The Housing Market Has New Rules. Realtors Are Evading Them.

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From the New York Times, I'm Michael Barbaro. This is The Daily.
Last year, a historic legal settlement created sweeping new reforms that were supposed to lower the price of buying and

selling a home across the country. But those reforms would cost realtors money.
And so those

realtors, it turns out, have found ways to evade the new reforms. My colleague, Deborah Kamen,

explains how they did it. It's Tuesday, April 29th.
Debra? Michael. Welcome back to The Daily.
It's nice to be here again. Good to see you.
It's really nice to see your face. In the flesh.
In the flesh. So a year ago, as many listeners I hope will remember, you came on The Daily to describe this really bombshell legal settlement that was supposed to transform how homes are sold in the United States.
And I want to start by having you remind us what that settlement was all about and why it was we felt wrongly, as it turns out, that this was going to be such a watershed moment. The expectations were sky high.
The words that were being used by economists and analysts in the industry, earth shattering, watershed, landmark, the greatest change for the real estate industry since the New Deal. Things that were really pinning hopes that this was going to shake up a stagnant housing market and offer real relief to consumers in the U.S.
who desperately need it. And a lot of that was pinned to the idea that rules were going to be followed to the letter, and they were not.
So here we are a year later, and things have shifted a tiny bit, but we're talking about a drizzle, not a watershed. Just take us back to the settlement.
So to take you back to the settlement, we actually have to go back a little bit further to October of 2023, when the National Association of Realtors, which is the trade organization that really oversees the real estate industry, they are the largest trade group in the United States. They are hugely powerful.
They have a ton of money and a really massive amount of power and influence because of their lobbying arm. Right.
You describe them as so powerful that they've trademarked the word real estate agent. The word realtor, yes.
Yes, sorry. It is a trademark of NAR.
So you can only use it if you are a member of this group. And they have a lot of members, 1.5 million.
They have more members than there are houses for sale in the U.S. So we're talking a very big, very powerful group.
They were sued by a group of home sellers in Missouri. The idea behind the lawsuit was that their rules had essentially fixed prices on real estate commissions, inflated them, and made it so that real estate commissions were higher than they should have been.
They did not expect to lose this lawsuit, but they did lose this lawsuit. And a jury agreed that they were fixing prices on real estate commissions.
Right. And I remember from our first conversation that that price-fixing claim really revolves around the amount of money that you owe the agents that comes out of selling a house.
Yeah, the dreaded 6%. It comes out of your pocket if you're selling.
And anyone who's ever bought or sold a house knows that when you sit down with your agent, it's overwhelming, it's confusing, and it gets wonky. No one really asks, how are these commissions paid? And it's just kind of there.
Right. And you also have enough things to worry about that you don't get into the weeds about how these commissions are paid.
But for real estate agents, for realtors, this is how they make their living. This is very important.
It's literally their bread and butter. And this settlement was meant to shake up the system of how those commissions are determined and how they're paid.
Right. No longer were they simply tablets handed down from gone on the mountain.
In the real estate industry, they were subject potentially to negotiation, conversation,

and potentially they could go way, way down, maybe even go away.

We are wandering the desert now. Absolutely.

Most importantly, it was meant to say, this is the way it's been done for a long time.

The way it's been done has actually been anti-competitive.

It's blocked competition.

Now it's changed.

Now home sellers can say, I want to pay X. I want to pay Y.
It's up to you how much commission you want to pay. Right.
And that brings us back to our superlatives. Because if suddenly a 6% commission on a home sale might not be 6%, but might be 5% or 4% or 3% or whatever, then suddenly home prices might change, might go down.
That is what economists predicted because commissions are actually baked into home sale prices. When you sit down with a realtor before you sell your home and there's all this paperwork and all this mumbo jumbo, one thing you generally do is you have a conversation, this is how much commission you're going to pay me as your agent.
So as a result, we're going to set the price for the home here so that when that commission is paid out, you still take home as much as you want. And if commissions go down, if you're only paying 5%, a 1% reduction in home prices across the board in the U.S.
is a massive dent in the housing market that actually really should open things up for a housing market that is so tight and so restrictive for so many buyers. So we were really optimistic that it was going to change things.
So let's talk about the big and then moment in this story of why all this promised superlative

change has not come to pass.

