike Landess.
(Transcripts are automatically generated and may contain phonetic spellings and other spelling and punctuation errors. Grammar errors contained in the original recording are not typically corrected.)
