Understanding Texas Buyer Rep Agreements Post-NAR Lawsuit

Amy Cearnal

(0:00) Rather than saying like, hey, I want to be your agent for the state of Texas for the next year, Mike. (0:07) Instead, they would say, hey, I want to represent you on 123 Main Street for the next 30 days. (0:14) Well, that's more palatable for me as a consumer to sign.

(0:17) Or they could say, I just want to go and show you this one house and you pay me the 50 bucks and you can have it for that address and for one day. (0:24) So we are going to see much different terms on some of that on how to go.

Mike Mills

(0:38) Well, howdy howdy, all you persistent property pros out there. (0:42) So August 17th is the date that everyone in real estate is only aware of these days. (0:47) That's the date that all the changes from the NAR commission lawsuit officially go into effect.

(0:52) But if you're in Texas, are you aware that there are changes coming your way on June 24th also, which is less than two weeks away? (1:00) And what are these changes and what do we need to know about it? (1:03) Well, you are always, as always, you are in the right place.

(1:06) This is the Texas Real Estate and Finance Podcast. (1:08) And I'm your host, Mike Mills, a North Texas mortgage banker with Geneva Financial. (1:12) So that means along with this podcast, I also do all kinds of home loans.

(1:16) So if you know anyone that needs a little help, give me a shout. (1:18) But today we are here to break down all the new updates coming your way on June 24th, what you need to know, what you need to do and how it's going to impact your business going forward. (1:28) Because like it or not, change is here and now is the time to start making adjustments.

(1:32) But good news, you are in good hands. (1:34) We got you covered. (1:35) So my guest today is, in my opinion, one of the most dialed in brokers to all this Sitzer Burnett craziness that we've seen over the last couple of years.

(1:43) She's a 20 year real estate veteran, a North Texas broker, and has been working to build her knowledge on the legal side of things over the last couple of years as well. (1:51) I don't know of anyone that has their pulse on what's coming down the line more than today's guest. (1:56) So I'm excited to see what she has in store for us.

(1:57) But really quick before we start, if you find this information in today's episode helpful, please share it with a friend. (2:03) We've reached over 4,000 listeners just like you. (2:06) And we want to continue to grow our little real estate community.

(2:08) And you guys are the fuel that powers this engine. (2:11) So like, subscribe, comment and share. (2:12) It means a ton when you do so.

(2:15) Okay. (2:15) Today's guest is no stranger to the show. (2:17) In fact, this is her fifth appearance on the podcast.

(2:20) And for those of you that know her, you understand why I keep having her back. (2:23) She knows her stuff and can break it down in very simple, digestible terms. (2:27) And she's here today to help us sift through all the changes coming our way.

(2:30) So please welcome Amy Cornell to the podcast. (2:32) Amy, how are we doing?

Amy Cearnal

(2:34) Hey. (2:34) I didn't realize it had been five. (2:36) That's fun.

Mike Mills

(2:36) Yes. (2:37) Yes. (2:37) This is your fifth time.

(2:38) There's 134 and you are representing five of those. (2:42) So I appreciate it. (2:44) You're always my go-to expert when it comes to all these new changes.

(2:48) Now, this one today is going to be very specific to Texas realtors. (2:52) We talk a lot about broad topics, but we're going to get a little bit more into some of the changes that are coming on June 24th. (2:58) Now, from what I understand, these aren't necessarily something that is going to immediately impact you, but you need to be aware of it because this stuff's going to be available.

(3:05) So let's just get right into it.

Amy Cearnal

(3:08) And I will say it does have some aspects that might affect people in other states too. (3:14) If you're at a brokerage or at somewhere in your world where they have not modified forms yet, you may be looking for, how can I build forms? (3:23) So like geeks like me that are really into this, like I've been collecting forms from across the country of like, what are they doing?

(3:29) What are they doing with some of that? (3:30) So anyway, that might be useful as well.

Mike Mills

(3:33) Yeah. (3:33) What a great hobby, collecting forms. (3:35) I mean, it's like, you know, you're living that fast and exciting life, Amy.

Amy Cearnal

(3:38) I like reading all the court documents and now we're reading all the...

Mike Mills

(3:42) How is the law stuff coming along? (3:45) Just got a curiosity real quick.

Amy Cearnal

(3:47) For me personally? (3:49) Yeah. (3:50) I'm pausing from law school right now.

(3:52) So because I was supposed to go back in May and my son graduated high school in May and I just couldn't move at all. (3:59) So, you know, something else to give. (4:01) So planning on going back in the fall, but we'll see how it goes.

Mike Mills

(4:03) Yes. (4:04) Yes. (4:04) Family always comes first on that.

(4:05) Well, I know you've been digging into that stuff, which makes you the perfect person to kind of help us go through all this because obviously you've been dealing with the, as a broker in North Texas, you've been dealing with this stuff for your entire career. (4:16) And then also I've been paying extra close attention to all the changes coming our way. (4:20) So, so let's start with what is happening specifically on June 24th.

(4:24) That's going to kind of adapt what agents do with their business with Trek.

Amy Cearnal

(4:29) Yes. (4:30) So, and it's with Trek and it's with Texas Realtors. (4:33) So it's, I'll just like kind of speak to that for a minute too.

(4:36) So right now, Trek has not made any changes on any of their forms. (4:40) So Trek being very consumer focused, honestly, this is a little bit less concerning to them because this is a lot, a lot of ways, just dealing with how we are compensated. (4:50) And so they're like, you know, we really don't, Trek is saying, we don't really care if you're compensated or not.

(4:54) We're, we're fine with all the forms as they are. (4:58) We want to have clarity for the consumer, but you know, whatever. (5:02) And so these form changes are happening on the Texas Realtors side, which is the professional organization that all Realtor members are a part of.

(5:12) So if they're a part of their local board, then they're also part of Texas Realtors and a part of the National Association of Realtors, which was the named party in the lawsuit that came up with the settlement. (5:20) And so that's why all of this is very important for those Realtor members out there that are looking to continue in the business. (5:27) They will be asked to modify, to use these forms.