I call it the great real estate workaround.

Hmm.

Very intriguing.

Thank you.

Explain.

The settlement was designed to take away these conversations that agents were having about commissions. These conversations were happening over these channels, these databases, they're called MLSs, multiple listing sites.
Right, these are online portals used by real estate agents to basically list a house. Exactly.
It's where home listings live on the internet. And if you're an agent and you're working with a buyer and you're looking for houses, you go to the MLS to see what houses are for sale.
But each listing has information on it. The address, the square feet, etc.
It also used to have a commission amount. This is probably the place where we need to remind everyone that commissions tend to be split, right? Between the agent for the buyer and the agent for the seller.
Yes, almost universally. Even though it comes out of the seller's pocket.
The seller pays the commission to their agent, and that agent for the sellers then splits that commission with the buyer's agent. Right.
That's how it has been done for a long time. And MLS just kind of laid it all out.
Yes, and the key focus of the settlement was that should be no more. Moving forward post-settlement, the rules said

that sellers pay their own agents, buyers pay their own agents. If you work with a real estate

agent, it's up to you to pay them. That was what was supposed to happen, which should have brought

a lot more competition and negotiation into the marketplace. What workaround could work around

that? Well, the settlement was very specific in its language, that these conversations about

Thank you. brought a lot more competition and negotiation into the marketplace.
What workaround could work around that? Well, the settlement was very specific in its language, that these conversations about splitting commissions could not happen on these databases. So the real estate community was like, okay, we'll just move these conversations elsewhere.
It never said we can't have them at all. And I don't mean this is happening in secret.
Hello, my name is Kevin Sears, and I am the 2024 president of the National Association of Realtors. Today, I'd like to touch on a couple of things.
Just a few days after the settlement. Now, in the settlement, there are a couple of key pieces.
One is financial, the other is rules. Now, let's talk about the rules.
The president of NAR made a video that went out to every realtor in the group.

Please hear me clearly.

You will still be able to offer compensation to a buyer broker.

It just cannot be conveyed on the NLS.

That said, to move these conversations.

If there's one thing I know about members, they will figure out how to

efficiently communicate the information to see if there will be any cooperating compensation.

That video was backed up by NAR's head of legal, who has doubled down on the idea that in the settlement, the language says these conversations are banned only on the MLS. So just know that we doing everything we can to continue to advocate for your ability to help buyers, sellers, tenants, and landlords all across our great country.

so where exactly do these conversations move to once the premier trade group of the realtor world says to them go be creative and find a new place to have these conversations move to once the premier trade group of the realtor world says to them, go be creative and find a new place to have these conversations? Michael, it's gotten a little bit wild. I've spent the past year following this very closely, talking to agents, talking to industry insiders.
Remember, the 6% was split 50-50. So usually, the seller and the buyer's agent would each get 3%.
I've heard stories of agents who in listing photos are putting three cookies on the kitchen table as a sign to a buyer's agent. If you bring a buyer, you'll get 3%, which means they'll get their 3% also.
Oh, wow. That's quite nefariously creative.
It's one way to put it. I've heard other stories of agents who've put movies on the TV screen in the living room.
During a showing of the house. During a showing or even in the listing photo, there's a movie playing, but it's a movie that has three in the title, like The Three Amigos.
Oh my gosh. A real kind of open winking of defiance.
Yeah, some of them are much more old-fashioned. We're talking emails, phone calls, texts.
Some of them are really tech-savvy.

There's one agent in Virginia.

She's an influencer on TikTok.

