Above, Filippo Incorvaia and Sarah Close
When real estate professionals, and anyone else for that matter, look back on what happened within the residential real estate industry during 2023-24, normally vital measures such as mortgage rates and number of homes sold will not just take a back seat to the legal issues that have dominated the last two years, but will barely even be on the radar by comparison.
On April 26, when HomeServices of America was the last of the original Burnett class-action commission lawsuit trial defendants to settle, there had to have been a collective exhale from brokers and agents nationwide. Finally, finally, it was time to get back to normal, or whatever new normal the buying and selling of homes becomes.
The settlements did not come without a price, both literally and figuratively. Aside from the many hundreds of millions of dollars that will be paid out, new rules regarding how buyer-agent contracts and commission decisions will be created are in the process of being formalized. Most brokerages, however, are now busy revamping whatever needs to be changed in the way they do business.
Sarah Close and Filippo Incorvaia are real estate leaders who must navigate the coming new normal not only for themselves, but for the teams they lead.
Close, broker/owner of Keller Williams Advisors Realty, in Cincinnati, Ohio, is a 26-year veteran in the business. She has guided clients through thousands of real estate transactions. Her practice has grown from a single-agent practice to a team of specialists. Close opened the first Keller Williams franchise in her market and now oversees five Keller Williams locations in the area.
Incorvaia is the founder and CEO of FI Real Estate in Miami, Florida. He began his career at Wall Street’s New York Board of Trade before venturing out to start his own business. Possessing a deep understanding of clients’ unique real estate needs and desires, he and his team are well-versed in utilizing cutting-edge internet marketing tools to attract the widest possible range of qualified buyers.
After all the lawsuit drama, what changes will you make, or have you already made, regarding buyer-agent commissions?
Sarah Close: We don’t anticipate any systemic changes, as our company practices and philosophies are already aligned with the requirements of the settlement. We will modify our written contracts to assure, unequivocally, that our documentation meets the standards spelled out by the settlement.
Filippo Incorvaia: Our main change will be doubling down on all the efforts to obtain more listings and represent more sellers than ever. We normally represent sellers and buyers in a 50-50 ratio. However, now more than ever, representing sellers will give us the opportunity to consistently be the top producers we have been for the region. We will not only represent more sellers, but those sellers will be spec home developers, representing just-built and new properties.
How do you plan to keep your agents during a time when most everyone thinks many agents will leave the business?
SC: There are as many business goals and reasons for having a real estate sales license as there are licensed agents. It is practical to assume the changes will create conditions where a number of agents may determine the environment is no longer in alignment with their goals, and they will elect to divest of their license. We would support that decision and work to determine exit strategies that will allow them to maximize their database after active licensure. For our rostered agents, we will relentlessly provide the training, coaching, industry knowledge and environment that will allow them to remain agile and focused on their businesses.
FI: Fortunately, we are focused on quality over quantity. We are a boutique, ultra-personalized service brokerage that is hyper-focused on providing the best service to our clients in south Florida. We currently have 15 agents and are looking to grow to no more than 25 this year. I believe that agents who stay educated and arm themselves with the resources to articulate their value will continue to thrive. Homebuying is a critical investment, usually the largest investment in someone’s life, and having support from qualified professionals will always be in the consumer’s best interest.
Will the changes the courts demand be a good thing or a bad thing going forward?
SC: It depends. What has been overlooked in the process is that whether a person is a buyer or seller is often simply a matter of time. Today’s buyers are tomorrow’s sellers. The purchaser of any product or service pays the hard and soft costs of that product or service. The settlement is not shifting who is paying commissions. It always has been and always will be the buyer. To suggest otherwise is nonsensical. Unfortunately, our industry was unable to self govern and demand of ourselves a clear, transparent presentation of our negotiable fee structures, and we are bearing the consequences. Redacting the buyer fee from MLS will add a layer of inefficiency, and consequently a burden to all consumers, but will not shift the net dollars received by a seller or paid by a buyer.
That being said, my concern is for the buyer who may not have the business acumen to understand the value of representation, and believes a DIY buy will save them money in the form of a lower purchase price. It would not be unrealistic to suggest that these may also be the same buyers who are stretching to get into a home, maybe even their first home. Having representation is a critical piece to assuring a sound purchase, and can have a huge impact on a person’s future wealth. While we are in the transition phase, before lending or other instruments are available to accommodate financing commissions, I fear there are buyers who may have a less-than-optimal purchase experience.
Sellers have and always will benefit from transacting with buyers who are educated on the process, well coached, well qualified and close. I am thrilled that buyer representation agreements will be required. This is long overdue. The lack of a mandated representation agreement created an opportunity for poorly skilled agents to represent buyers without clearly articulated standards and expectations. I genuinely believe both agents and consumers will benefit tremendously from this requirement.
FI: Like any other industry, ours will go through changes that will make it evolve and become more transparent. These changes will certainly alter the way we have normally done business and will keep us competitive. Ultimately, if we focus on what is truly important, the consumer, our industry will succeed and move in the right direction.