(5:31) Texas has them available for use on six 24. (5:36) And it's one of those where they, they aren't dropping them until six 24 and then you have to use them.

Mike Mills

(5:41) So moratorium or anything. (5:45) It's like once they're out, you got to use them.

Amy Cearnal

(5:47) Yes.

Mike Mills

(5:47) Okay.

Amy Cearnal

(5:48) So this is a like kind of quick situation. (5:50) And so that's why we're wanting to make sure there's as much training as possible on there. (5:54) I am a Texas Realtors instructor, which there are a lot of us out there.

(5:59) We had a call with general counsel on Monday. (6:02) So we're all new at this too. (6:04) And got the, like spent hours on a zoom, trying to work through all of the changes with them.

(6:10) And now we're kind of disseminated across the state, trying to help make sure that everybody's ready to go on that. (6:16) So if you want to find somebody in your jurisdiction to get more hands on, like a deeper class, a lot of people are offering three hour classes, but like over the next week to make sure that everybody's ready to go for the 24th.

Mike Mills

(6:28) And you're doing a live zoom as well. (6:30) Correct?

Amy Cearnal

(6:30) Yeah, I'm doing classes on Monday. (6:32) So I've got an in-person class in Arlington on Monday and a zoom class on Monday too. (6:36) Okay.

Mike Mills

(6:36) Perfect. (6:36) So if you guys want to, once you find out kind of the overview of this, if you want to dive in a little bit further, Amy's going to be offering an in-depth class on a Monday, the, what is that? (6:44) The 20th, 17th, 17th, sorry, Monday the 17th.

(6:48) So then that way you can dive into that. (6:50) And I'll put a link for that also in the show notes so that everybody can get access to it.

Amy Cearnal

(6:54) Thanks.

Mike Mills

(6:56) All right.

Amy Cearnal

(6:56) So what's coming on? (6:58) So we've got new forms coming that are both on the listing side and the buyer rep side, because we're trying to make sure that it is very clear to the consumers what the new world is going into post-settlement. (7:10) So just to refresh, which I know you've done a great job of educating everybody on as well, but it's that, how can we tell the story of that?

(7:19) This is totally optional, what the seller wants to pay as far as buyer representation. (7:24) And then as of August 17th, so we're jumping for a little bit, but as of the August 17th, and that's when all of the compensation on MLS has to be off. (7:34) So these forms that are starting June 24th are, they couldn't do like easier days for us, right?

(7:41) Where it's not on these weird days, but June 24th, those take into account and give the clarity on, these are not going to be fees that are presented on MLS. (7:53) These are fees that would be presented privately between brokers. (7:58) And so then that does give the seller the ability, if they want to offer a buyer agent commission, then they can.

(8:04) If they do not want to offer a buyer agent commission, that is fine. (8:07) Or if they want to say, hey, bring me an offer and I'll consider a buyer agent commission. (8:13) They're going to have all three of those options on the listing side.

(8:17) And then the buyer side, we're going to have two buyer rep forms. (8:21) Now we have a buyer agent, buyer rep long form, and we have a buyer rep short form. (8:27) And that's what's really putting everybody into a little bit of a tizzy because the short form contemplates a very limited service agreement where we just allow for a showing rather than actual full representation for a buyer.

Mike Mills

(8:42) Okay. (8:42) So the first one is Zillow did something or tried to do something like this recently, right? (8:47) Where they put out a temporary buyer's rep to where you're not agreeing to compensation.

(8:52) You're not agreeing to anything. (8:53) You're just saying, hey, you can sign this and I will show you homes with no expectation of anything in return, right?

Amy Cearnal

(9:00) Yes. (9:01) And the thought process behind that is that the way the settlement reads is that prior to touring a home, a buyer has to have a representation agreement in place. (9:11) In Texas, we don't really use the word touring very much.

(9:14) It's really showing, right? (9:15) So before showing a home, before actually walking through, not virtually, but actually walking through a home, then that is when a buyer would need to have a representation agreement in place with whoever is walking them through that house. (9:28) So if it's somebody that they did not want to have a long-term relationship with and have them actually representing them all the way through the transaction, negotiating and advocating on their behalf, if they just wanted somebody to walk them in the door, then that new short-form option has that.

(9:46) It has where that agent slash their broker could also collect fees for that service. (9:54) So let's say that I said, you know what? (9:57) I'll show you anything for 50 bucks.

(9:59) Right. (10:00) So I could collect 50 bucks and then that would have totally fulfilled that showing agreement, that buyer rep short form. (10:08) And so then that would give me the ability to service, sorry, that buyer so that they could see the home, but also not create any obligation for them to pay me a percentage or a flat fee or anything beyond that 50 bucks.

(10:22) Now, if they decided, oh, I really like Amy. (10:25) I want to work with her more. (10:26) I want her to represent me on this.

(10:29) Then an adjustment could be made and a new form, either the new buyer rep long form or there's a full service section of the buyer rep short form could be used to modify, to bring them into whatever fee structure would be appropriate at that time and service level structure.

Mike Mills

(10:47) Are those short forms, are they time sensitive? (10:50) Do they have like a time, like for a week or whatever?

Amy Cearnal

(10:55) So it is similar to what we have on the other form where it has this agreement begins on whatever and ends on. (11:03) So we are seeing though that a lot of agents and their clients are utilizing both the buyer rep long form and short form to be for however long or short they wanted it to be. (11:14) I personally think it is hard for a consumer to sign a really long-term buyer rep form right now when they don't know what's happening.

(11:22) It's also hard for them to sign a really broad market area on there. (11:26) So rather than saying like, Hey, I want to be your agent for the state of Texas for the next year, Mike, instead they would say, Hey, I want to represent you on one, two, three main street for the next 30 days. (11:41) Well, that's more palatable for me as a consumer to sign.

(11:44) Or they could say, I just want to go and show you this one house and you pay me the 50 bucks and you can have it for that address and for one day. (11:50) So we are going to see much different terms on some of that on how to go.

Mike Mills

(11:56) And we have a question here is, did you see that? (11:58) It works. (11:59) Is it the broker that's paid the 50, if you charge, right?

