As brokers stare down the barrel of the August 17 deadline, when changes agreed to by the National Association of REALTORS® (NAR) in its commission lawsuit settlement will go into effect, most are confident their agents are prepared to at least cover the basics of altered real estate rules and practices—things like updated forms and presenting the facts.
But according to RISMedia’s latest broker confidence survey, real estate business owners are significantly less confident that their agents are ready to take the more technical, skill-based shifts precipitated by the settlement, including communicating their value, negotiating compensation with clients and explaining mortgage changes.
“My confidence is affected by disruption to the business due to the NAR settlement’s new rules implementation. There is a short window to fully understand and train sales associates. And a potential decline in total commission due to the impact of the new rules,” said one broker, who requested anonymity.
Overall confidence in the real estate market remained unchanged from last month, the poll found, weighing at 6.6—down significantly from April’s 8.0 reading. But more urgently, brokers are scrambling to ensure their agents are educated, trained and confident in the specific, and possibly challenging, new processes.
“We have been holding weekly workshops and trainings (up to three a week) since February,” said Vanessa Bergmark, owner and CEO of Red Oak Realty in California. “Since the (new state associations) contracts have been made public, we are doing these three times a week online, in person, and providing deep how-to videos, written documents, flow charts, scripts and one-on-one trainings for our 200 agents. Getting comfortable with the contracts is the first step.”
It is those skills that brokers overall expressed significant confidence in their agents having. Asked to rate how prepared agents are for various aspects of the settlement, brokers averaged a 4.2 rating (out of five) regarding the use of new and updated forms. Real estate business owners were even more confident in their agents’ ability to avoid inadvertent compliance issues, including so-called “steering.”
On the other hand, though, brokers were less confident that their agents are ready to negotiate their compensation with clients, advising clients on how the settlement does (or doesn’t) affect VA and FHA loans, or generally communicating their value.
Robert J. Bailey, broker/owner of Bailey Properties in California, said that the upcoming changes are proving to be a drag on agents despite a generally improving real estate environment.
“Though we are seeing both an acceptance of rates and more inventory, the changes in commission structure are weighing heavy on agents,” he said.
On one hand, the fact that brokers are extremely confident that agents are ready to be compliant, work with new forms and educate consumers on the new changes shows that the industry has been able to adapt on short notice, prioritizing the fundamentals that are now required to complete transactions.
On the other hand, the lower confidence ratings related to expertise, communicating value and negotiating compensation could spell trouble for the short term, if agents begin losing the trust of consumers or struggle to adapt to the new modes of commission discussion and payment.
Jim Fite, president and CEO of CENTURY 21 Judge Fite Company, said that his confidence is most affected by seeing “the amount of companies and agents that are not being trained or supported” related to the settlement. Fite added that the most important preparation agents need to be doing right now is in the areas of buyer presentation, explaining their services and fees, and closing techniques “to secure a client for life.”
Countdown
Despite the crunch and potential issues with certain adaptations, there were other positive signs and feedback from brokers ahead of the deadline. Every single respondent to July’s BCI said they had special trainings, educational sessions, Q&As or all-hands meetings planned at the beginning of August.
Carl Cohen, managing broker at Keller Williams Domain in Michigan, said he held a town hall with 130 agents and is planning a “show and tell” for agents to share buying and listing “techniques” ahead of August 17.
Other respondents said they had prioritized one-on-one meetings, buyer value propositions and how to let go of “the old ways” in order to succeed going forward. Most, but not all, said they were focusing on buyer agency issues, and many touted the attendance at these meetings as being unprecedented.
Only a handful of brokers—less than 5% of respondents—said they felt there wasn’t enough time to prepare for the changes at this point. A significant proportion of brokers said they had ramped up training in June, May or even earlier.
Another broker who requested anonymity focused on one of the points that almost everyone, from the harshest critics of real estate to its most ardent advocates, agree on—namely, that hard-working and dedicated agents will rise above the turmoil to build a business in the new environment.
“The professional and experienced agents aren’t going to see any difference (after the changes),” the broker said. “And if they do, it’s to their benefit.”