I'm just Liz, and I sell real estate in Charlottesville and Richmond, Virginia, and this is the way we're going to do it.

She just said, okay, you can't go on the MLS.

I'm sure someone's going to have another way, but I'm going to build a landing page.

And she's created a landing page that other agents can use.

Easy peasy for every one of my listings. And on that landing page is going to be all the information that any buyer's agent would need to know.
So I can easily just poof, text it to them. Here you go.
It enters all the homes they have for sale into their separate non-MLS sites, compiles their data, and includes the commission. So this is pretty open and creative and perhaps legal flouting of this ruling and settlement.
How much, Debra, do you think that this represents real estate agents thinking to themselves, look, this is how we get paid. Our work is important to the process.
We are essential. And many people will tell you that they're, especially on the seller side, broker, work their tush off, increase the value of their home.
Maybe not everyone. There's data that says that people who use real estate agents tend to get a higher price.
There it is. There could be confounding variables to that data.
Those people could have more money, could have higher priced homes. There's all sorts of things.
But yes, there is a lot of data to back it up. So isn't this the equivalent of agents creatively fighting to keep the equivalent of a waiter's 15% tip? It's like it's what they need to live.
Yes. And it's important to understand this is not happening organically.
In many, many ways, real estate agents are just doing what they've been told by the National Association of Realtors to survive in an industry that is cutthroat. Again, we're talking more agents than listings.
There are not enough houses to go around. And agents do not work for companies.
They're independent contractors. They pay their own taxes.
They split their commissions with their brokerages. For the people on the ground, this really is a life or death moment for their career.
So they feel we're being told we should have the conversations elsewhere. And so they are.
Why would they not, right? It's their job. But if you talk to the legal team that argued the settlement, they would say, sharing is caring, unless we're talking about real estate commissions, and then sharing is collusion.
And the real losers are home sellers because the settlement was supposed to drive down prices. Right.
So how effective have the great workarounds that you're describing here been in preventing the reforms and reductions in price that we thought this settlement was going to usher in? Initial data shows that these workarounds have been very effective at preventing the reforms. There have been a handful of studies in the real estate industry looking at how commissions may or may not have moved.
The data is problematic because most of them are being carried out by people in the real estate industry, so they have a vested interest in the data. That makes the data less than reliable for reporting processes.
But one study by one real estate media company showed that in the months after the settlement, commissions dropped about half a percentage point across the board, which is a lot of money. It's not this watershed that we thought was going to happen, but it's something.
Two other studies, one was carried out by Redfin, which is also a brokerage, and one was carried out by a real estate accounting technology company, so they have a vested interest in this data, say commissions haven't moved at all. So the American home seller is not getting any relief at a time when they desperately need it.
So we can use that data, but we don't want to rely on it because of the conflict of interest. What is more telling are the conversations I've had reporting on this for the past year.
I've talked to dozens and dozens of home sellers and buyers. Right, the ones interacting most directly with the commission structure.
Yeah, so this is anecdotal data, but there's a lot of it. And they are all telling me that not only are there workarounds, they're more aggressive than ever, and they're more frustrating than ever.

Some sellers are so frustrated that they're saying, I'm just going to go it alone. I'm going to sell my house on my own and cut realtors totally out of the equation.
Find a workaround around the workaround. A workaround around the workaround around the workaround.
But, you know, Michael, you used a biblical reference earlier about Mount Sinai. I'm going to use another one.
we're really in a David versus Goliath sort of situation