(12:01) If you charge, is it the broker that's paid?

Amy Cearnal

(12:03) Like, yeah, you'd see that. (12:06) Perfect. (12:07) So that's the kind of problem and what through the entire Texas realtor instructor community into a tizzy on Monday, when we saw this form for the first time is like, yeah, who does collect that fee?

(12:18) Because it says on the form that the broker is to collect the fee. (12:21) And that's how Texas has always been set up is that the broker collects the fee. (12:25) But what keeps the agent from doing things out there without the broker attached?

(12:30) And you know, the independent contract agreement should, so the broker should kind of shut that down and create a mechanism for their agents to pay the broker or for the clients to pay the brokerage directly and then the brokerage to pay the agents. (12:46) And the reason why that is important is that that way we can track who, what representation agreements are out there and track for tax purposes, what income is going to those agents so that those dollars are captured on a 1099.

Mike Mills

(12:59) This doesn't sound complicated at all.

Amy Cearnal

(13:01) It sounds like it's going to be so easy. (13:03) It's going to be a really interesting situation on that because I don't know. (13:08) I mean, all of us were like, wow, we've never seen anything like that before.

Mike Mills

(13:12) Like if you, if you sign an agreement with a buyer to do this and let's say you do say, Hey, look, I'm going to charge 50 bucks or whatever it is. (13:19) Well, I mean, are they paying you in cash? (13:21) Are they writing a check to the brokerage?

(13:23) Are they getting a credit card? (13:24) Do you have a Apple swipe in your car that you can put that'll go to, and then how are you reporting on your taxes? (13:29) And who, you know, and then if they, if somebody does do something somewhat maybe where they don't pay the broker and they pay the agent individually, because let's, let's not pretend like that.

(13:39) That's not going to happen. (13:41) Then what's, what are the legal ramifications of that? (13:43) Is the broker responding?

Amy Cearnal

(13:45) I mean, there's so is there any sort of receipt or anything on this page? (13:49) Nope. (13:50) None of that.

(13:50) We don't have any. (13:51) So it is that that's a tough one. (13:54) Now brokerages could say, Hey, we just don't use the short form.

(13:58) So the pages like, you know, kind of prohibit their agents from using it to help prevent that.

Mike Mills

(14:02) Yeah.

Amy Cearnal

(14:03) It's just hard. (14:03) Once this form gets out there, it's going to be interesting to see how it goes. (14:07) And some of this is because all of this is so new, we're waiting to see how the real estate market adapts and, and kind of uses it to their own benefit of how things will go.

(14:19) You know, it may be that people execute that form with a dollar in there. (14:24) Right. (14:24) And so then the broker's like, well, I don't care about a dollar.

(14:27) If you do it for a dollar, like whatever, keep the dollar, don't collect the dollar. (14:30) I don't really care. (14:31) Right.

(14:32) But we don't know, you know, and is that our agents going to want to go do that for a dollar or do they want to get the full thing signed? (14:39) How are they going to react to the clients on that?

Mike Mills

(14:41) This is going to be a giant social science experiment is what you're saying.

Amy Cearnal

(14:44) Really a hundred percent. (14:46) Yeah. (14:46) And then you have exactly what you're saying.

(14:48) You have Zillow agents, you have Redfin agents out there, you have different companies that are all, everybody's coming up with some of their own forms on this too. (14:55) And so that's fine. (14:57) That is all totally okay.

(14:59) Like these are not promulgated forms by the state. (15:02) So any brokerage out there could do different agreements, different buyer rep agreements, different listing agreements and do their own thing. (15:10) And so that's what we're to like, are the consumers going to react to that positively?

(15:13) Or are they going to say, well, I'm used to signing this or are they going to say, I don't really know. (15:17) And so it's fine. (15:18) I'll sign whatever.

Mike Mills

(15:19) So I'm curious now for your opinion, right? (15:23) We know what's happening here, but I want to know your opinion. (15:25) What, I mean, is this short form thing a good thing?

(15:29) Is it, I mean, I know who knows at this point, we won't know if it's into play, but you know, how do you feel about it?

Amy Cearnal

(15:36) So I met with our agents on Tuesday and I have told them for a long time. (15:40) And I was like, guys, this has not changed in my opinion, is that we have really smart attorneys out there that work for our Texas association that work for our national association. (15:51) And by virtue of those attorneys and their work, they created the five page buyer rep agreement.

(15:57) They also attached like another 20 pages of addenda that they believe are also valuable information for the buyer and great CYA for an agent. (16:08) So to me, do I want to just rely on a one page document? (16:12) No, I mean, because I want to have enough to say, look, first off, I'm a professional, this is a professional agreement.

(16:18) This is not just a fly by night situation. (16:21) I want to be in relationship with you, Mr. Buyer, but I also need to know, I need you to be educated and know what that looks like on your part and what that's going to look like on my part. (16:30) And the best way to do that is to me with a little bit more documentation and really utilizing the full, the long form really plus all the addenda too.

Mike Mills

(16:40) So my opinion on this has always been since all this came out was that the hardest part or the biggest change that I still don't see happening yet, because I don't think it's going to happen until we have maybe June 24th here, obviously is, you know, in the past, buyer agents have never had to have this conversation, regardless of what they sign and what they've done in the past. (17:03) They have never had to have the, Hey, here's how I get paid conversation because it's always been just, this is kind of standard practice. (17:12) The seller pays.

(17:13) I mean, it's been what we've done for a long time. (17:15) It's always been negotiable. (17:16) You know, that's, that's not, you know, there's nothing new there, but this conversation has not been had.

(17:23) And this is the hardest part of this, because now before you even, you know, walk out the door to show or open a door for somebody to look at a home, you're going to have to have this talk. (17:34) And, and that's going to be a big, big adjustment for most agents that have been showing buyers for a long time. (17:40) I think seller listing agents, if you're primarily a seller's agent, you know, you've done this obviously multiple times with listings, because you have to have that conversation, you know, pretty frequently a little different now, but still it's there.

