Welcome everybody to Midday magazine for this Tuesday, August 13th, 2024.
Have your host James J. Mailoff here.
We're welcoming in our good friend David Farmbrough from Cova Banker,
see it realtors and it's let's talk real estate time.
David, good to see you.
And it's good to be here again.
Nice to see you James.
Always good to have you by the studio, David, to be able to talk real estate.
It's one of the more fascinating industries in the world to me.
And one of the things that is such a good parameter to not only the economics of a community,
but the livelihood of a community.
And it's a fascinating topic and there's so many different layers to it
that we don't ever get a chance to really kind of stretch our legs and really dive into.
And today we're going to be talking about some of the changes that we've talked about in previous shows
and touching on some of the things that are going on with real estate.
Yeah, that's right.
We got a big change coming up and the change has actually been implemented this weekend
on the 17th of August.
And it's something that a lot of people might have read something about.
It's been mentioned in various media outlets, but unfortunately we haven't always had the accuracy
or the right emphasis.
The other thing is there's going to be a lot of changes to we realtor the way we do things
that really don't affect people who are buying or selling homes.
So I'm not here to talk about all the different forms we've got to fill in
or what this is going to mean for us.
I'm here to talk about the difference it will mean to you if you're listening now.
So David, let's start right from there.
What actually happened and what law changed?
That's a good question.
Actually, there was no change in the law.
And the way that the real estate industry is governed is slightly complex
because yes, we do have our laws, we have our federal and we have our state laws.
But we also have the framework that we operate under as realtors.
So all realtors are members of the National Association of Realtors,
which is like a professional organization or a union.
And what the NAR does, we mustn't call it the NRA
because then we get it muddled up with those other people.
What the NAR does is it sets up a framework so that we give the best service we can.
So we give professional service to our home buyers and home sellers.
And as realtors, we have to follow those rules.
Now, what happened was there was a lawsuit
and the National Association of Realtors reached a binding agreement
with those who brought the lawsuit.
And part of that agreement was that we would do things slightly differently.
Were there as far as training goes for something,
these changes or anything like that?
Were realtors asked to take different classes or sessions to train for this?
Or did you have to do anything like that for some of these changes?
That's a good question.
No, there's no compulsory training.
Although most real estate offices will have done a lot of training on this
because this is a big change to the way we do things
but also in the way that we deal with buyers and sellers.
So it does mean that the examinations that we have to take are slightly different.
Now, we do do continuing education every two years.
We have to renew and there will be slight changes to what people are taught.
But even if we already did our two years compulsory,
it's a continuing education earlier on the year
before this settlement was reached,
we will still need to know about these changes.
And so there's been a lot of information put out
by the National Association and also the Wisconsin Association
and also our local board, which is the Central Wisconsin Board of Realtors.
You know, I've always found interesting industries
that continue to educate themselves,
to continue to work and get better at them.
My Aunt Neha cut hair for a long time,
for like 30, 40 years.
And I used to think that as a kid,
well, she learned this, she just does it.
But I didn't know that she was constantly going to like workshops
and finding out new hairstyles and what were new techniques in these things.
Even after doing the job for 30 years,
she was still finding different things that she could do to take
her with to do the job better.
To hear that our realtors are out there doing this every couple of years
and refreshing themselves or learning new techniques or anything.
It only makes our this whole entire industry that much stronger,
which is better as well for buyers and sellers out there.
Yeah, we have to because the laws change and the procedures change,
markets change and also the structure of companies change.
So for example, you might have found that 10 years ago,
there were no virtual real estate brokerages.
Now we've got a big one around here called EXP
and those people don't have offices because it's 2024.
Most people find homes on the internet.
So everything's changing and we need to keep up to date.
If we don't set up to date, we can't do our job well.
Yeah, you touched on this a little bit,
but with these changes, what does this mean for realtors?
Well, for realtors, it means that we have to be better
in how we explain our payment process.
It's really, you know, people know that realtors get commission,
but sometimes we don't know exactly how it works.
So typically, I don't use this expression myself,
but there have been some realtors who've said,
well, you don't need to worry.
You don't need to pay me because I'm working for you as a buyer
and I won't charge anything.
Well, that's not really true because we have to be paid.
And although typically it is the seller who ends up paying the commission
for both the buyer's agent and the seller's agent,
that's not necessarily the case.
And the changes now mean that it's incumbent on us realtors
to explain these things better to our buyers and sellers.
So what we have to do now is we have to say to a buyer,
look, we don't work for nothing.
You know, we're doing a job.
We're entitled to be paid.
And therefore, before I show you a single house,
I've got to ask you to sign a form.
Now, this might seem like we're trying to get buyers to commit
to using our sort of paying us a lot of money.
It's not necessarily the case.
There are different forms of this agreement that we can use.
And sometimes we'll just have an agreement that says,
okay, you haven't made a decision to use me as a realtor yet.
But I'm just telling you that at some stage,
that will come up right now.
I'm going to show you the house and you can say,
I'm going to charge you for showing you the house
or I'm not going to charge you anything.