where you have these individual sellers

who want to sell their very valuable asset and an entire industry of realtors who are very committed to maintaining the status quo, mobilizing together to fight them every step of the way and make it extremely difficult to work around the system. We'll be right back.
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So, Debra, tell us about some of the sellers who tried to go it alone because they're so frustrated with the world of realtors, with the commissions and the status quo, and about the resistance that, as you said just before the break, they encounter when they try to do that. Michael, let me tell you about one of them.
Day two of trying to sell my house without an agent in one of the most rigged real estate markets in the country. His name is Mike Chambers.
He's a home seller in Boulder, Colorado. They try to make this impossible, but I have a plan.
Okay, so I actually started... And I first became aware of him because a source sent me a video on Instagram that Mike had made.
All right, let's clear something up because from the first video, I think a lot of people assume I think realtors are useless. And the truth is I don't, but I do think that most drastically overvalue their services.
And in Colorado specifically, they kind of operate like a cartel. So here's my take.
He created a handle called Realtors Hate Me, and he was chronicling the process of selling his house himself without an agent. Are you okay if I record our call? Yeah, that's fine.
Okay. Fabulous.
So I called him to find out what was going on, and he told me his story. Mike is a former professional athlete, an entrepreneur.
I have no background in this whatsoever. I've been thrown into this, honestly.
I didn't really think too much about the real estate industry until about four weeks ago when I decided that I wanted to list my house myself. And Mike has a really nice house.
You know, I've got a great house. It's turnkey.
It's a desirable location and desirable city. It's worth probably about $2.75 million.
A really, really nice house. Really nice house, turnkey, renovated.
I spent the past couple months having some conversations with local agents regarding potentially listing my home. He decided to put it on the market.
He interviewed a handful of real estate agents. And in those conversations, I asked the questions that I would of any sort of service provider that I would be interviewing to get a sense of, like, how they were going to provide value.
He knew about the settlement. He had read the reporting.
He knew that things were supposed to be different now. There was supposed to be room for negotiation.
You know, I couldn't find an agent who was willing to go below two and a half percent to list my house. Every single seller who came to his home said, I'm not willing to negotiate, and wanted him to pay at least 5% commission.
It's going to be $140,000. On a $2.75 million house, that's over $100,000.
Oftentimes, it equates to about 10 to 30 hours worth of work. Exactly.
For many people in this country, that's a salary for a year they can only dream of achieving. And he could not figure out what the agents were going to do that was worth $100,000.
Because like you said, this house is ready to sell. It's pristine.
So in his mind, it doesn't need the kind of attention, the kind of love, the kind of investment that a seller's agent can bring when a house is in rougher shape, when it needs work. Yes.
It was a lot of money. Everyone's like, well, you're being cheap.
Like, it's such an expensive house. I'm like, it's my money.
Like, I've worked hard to build this equity in this house, and I don't want to just give it away. I want to pay someone for their services, of course, but I don't want to just light it on fire just because there's a system that's forcing me to.
It seems kind of crazy. And a lot of real estate agents obviously would disagree with this, but from Mike's opinion, this is his asset.
He did not want to put forth $100,000 or more of the sale price to an agent, but nobody was willing to negotiate. So anyhow, it all just felt weird.
I just didn't like it. I was frustrated with it and really just had this epiphany.
Like I was, I'm a marketer. That's my background.
So I felt confident in my ability to market the home. So he said to himself, how hard can it be? So I just decided to go for it.
I'm going to do it myself. And he began not just selling his house on his own, but chronicling the whole thing online for viewers and building a following as he did it.
Okay. And what happens once Mike decides to go in on his own based on all these frustrations with realtors in Boulder? He starts running into roadblocks.
He learns very quickly that the industry has made it much harder than he thought to sell his house. First of all, he knows that if he wants a buyer to come, he needs to offer commission to the buyer.
He was willing to. I'm just going to slow this down to make sure I understand.
Sure. He knows he's going to have to offer some percentage commission to the buyer's agent.
He himself is his own agent, so he's the seller's agent that's taken care of. It's almost like he's in court representing himself.
Okay. So he knows if I want buyers to come, I should probably be willing to pay the buyer's agent commission.
So he's already winning in a sense because the commission he's paying is probably going to be what, around half of what he would normally pay if he had to pay both the buyer and the seller's agent. Exactly.
So he's willing to pay that commission and he wants to get the house listed on the MLS so people can find it. Now, if you're not working with an agent, how do you list a house on the MLS?