(17:51) But for the folks that have just been, you know, representing mostly buyers and haven't had these, what, what, I mean, how are they going to approach this? (17:58) What's, what's the, what's the biggest hurdles on these things?

Amy Cearnal

(18:01) Yeah. (18:02) So I think you were totally right. (18:03) This is a major thing and it's causing a lot of fear for agents out there.

(18:08) And, and I hope that they are seeking out good training and coaching and that kind of thing to try to get out of a fear base and just into like, this is how it has to be. (18:16) This is how we're going to go forward. (18:18) Because as of August 17th, that is the new world that they, buyers are not coming into the homes without some sort of agreement in hand.

(18:26) Yeah. (18:26) So, you know, how does that go? (18:28) I think it is like just more of a buyer education process, right?

(18:32) That it's not, it's kind of the same way that we would do a listing. (18:36) We've said it for a long time in our shop, like you shouldn't just have a listing appointment. (18:40) You should have a buyer appointment.

(18:41) They need to be educated. (18:42) They need to meet great lenders. (18:44) Like Mike, you can't just wait and deal with that on the backend.

(18:48) You need to be having that introduction and that like really professional setting, sit down, hey, this is what this looks like to engage with me, conversation before you ever go and walk into the house. (18:59) And so that is likely, you know, best practice. (19:02) That's what it's going to look like.

(19:04) Now, will everybody do that? (19:05) I don't know, you know, and because, and, and will buyers relate to that? (19:10) Because I do hear from our agents a lot.

(19:12) Like I tried, but they don't want to, all they want to do is see that one house. (19:16) And so that might be a good clue for you as a buyer's agent. (19:20) Like, Hey, they're probably not going to be a real sustainable, very serious buyer that really wants to buy in this market and get the education that they need.

(19:28) They're just a looky Lou hoping to help, like help people as they go, like, but not really going to serve, like be a real client to be able to serve.

Mike Mills

(19:37) Well, this is another great question from Barbara. (19:40) So on August 17th, what about the people that walk into an open house? (19:44) What, what do we, what do we do there?

Amy Cearnal

(19:46) Yeah. (19:47) So, and actually California put out a bunch of forms on your desk. (19:52) Yes.

(19:53) So that would be on this one that I've been like, like this one that to me has been the best one that has gotten put out. (20:01) And it was from the California association of realtors and it's open houses in a post NAR settlement world. (20:06) And so really what, what has been said about open house and this is settlement all the way down is that the listing agent can hold the open house and they do not have to have a buyer form because they are representing the seller there.

(20:20) That listing agent works with a listing broker. (20:22) The listing sits with the broker's office. (20:24) So it's anybody in the listing broker's office can host that open house and we're good.

(20:30) Now, what we have had from time to time is where somebody in an alternate brokerage holds an open house that has not been ruled on yet. (20:38) We don't have any sort of precedent or anything to be able to go on.

Mike Mills

(20:42) Yeah. (20:42) When someone else has a house for you. (20:44) Yeah.

Amy Cearnal

(20:45) Because are they a representative of the seller at that point or are they trying to get buyer agent or buyer leads? (20:52) And so are they really trying to get buyers? (20:54) And so then in that case, it probably would be more appropriate for them to sign at least that, that short form with those people as they come through.

(21:01) We actually don't know that answer, but it has been clarified that anybody with the listing brokerage that is holding an open house for the benefit of the seller, that is okay. (21:11) No buyer forms need to be signed to do that. (21:14) Other than at the first substantive conversation in Texas, we have our IBS, our information about brokerage services, that that would need to be presented at some point that you're having a true conversation about making an offer and those kinds of things on that home.

Mike Mills

(21:28) Right. (21:29) Can you speak a little bit too? (21:31) Because so here's another thing that I see kind of leading into all this is that we've existed in this world in real estate for a very long time where your best friend calls you and she wants to go see this house at the street.

(21:44) And it's like, let's just go look at it. (21:47) I'll do whatever I got to do, but it's not a big deal. (21:50) I don't really care, blah, blah, blah.

(21:52) But now we're in such a, I mean, I don't know how much you, I know you pay attention a lot on the real estate side, but even on the mortgage side now, the amount of litigation and the amount of lawsuits that are coming out against mortgage companies, against real estate companies, against, I mean, any, you name it, like they are hitting. (22:10) So we are in this world of litigation, like zeitgeist, where everybody sues everybody. (22:16) Right.

(22:17) So I want you to talk a little bit about the importance of, yes, this, this, this has always been kind of a casual relationship, but having documentation and for signed forms and all that is going to be so critical going forward, because you don't know who's going to walk out the door and decide to pick up the phone and call an attorney and say, oh, they didn't do this right. (22:38) And now they come after you. (22:40) I mean, can you talk a little bit about that?

Amy Cearnal

(22:42) Yeah. (22:42) And, you know, I hope that we'll be able to explain that well to buyers you know, especially more casual buyers as they go like, hey, you know, I want to go see the one, two, three main street, but I don't want to sign anything because I'm not even really that serious about it. (22:56) Can I do that?

(22:56) I think that's a good conversation to have of like, is that something that you need to be doing as a professional going and showing somebody that really is an interest in the house and, and potentially putting the buyer, the seller through a showing on it. (23:08) That's number one. (23:09) But number two is really like helping them understand there's no obligation.

(23:13) If you don't go forward, potentially like really it's, it's a procuring cause situation. (23:19) If I procured you to buy that house, then I'm owed something. (23:23) If, if you don't buy the house, then we're done.

Mike Mills

(23:26) Right.

Amy Cearnal

(23:27) Especially if you limit it to that specific address for that market area and a specific date. (23:33) So that gives that should give buyers a lot more confidence to say, okay, no big deal. (23:38) I'll sign up for you.

(23:39) Right. (23:39) So that's where I think we'll probably get to is where there's a quick app or something that we push out. (23:45) And so on every showing it's super easy to like have them click through right before we walk in the door and we're good.

(23:52) But that is probably more of that short form side or the Zillow side, some of these others that is not going to actually give us the ability to negotiate and represent those people. (24:03) Well, then we would have to go to the next level of getting an actual representation agreement in order to collect the commission on it.