But we have to be transparent.
We have to be clear to the buyers so that they know
that ultimately, we will be looking to be paid.
This really seems like, and I understand
that nobody wants to have to fill out more paperwork
or anything you guys or the seller or buyer possibly.
But this is really for everybody's well-being.
This feels like one of those things that's trying to cover
all bases, get everything up front,
make sure that things are very clear to everybody involved.
That's true.
And many of us used to have this conversation anyway.
I should mention that the Wisconsin Realtors
are a little bit ahead of this agreement
because we've operated buyer agency agreements
for many years, whereas in some other states,
they haven't had buyer agency agreements.
And the situation is a bit more of an upheaval for them.
What we have to do now is we have to explain to a buyer
before we go into any property how we're expecting
to be paid and then the buyer will have a choice.
So we can say to a buyer, look,
this is what I charge for my commission.
I'm expecting the seller to pay this.
But sometimes the seller will not agree to pay this
and then it'll become a point of negotiation.
You could end up where the seller says,
oh, I don't want to pay the buyer's agent anything.
And then in that situation,
the buyer's agent is going to want to be paid.
So they might ask their buyer to pay the commission.
So an unusual situation, but it may occur.
What does this mean for sellers, David?
Well, traditionally the sellers have been the ones responsible
for paying the commission for the buyers and the seller's agents.
And the reason for that is that generally,
if you're selling a home, you've got a little bit of equity,
you usually have the wherewithal to pay that commission.
But if somebody's buying quite often,
they come in with not very much money to spare,
all the money they have they're putting into their down payment,
paying for their inspections and things like that.
And they just don't have the money to pay their agent.
So traditionally, that's why the seller has been responsible
for paying the agency fees on both sides.
But it doesn't have to be like that.
So now a seller is going to be told,
look, you don't have to pay the buyer's agents commission.
Right.
Now, there is something that the market will take care of,
which is that if a seller is selling a home
and they're not willing to pay any buyer's agents commission,
then a buyer might come in having agreed to pay his agent
a commission and he might say, well,
if the seller isn't going to pay my agents commission,
that means I've got to pay it.
So I'm going to reduce the amount that I offer for the house
by the amount that I'm going to have to pay my realtor.
And so for that reason, to me,
it seems that the market is more likely to adjust
to a situation where the seller acknowledges
they will have to pay the buyer's agents commission
just as they've been doing in the past.
But it will now be a more informed process.
Yeah, well said, yeah.
Now on the other side of this, what does this mean for buyers?
Well, buyers will be in a more informed position as well.
So the buyers will know that they can negotiate
their agents commission, not every agent
will want to negotiate of course,
but that's going to be up to the buyers
and their agents to sort out between them.
It'll be determined by market forces.
Now, a buyer will also want to look at this
when they're putting their offering
because they'll have to decide whether they want to have
their seller paying their agents commission or part of it
and whether they're going to be able to contribute
to this themselves.
Like I said, a lot of buyers are just not in a position
to do that.
And so that won't happen for those people.
But they will know that they have the choice
and they will be able to talk to their agent
about how that commission is paid.
It's, let's talk real estate with our friend, David Farnborough
from Cole Banker, CEO, realtors.
And David, before we move on, just staying with this
and what we've talked about about how it affects
and what it means for realtor sellers, buyers,
it feels like the little homework I've been able to do
on this subject and certainly being informed by you,
it feels like this is covering gray area
that used to be there or the possibility of gray area
that used to be there and really kind of just making things,
hey, everything's always on the up and up.
But I mean, everything's kind of detailed.
It's in paper, in writing for you.
We're getting a little bit more of that.
It feels like in the industry.
Yes, you're absolutely right.
So six months ago, I'd go into a home with a new buyer.
I wouldn't necessarily have an agency agreement signed
at that point, but I would say to them, look,
because we don't have an agency agreement yet,
I'm showing you this home on behalf of the seller
and therefore I have certain obligations to you.
But what I'm not allowed to do is I'm not allowed
to advise you on price, on negotiate,
on your behalf at this stage.
So I would usually have that conversation.
Well, what's going to be different now
is that I will have a form that will be documenting that
if they decide not to enter into an agency agreement
at that point.
A tough question, but I got to ask,
because it does feel like this is doing a lot for buyers,
for sellers, which is fantastic.
That's great.
We want to look out for that in the industry.
Is this hindering real at all, or is this changing things up
for you all in those in your job at all?
It feels like another added thing to your job,
or is this just one of those things that, again,
is clearing up that gray area?
Well, there is work involved in the change over,
because we are going to have to adopt a lot more forms.
The other thing that's a big difference, which
may not be visible to the public,
is that sellers agents are no longer
going to be putting commissions that are offered in the MLS.
So this is going to change how commissions are negotiated.
So it is going to be a big change for us,
but it's something that, I believe,
the majority of us have got behind.
We've trained ourselves, we've prepared,
and we're going to be able to take it in our stride,
and we're going to be able to proceed on the basis
that we want to have informed clients,
and we want them to know exactly what they're doing.