I don't know.

He Googles it.

He figures this out.

There's companies that do this for you.

But he lives in Colorado.

And he quickly learns that in Colorado, there are laws that say, if I'm going to list the house on the MLS, I have to also do a bunch of other stuff and you have to pay me all this stuff.

It's a rule designed by realtors to make it too hard to get your house listed on the MLS.

That was the tipping point for me where I was like, this is a mess.

This whole system is a mess.

Thank you. It's a rule designed by realtors to make it too hard to get your house listed on the MLS.
That was the tipping point for me where I was like, this is a mess. This whole system is a mess.
Then he realizes he wants to get his house listed on Zillow. Everybody uses Zillow in Redfin to search for houses.
In listing my house on Zillow, I learned that even Zillow has its own safeguards to push people to work with brokerages. And he learns that Zillow actually has a program that homes that are sold for sale by owner, not with agents, are actually harder to find than homes that are listed by agents.
So the agents strike back again. So basically, in real time, for all these people following him on Instagram, he's discovering all these layers to the real estate industry that he didn't know existed.
So here I am, I kick it on MLS. Zillow's sort of stonewalling me.
So he gets the home on the market. He stages it.
He takes photos. It's ready to go.
Buyers agents in Boulder know about his house. Obviously, like, these videos are starting to go viral.
And there's starting to be a conversation locally about my story in particular. And I start to like hear some weird stuff.
And one day one of them gives him a call and says something's happening that you need to know about. Agents representing buyers at my company are talking to each other in text and in person saying we're not going to sell this guy's house because he's not playing by the rules.
So agents who might represent potential buyers who would love to have a $2.7 million turnkey house in Boulder are saying we are not going to take our potential buyers to this house. We're going to boycott it.
There's a word for this in real estate. It's called steering.
You're either steering buyers towards a certain home or away from a certain home.

And you're not allowed to do it.

But it happens all the time.

And what would be the explanation that these agents would have

for steering people away

from Mike's house?

There's no hypothetical.

They gave the explanation

in text messages

that I saw when I was reporting.

Wow.

They told this other agent

who wanted to bring buyers,

why would you take buyers

to a house with a seller who's working against the system, who's undermining the way things have been done? It was a boycott. So what ends up happening to Mike and to his house? So Mike does find a buyer.
There's a couple in Florida who sees the house on Zillow. They make an offer.
He actually offers to pay a commission to the agent who's representing them. But in the end, he actually pulled out of the sale because Mike decided, after seeing so much of the inside workings of the real estate industry, that he wants to start a business to try to fix it.
Wow. So rather than moving his family to Costa Rica, which was his dream, he's now going to stay in Colorado for the time being and work on this startup company that he's created to try to change real estate commissions.
Fascinating. And he told me about how it's not that he's trying to take down the real estate industry.
I do think there's a critical role for real estate agents in the world. And I think this has never been my issue.
He believes that real estate agents are very important and sometimes are really useful. Just allow me to act in my own best interest.
And through this experience so far, it's felt like quite the opposite. His message, though, which has been echoed by many other people I've spoken to in my reporting, is that you should be able to determine how much you want to pay for that service.
And the industry is not allowing those conversations to come to the surface. Sounds good.
All right. Great to meet you.
Bye.

You too. Bye.

Right, because everything you found and he found

is that one way or another,

agents are still operating to a real degree in the shadows

as they try to ensure that the commission structure

that is supposed to be negotiable

is actually not all that negotiable.