Mike Mills

(24:10) Yeah. (24:10) There'll probably be a bunch of little cottage, uh, businesses and industries that (24:13) kind of pop up from this just for ease of ease of getting some of this stuff done that you have to (24:19) do that maybe, I mean, it was always, I mean, correct me if I'm wrong, but it was always kind (24:23) of required, but it was just kind of one of those things where, you know, if they were just going (24:27) to go look at the one house, okay, you go show it to them.

(24:29) You don't have them sign the rep. (24:30) Cause I know that it happens. (24:32) I hear people just like, well, I didn't have them sign a buyer rep on this one because I just showed them one.

(24:36) And now it's like, okay, well that that's not an option anymore. (24:39) Like you have to do that no matter what, not just because they may or may not buy that house because you got to protect yourself. (24:44) Like that's the most important piece you have to understand.

Amy Cearnal

(24:46) Yep. (24:47) Yeah. (24:47) You're totally right.

(24:48) And so that's where like a lot of really quality agents, which I mean are so many out there are like, this is not that big a deal. (24:54) Like we were already getting buyer reps sign. (24:56) We were having those buyer meetings before, because that's the best way for me to build my business.

(25:01) And to know that I'm not like running around and showing properties to people who have no business seeing those properties. (25:06) So that's all fine. (25:07) Like we're, this really doesn't change very much.

(25:10) Where it does change a little bit more is back on that listing side is because we are really having those more substantive conversations with the sellers about different compensation models and options on how they market their home. (25:22) And so we're having to modify that conversation a little bit more. (25:25) So the buyer rep side, like maybe we're just pushing that conversation up a little bit and getting, actually getting the stuff signed faster.

(25:32) On the seller side, we're actually having to modify that conversation more and really make sure that everybody's on the same page with what does the seller want to offer when they are listing their home.

Mike Mills

(25:42) Are these, these new forms coming out in June? (25:44) Are there some seller side as well?

Amy Cearnal

(25:47) Yes. (25:47) So we've got both sides because now like the way that our current listing agreement shows is it's like, Hey, the listing broker is getting this, that we are going to offer on MLS this for the buyer's agent. (26:02) And so can't have it say that anymore.

(26:04) So that this will be a new form that is to me a little more elegant than what we have, where it puts them both together. (26:10) Cause right now we've got this weirdness of the total compensation is on page two, but then that buyer agent compensation is way back in paragraph eight on like page five. (26:18) And it just isn't super together.

(26:21) This has put it all in one space. (26:23) I'm still, you know, there's always things that were like, well, I would have done it this way or whatever. (26:28) So I think there were a few frustrations heard of like, well, maybe we could have done a little bit more work on it, but ultimately they're having to make changes on a, a big form that is executed, you know, thousands of times a day, um, that they needed to get out quickly.

(26:44) And so this is what we're, we're rolling with. (26:46) So it'll be fine. (26:47) And then maybe at some point they'll change it down the road.

Mike Mills

(26:49) Well, I mean, they had to get it out. (26:50) So, I mean, the, these things start to have, they had to start rolling this stuff out and getting it available to people to start using, because part of it is to, you know, maybe the benefit of having this out a couple of months before the actual deadline kicks in is that there will be some feedback, you know, we can't do it this way because you don't know until you put things into practice. (27:06) So it's very difficult.

(27:07) You can sit in a room with 10 people that are the smartest people in the world and say, Hey, we're going to figure this out. (27:12) We're going to put it this way or whatever. (27:13) But until you actually get it amongst the masses and start using it, whatever issues are going to come up from it, you're not going to know that until it's into practice.

(27:20) So, I mean, they had to kind of put this out there. (27:22) And then I'm, I mean, I would be almost certain that at some point, six months, two months, who knows, they will make changes and tweaks because they will come across people and say, well, this happened here and this happened now.

Amy Cearnal

(27:34) Yeah. (27:35) So let me tell you, Mike, about three forms that are happening that are probably not on people's radar that will be on their radar post this world. (27:44) And so these are the ones that, you know, the regular buyer rep and some of that, like you'll, you'll kind of be comfortable with, but these are things that we have not used.

(27:52) And it's the Texas Realtors 2401, which is called now compensation agreement between broker and owner. (28:00) It was called registration agreement between broker and owner. (28:03) And this is what was used to set up compensation on for sale by owners.

(28:08) So if you saw a house on the corner, your client said, Hey, I want to go see it. (28:12) Before you would go in that house with your client, you would call the agent or sorry, no agent. (28:17) You would call the owner, try to knock on the door sometimes and say, Hey, I have a client that's interested in it.

(28:22) Would you pay this commission? (28:25) If they sign it, then good. (28:27) You're, you're good.

(28:28) And you, and your buyer knows, and you know, Hey, I'm going to get paid from the seller on that. (28:32) This can be used with a represented seller now, but we also have this new form or new ish form. (28:40) Again, this one's a little bit of a revision to you.

(28:42) That is T Texas Realtors 2402 called compensation agreement between brokers. (28:48) This is what really replaces our MLS compensation. (28:51) So if on the front end, the seller says, Hey, I'll pay a buyer agent commission.

(28:56) Then rather than have it on MLS, where then that guarantees our payment, we need a form sign. (29:01) This will be our form that will be signed. (29:03) You will see this, this form everywhere.

(29:06) This is going to be every listing is going to have it. (29:11) So if that seller is offering a BAC, you're going to see that form on the kitchen counter. (29:16) You're going to see it in your email.

(29:18) You're going to see it everywhere except for MLS. (29:22) Okay.

Mike Mills

(29:22) So that was my question is they can't even put that form because in there a section inside MLS where all the like sellers, all the forms go into, but that form will not be there.

Amy Cearnal

(29:32) Nothing about compensation on MLS, but off MLS, whatever, talk about it. (29:37) So you may see signs in the, in the yard that are a QR code to this thing. (29:42) You may see like flyers in the house that have this on the back.