And this will be something, probably, that in a years' time
we'll say, yep, we did that.
We made things a bit better, and now we're just
proceeding as strongly as we ever were.
It's encouraging to hear.
I never really thought too much at being honest,
and I've mentioned this to you before on air off air.
I've talked to Jay about this on air off air.
I'm an actor.
I'm an entertainer, so I never really
thought about owning a home.
I just didn't think that was something
I'd ever be able to do wasn't talking to J.R.
Realizing not only is that something
I might be able to do one day, but well,
who do I want to go to, what do I want to do?
And I realize maybe more than any other industry in the world,
in real estate is a reputation business.
It is really how you treat people,
and the way that word of mouth is and so much of that.
And when it comes to that, there is some murky area.
There is some gray area.
This kind of clearing that up really
feels like it strengthens those things
and reinforces that connection of, yeah, I know,
Cole Banker, they treated my friends right.
I feel confident they're going to treat you
and your family right.
That reputation part of the business
strengthens with some of this, I feel like,
just as a late, you know, third person,
third perspective and everything,
it feels like it's only going to enhance this industry.
It seems.
I think that's right.
I think it's going to have more of effect
and effect in other states whereby
as agencies were not used.
And I think that's certainly going
to enhance the reputation of realtors.
But certainly, yes, it is going to have an effect here.
And I'm hoping that people will just see,
oh, OK, yeah, I get what they're doing.
I understand how commission is charged.
And this is OK.
We'll use this system.
Do you have you building up to this and everything?
Because again, August 17th is when this will take place,
correct?
This comes in.
That's right.
Yeah.
Have you been able to, I imagine there's
some people that you're working with
that are going to be grandfathered in or have to be
brought into this?
Yes, that's absolutely right.
So I've got people who I've already got under contract
to either sell or to rent premises.
And I've got buyers who I'm already working with.
Those who are already under contract to sell,
it doesn't affect, because we already
know exactly what we're doing with those.
There are people I'm working with now
who are looking to put off offers in on houses.
What I'm doing now is I'm keeping
a little stock of the new agency forms in my car.
So that if someone calls and says, I like to see this house,
I've got that form with me.
Now, I do feel a little bit intimidated saying,
well, can you sign this form before we go in?
Because it's like I'm trying to get them to do something
that maybe they don't want to do.
But it does force that conversation.
It does mean we have to explain what we're doing
and for whom we're doing it and how we're going to be paid.
David was nice enough to bring in his crystal ball.
So David, how will this affect home sales
in the next few months and moving forward?
Well, I have heard it's speculated that there may be
a slight break put on the market in the next month or so.
But I don't really see that happening
because we're still in a position
where we have too many buyers chasing two few homes.
We have seen a slight drop in interest rates,
which will add a little bit of oil to the wheels of the market.
So what I would say is that even if there is a slight change
in the next month or so, we're not going to see a big impact.
And that seems to be the case in the industry as it is.
It feels like it'll affect the industry in some ways.
And I think you touched on this earlier very well.
It also will, but in ways that maybe buyers and sellers
don't necessarily know, maybe a form that you sign,
maybe one extra form or something here or there.
But for the most part, it really feels like something
that your colleagues are going to feel and make adjustments to.
That's right.
And I think there probably will be a slight change
in the makeup of our profession,
because I think a lot of the realtors
who've been in the game a long time,
who have very used to all the old forms,
might say, well, I'm just not going to bother doing this.
And I saw this happen when I worked in law,
whenever there were big wholesale changes,
you saw a lot of people retire,
or some people who have passed retirement age,
or some people who thought they could take early retirement,
they just thought, I'm not dealing with this.
So I do see a slight change coming,
but I don't think it's going to be a lot of us,
because from what I've seen of most of my professional colleagues
in the area, they are all very well prepared.
They're getting familiar with the new forms,
and they will just take it in their stride.
For every, I hear you on everything you were saying
before about some colleagues and some people,
I will say that there are a few industries
and few people that are more adaptable
and really can improv than realtors in the industry itself.
And I really commend you guys on that
and the way you're able to adapt to not only these things,
but a changing market, a market that changes all the time.
So I find it really unique in a very, very interesting industry
that we always learn and feel better about
after we talk real estate with you
and our friends at Cold War Banker,
really do appreciate the time and the information, David,
a very nice job breaking this down for us.
I even understand it.
Thank you, and I appreciate the opportunity to come in
and to talk to anyone who's interested about this sort of thing.
If people do have fault questions, they want to know more,
and maybe they just want to reach out to you
as a realtor, David, how can they do that?
The best way through my phone, my personal cell phone,
is 715-323-8594.
And I always say to my clients,
you can text me anytime, day or night.
He's right about that.
I text him all the time at midnight.
He answers it always.
He's weird about it.
David, I appreciate you very much.
Thank you for the time.
Say hi to everybody over there for us.
I will do, thank you very much.
We'll have more Midday Magazine coming up for you here
at 97.5 FM 13.20 AM, WFHR, we are locally grown radio.