If you talk to economists and analysts in the industry, they will say the settlement was a massive breakthrough moment. If you talk to agents, many of them will say, the settlement changed nothing.
There is a huge gap in understanding. And in the middle are agents on the ground just trying to make money and home sellers and buyers just trying to navigate the process.
There's no clear communication here about how it's supposed to work. So surely the government regulators know what you know.
Maybe that's asking too much. Well, they read us.
They do. Right.
They know what you know based on your reporting. And they would seem to have a real interest in enforcing the original settlement in as broad a way as possible, right? So is that happening? Is there an effort underway to clarify some of this confusion that you are still seeing out there? Yes and no.
The Justice Department has been investigating the National Association of Realtors for years. There's been a back and forth with them for a very long time.
The settlement was brought by private home sellers. Right, it wasn't a government loss.
It wasn't, but the DOJ was absolutely investigating NAR, and they continue to investigate NAR. Commissions and the conversations about commissions are a huge piece of that investigation.
But the Justice Department has a lot of other things on their plate right now. The government is very busy and working with many fewer staff than they used to.
So it's really anyone's guess how high of a priority this is and if there's going to be further enforcement. Is there an appetite for it? Yes, definitely.
Understood. I think it makes sense to end here with a little bit of news that you can use, which isn't exactly the space we normally occupy, but I'm just going to assume that somewhere in the universe of daily listeners are folks who are thinking of buying or selling their home or perhaps are in the process of buying or selling a home and could benefit from the journalistic wisdom that you have accumulated over the past year or so reporting on this.
So what would you say to people who are trying to figure this out, perhaps aren't willing to do what Mike did, which is actually take charge of the whole process themselves, but they just want to be able to navigate the current dynamic in the best way possible? If I've learned anything in the last year from reporting on this, it's that buying and selling a home is really scary and really overwhelming to the vast majority of people. Mike is an anomaly because he decided to just go with his own and kind of figure it out as he was going along.
For most of us, it's really scary. I've sold a home.
I remember sitting down with my agent. I had no idea what the stack of papers was in front of me, and we just agreed to whatever she said because we trusted her.
You, a real estate reporter, didn't ask about the commission. I did not ask about the commission.
I'm willing to say that to you, Michael, to your face. I did not ask about the commission.
I think we paid 6%. I honestly don't remember.
If it happened to me, it can definitely happen to anyone who's listening to this. It is not a problem to pay 6% as long as you know what you've agreed to.
Which probably means asking. My number one piece of advice is to understand, even if you're told you cannot negotiate on commissions, you can negotiate on commissions.
And if the agent doesn't want to, you have the right to go find another agent. You also absolutely have the right to know what you are paying for and to ask the questions, okay, you're going to charge me this much money.

What are you doing for that money? Just like you would with any other transaction. It's my understanding, based on everything I have read, that this legal settlement has only officially been in place, I think, for a little bit less than a year.
Since August of last year, correct. Exactly.
So I wonder if there's a case to be made that as successful as all these workarounds have been, that it's still very early days, and that over time, the system could change to better benefit the consumer as they become more aware of guidance like what you're talking about here and of the new realities and rules that are now in place. Or if you think that the more time goes by, the more power that realtors and the realty industry will accumulate.
Michael, I asked this question to the lawyer who brought the case that resulted in the settlement and won it. His name is Michael Ketchmar.
And what he said to me was pretty interesting. He said, you know, Blockbuster Video, when movies started streaming.
Okay, now you're really taking us back. Yes, I am.
Back to the 90s. But Blockbuster did not shut down all of its stores the minute things started streaming.
It took time. Right.
VHS didn't just go the way of the dodo overnight. It probably took, what, 10, 15, 20 years?

Yeah. It was a great transformation, just like he believes this will be a great transformation too.
But these things do not happen overnight. We're talking about an industry that has been ruled by a group, NAR, for over 100 years.
And only very recently have people started challenging the way things are done. So the people that I've spoken to in my reporting believe,

yes, it is going to change,

but it's going to take real time before those changes are clear and obvious

and buyers and sellers feel the effects.

Well, Deborah.

Well, Michael.

Thank you very much. My pleasure, as always.
We'll be you next time. It's just delicious.
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