(29:45) Like it, that one is going to be a big player going forward.

Mike Mills

(29:48) Yes.

Amy Cearnal

(29:49) Then we have one more form. (29:51) And this to me is the kind of the most interesting form, but this is probably a short-term form for us. (29:56) And this is the TXR2406.

(29:59) And it's an actual addendum to the Trek residential contract. (30:04) So this would be used to clarify commission to both the buyer and seller on the actual contract form so that they, they know like who's kind of paying who on some of this. (30:15) So this has listing broker fee, other broker fee, but it also has a way for the offer to be made to ask the seller to pay for commission.

(30:25) So let's say I want, my client wants to make an offer on your house at 400,000, but they want my fee to be paid. (30:32) Whatever my fee is, they could add that to that sheet. (30:35) They as the buyer sign saying, Hey, Mr. Seller, I'm paying, I'm offering you 400, but I want that paid. (30:41) And so if I don't have these pre-negotiated compensation structures together, that's fine because we have that, that already there.

Mike Mills

(30:51) So this is kind of a way where the buyer can actually, you know, offer the home, but offer it in a way that, Hey, I'm making an offer on your house, but only if, you know, part of my offer is that you pay the agent, whatever percentage I asked.

Amy Cearnal

(31:05) Exactly. (31:05) Because what they wanted to not have happen was like, let's say that I don't know if there is a compensation or not, but my client wants it. (31:13) And so I call the listing agent and I'm trying to get this form signed and I'm like, blowing them up, text, email, trying to figure out.

(31:19) And then they take another offer before I can get my offer in because I was waiting on them for that. (31:24) Instead, we could use this, attach it to the contract and go. (31:28) The reason why I say this may be a short-term form is because if this works well, then hopefully Trek will modify their contract form so that that could be an actual Trek addendum or a part of the Trek contract rather than this, like, you know, kind of us addendum, adding it onto that.

Mike Mills

(31:47) Gotcha. (31:47) So you think eventually if this kind of becomes a standard practice, let's call it that you will have Trek come in and say, okay, well, we're just going to make this as another addendum to this piece. (31:58) So then that way they can, they can include with the offer.

Amy Cearnal

(32:01) Kind of similarly to like what we had with the appraisal addendum and some of that, you know, we had written in the special revision so many times, all the attorneys had like little verbiage for us to write in. (32:10) And then they're like, okay, we're not doing that anymore. (32:12) So we're going to just put it as part of the form.

Mike Mills

(32:14) Yeah. (32:14) And they've already got one basically. (32:16) So now it's just a matter of creating it or adding it to it.

(32:19) Barbara had another question. (32:20) She said, so if agents are using Trek, I'm assuming that they will make additions and deletions on it until Trek comes out with the forms.

Amy Cearnal

(32:29) Yes. (32:29) So kind of that's, so this will be our work around the 2406 until Trek makes those changes.

Mike Mills

(32:35) Okay. (32:35) So what are you, you know, obviously you've, you've been disseminating this information to your agents for the last, you know, several months. (32:45) You know, I know that this is a topic that you guys discuss all the time.

(32:48) What are the most common concerns, common feedback that you're getting from realtors that they're worried about? (32:55) You know, cause this is going to be a thing where, you know, we're in a, this crazy place right now where business is the slowest it's been in a very long time. (33:04) And it's impacting people's lives, people, how they make money, how they support their family.

(33:09) And they're having to make decisions. (33:10) They're having to decide, am I going to keep doing this or am I not? (33:14) And Oh, by the way, if I keep doing this, there's a whole nother list of things that I have to do now that I didn't have to do before.

(33:21) So it's a, I mean, it's a real concern for folks. (33:24) So, so what are you hearing in, in, in what are you trying to help, you know, alleviate with some of this when they're coming to you with these concerns?

Amy Cearnal

(33:33) Yeah. (33:33) So, okay. (33:34) So to me by far, the biggest concern has been what is going to keep a buyer from walking into that open house or walking or calling that listing agent and saying, I want to make an offer on one, two, three main, I do not have an agent.

(33:49) And so then they, they don't have that liability to pay broker agent commission, but they then also nobody gets paid as a broker agent commission, right? (33:57) The listing agent potentially just handles it and works them as an unrepresented buyer. (34:02) And then they are fully representing the seller and the buyer just buys the house with that.

(34:06) And that is not, that's not illegal. (34:08) That's not, that's okay. (34:10) But there are a lot of agents that are concerned about that.

(34:12) Not, not just like greedily of like, I want to get paid, but also as a like true concern, like then what happens when that person is unrepresented and maybe overpaid, or maybe didn't really get the best, you know, best inspection or those kinds of things. (34:27) Now they come to me as a seller a year later, and they're in a bad situation. (34:30) Like, is this really the right thing for a consumer to really even have that, that path to go straight to the listing agent to be unrepresented and, and somewhat encouraged to do that.

(34:42) And so that has really been a big topic on all of this as the unintended consequence of what is happening on this.

Mike Mills

(34:50) I mean, it could be a default for a lot of buyers because they're like, if they, when they learn, I have to pay my agent now or may have to pay. (34:56) Right. (34:57) Well then, I mean, if you don't understand, which most people don't, cause they only buy a house three or four times in their life or whatever it is.

(35:03) If you don't understand all that goes into it, then you just say, well, I'll just go directly to the listing agent. (35:07) And then they can help me without understanding that their fiduciary responsibility is to their seller, not to you. (35:14) And there are so many other pieces that come into play once you get under contract that, you know, you, as a consumer, you don't realize it, unfortunately, until it's too late.

Amy Cearnal

(35:24) Right. (35:24) And so that's where, you know, I think you just nailed it on the head. (35:27) I mean, I think it's just this concern of, are they going to get taken advantage of?

(35:31) Are they going to, you know, are they just not going to really understand where they should be on this whole thing and what, you know, what that looks like? (35:39) And, and I don't know what that looks like. (35:41) I will tell you, like we have had, um, definitely since, uh, October and uptick in unrepresented buyers in our practice.

(35:49) Um, it's not necessarily a bad thing. (35:51) I, you know, I'm not saying that that that's terrible. (35:53) It's just different than what we've had in the past.

(35:56) And so listing agents also are trying to figure out, um, you know, just for their business model, like how do I price? (36:02) How do I make sure that I am giving the best advice and opinion to my sellers on how to deal with something like that? (36:08) Is it a better deal for them to have an underrepresented buyer?

(36:11) Because maybe they don't have somebody asking for more commission on it, or is it a worse deal? (36:16) Because maybe that's not as likely a deal to close. (36:19) It's an individual situation happening on every deal.

(36:23) And that's just having more conversation and more, a little bit of fuzziness for both the buyers and sellers on that of just not being sure of what path they should go on. (36:33) Um, you know, as Realtor members, like we are advocating for home ownership, but we also want responsible home ownership. (36:38) We don't want people (36:40) to just buy homes and not know what they're getting into buy homes and not know, you know, (36:44) really what those payments are going to look like until the end, because they just logged in with (36:48) somebody online and didn't have a quality lender that they were working with, like what you do for (36:52) your clients, that that's a problem if we have that as like kind of the norm going forward. (36:58) And that has been the norm in many other areas of the world. (37:01) So I was on Facebook the other day, and I have a friend that's buying a home in Germany.

(37:06) And they're like, you know, it's really hard here because we don't have buyers agents. (37:09) And so we're having to do all the legwork. (37:11) And we really don't know what we're doing.

Mike Mills

(37:13) Yeah.

Amy Cearnal

(37:13) And so, you know, not only do we not know the language, but we're also buying this house in this other area. (37:17) And so I was thinking about that, like, and she's right, like, that is tough. (37:21) How do you do that?

(37:22) I mean, don't even know where to start. (37:24) You don't know about what the inspection process is, their appliances or any of it. (37:28) So anyway, that's the biggest thing right now is just trying to figure out, does all of this upset the apple cart too much that the buyers just avoid representation altogether and try to go straight for a better deal?

(37:42) Or the seller try to cut the buyers agents out so that they can get a better deal? (37:47) Like does this add to the kind of the dealness of it and not and take away some of the quality of really having win win deals on here?

Mike Mills

(37:56) Yeah, well, and Barbara brings up a point that I was gonna say too, is that, you know, this is gonna put lenders in a whole new world moving forward too, because now, and I've experienced this myself a couple of times already where they're coming and asking questions about the transaction process that normally I would say, hey, look, you know, you really need to talk to your agent about this. (38:17) Here's what I understand, but this is who you need to address these concerns with. (38:22) And that's gonna become more and more of a deal.

(38:24) And I didn't even really think about what you just said about, again, this is who's educating the consumer on what to do, right? (38:32) Because right now, if you're a, you know, a Gen Z, and you are on TikTok and whatever all the time, and you see lenders talking about the oil, I'm going to call this lender, I'm going to call Quicken, and they're in Chicago, and I'm in Texas, and I'm going to talk to this person. (38:47) And more often than not, they're, they want to get you excited.

(38:50) They want to say, yeah, you're pre approved, go buy this house, whatever. (38:52) You don't talk about what type of loan, you don't talk about what kind of payments, you don't talk about anything other than, hey, I get to buy a house, I'm so excited, right? (39:01) And then you go find the house, everybody's thrilled, you get the, you know, maybe if they send you in the beginning and say, here's your payment, you're like, Oh, my gosh, I didn't realize because that, that is the biggest shock that's existing right now.

(39:13) And what I do every day is when someone calls me and they say, I want to buy a house for $400,000. (39:18) And I want to put down the minimum and I want to do an FHA loan or whatever. (39:20) And I'm like, okay, great, your payment is going to be $3,800.

(39:23) And they're like, wait, wait, wait, what? (39:25) And I'm like, that's up, you know, I'm giving Texas taxes, other things, but, but that's, you know, about what it is. (39:31) And that number is shocking to people.

(39:33) And they take a second and I've had people come back, looked at homes and come back and said, you know what? (39:38) We just can't do it right now because we can't, you know, maybe you, you say we can, but my budget, my household budget just doesn't allow for it. (39:46) And the scary part is, is that someone's going to get under contract, they're going to put up earnest money.

(39:50) They're going to put up all this because they haven't had an agent leading them along the way to say, Hey, look, I know you talked to internet lender one-on-one, but what did they tell you? (40:01) And well, I don't, okay, well at least talk to my guy over here, talk to my girl over here because you know, they're going to give you more information. (40:07) And those second conversations that people have, and I have people all the time, they're like, I didn't know that.

(40:13) Nobody told me that the last person didn't say that. (40:15) And I'm like, I know that's going to happen so much more going forward because they don't have somebody holding your hand on the buyer's side to point them in the right direction for all this stuff.

Amy Cearnal

(40:25) Right. (40:26) And it's because they're trying to save money, which we understand. (40:28) I mean, you see it every day.

(40:30) We see it every day. (40:30) I mean, it's a big dollar expense, but it's also a big amount of hours and education that goes into what we provide to help make that all look so seamless. (40:40) And so realtors have done, um, you know, it kind of famously that this isn't just me talking, but bad job of really helping the consumers know all the pieces that we do, because a lot of it is done behind the scenes for them.

(40:52) And they just, they don't know when there's like a freak out on the lender side because your VOE came in, you know, short, you know, said they were 1099 instead of W2. (41:01) And so we've got to talk to this or that, you know, it's like these random things that the consumer doesn't know that even any of that happened because we've been sheltering them from that. (41:11) Now, you know, are they going to do a transaction to, to like think like, oh, it's going to be that easy.

(41:16) And then things start to fall apart and they've got, they've already gotten too far down the path where then it's harder to bring an agent in on it to help clean up the mess.

Mike Mills

(41:25) Yeah.

Amy Cearnal

(41:25) I don't know. (41:26) Um, you know, but that's where, that's what we hope is not going to happen with this, that we hope that the consumers can see the value that the real estate community is bringing to the transaction on both sides. (41:38) And that they'll roll with us on this whole new process for us to, to be able to take, take them through from, Hey, I want to go walk in and see that house all the way through the closing table and really help get that representation all the way through the life cycle.

Mike Mills

(41:52) Well, unfortunately there's going to be pain along the way. (41:55) And that's the part that is unfortunate. (41:57) And that's the biggest disadvantage for the consumer is because there are going to be situations where a buyer goes through the process because they went directly to the listing agent or did whatever they did and things go bad and they're going to be upset about it.

(42:11) And they're going to have things to say about it and they're going to be on social media and they're going to blame listing agents and lenders and all, whatever, whatever they're going to do to be, to handle that. (42:18) And then their network of people is going to go, okay, they went through this experience. (42:23) I don't want to have that experience.

(42:25) So I probably need to call a buyer's agent and have this conversation because I don't want to go through what they went through. (42:31) But until that happens, it, and that's going to be a slow thing. (42:35) It's going to occur over time and not ever.

(42:37) Some people are going to have easy experiences. (42:39) It's going to be fine. (42:39) Some people are going to go through it and it won't be any issue whatsoever, but there are going to be circumstances where it will be a problem.

(42:46) And those that go through those pains and share it with the world, that's when, that's when it really starts to get out there. (42:52) And it's unfortunate because I agree with you as an industry and not just realtors, (42:56) lenders, all of us, we, we have to do a better job at educating these people when they go into the (43:02) process, which is why, especially with realtors, you see when social media comes into play and (43:08) you see people out there on Instagram and YouTube and Facebook, and they're making videos there, (43:12) there's a small group of people that do it.

(43:14) There isn't that many people that are actually out there making videos, explaining what earnest money is, what a home inspection is, just the one Oh, one basics of buying a house and doing that kind of thing and putting yourself out there a little bit and saying, Hey, look, this is why it's, you don't have to say, this is why you need me. (43:31) Just like, this is how you buy a house. (43:33) This is what it takes.

(43:34) That's the kind of thing. (43:35) And those are the people that are going to have the biggest impact, I think, because the consumer is going to be looking for this stuff, because they're not going to have their friend that they can necessarily pick up the phone and start asking all this to, like we used to have with this new world that we're in.

Amy Cearnal

(43:49) Yeah, it's funny. (43:49) We've been talking about that. (43:50) Spencer and I have been talking a lot about that as well.

(43:53) And like, why, why agents aren't doing that, why they're only focusing on the fun side and not on that, that other side. (43:59) And so part of it is the consumers just don't really care about earnest money and that kind of thing. (44:02) Like they're not hungry for that.

(44:04) They are hungry for the fun TikTok videos of like the agent that jumps in the pool or like, you know, that they follow a little dog around the house as they go through whatever. (44:13) But there is there is really that value that we can bring to give freely to all out there. (44:21) And I think there's just a fear based from the agent side that they're like, Well, I don't want to tell people about earnest money and that kind of thing, because then they're going to just not use me too, they're going to go straight to the listing agent.

(44:30) But really, that is the right thing on a lot of this is to help really, you know, this, this process is complex, but it is not brain surgery, you know, surgery or any of that. (44:41) And so if we can help the consumers that may not be the right consumers to go through a full service representation situation, maybe that's what we should do. (44:50) Again, I don't hear me say that I'm 100% advocating for that.

(44:54) But it is how can we present enough information to make sure that we have an educated populace on what it is to be a homeowner, so that that doesn't just keep them into rentals. (45:05) And that's really the basic of that, right, that we want to make sure that homeownership doesn't take a dive because of this, and that we're at risk of seeing that we're already seeing a major decline in homeownership over the last few years, and in more of a significant way per like, per, like, was that pro rata or per capita? (45:24) I don't know what that right word is.

(45:25) But then we've seen in other years, I mean, this is a bigger shift. (45:30) And we're hearing all this, well, oh, you know, everybody wants to have the ability to move around.

Mike Mills

(45:36) Yeah, yeah. (45:37) And that's what the New York Times tells you, the Wall Street Journal tells you.

Amy Cearnal

(45:41) But ultimately, that is going to create this community of really transient people that do not have those roots set down in community and are more focused on building strong communities across Texas and across the nation to really make sure that we have quality schools and quality, you know, to be able to grow that up. (46:02) So much of that is entrenched in homeownership. (46:05) And if we let something like this take a step back on it, that's going to be really unfortunate for everybody.

(46:10) So hopefully, this will be a little bit of a blip. (46:14) And we'll be like, yeah, remember, we changed how we did it in 2024. (46:17) And then it was all fine.

(46:18) So that's, that's my hope for these forums. (46:20) And really, I hope that everybody takes that to heart and really helps explain that to the clients that they're working with on a daily basis and that kind of thing. (46:28) Like this is not like the world has not ended.

(46:31) Like you can keep going in a very similar way than to what you've done in the past.

Mike Mills

(46:36) Well, it's a look, it's a big, we live in a big country and a big state and a big planet. (46:40) Like there are a lot of deals and transactions to be had. (46:43) There's not as many as there were, right?

(46:45) It's less and it's gonna, in my opinion, it's going to continue to be less as we move forward a little bit because of the price of homes because of like what you said. (46:54) I mean, look, these days, or I saw something the other day. (46:58) So Gen Z, which is, millennials, by the way, are the biggest homeowners in the country right now.

(47:02) They just overtook baby boomers. (47:03) But, but Gen Z, but they use this metric is basically by the time they were at 30 years old, how many of them owned homes? (47:11) Okay, essentially.

(47:12) Well, boomers, by the time they were 30, it was like 65% or something. (47:16) I don't have the exact numbers, but Gen X was like 55. (47:20) And now Gen Z, it just getting like to 50% of the, so it is declining overall when you look at the different generations on how soon people are becoming homeowners.

(47:29) But part of that too, is that household formations are happening later. (47:34) We're having less kids. (47:35) Okay.

(47:36) Population decline is, is a thing, whether people realize it or not, but people are having less children. (47:41) They're forming families later for many, many reasons. (47:44) Okay.

(47:45) Which is also kind of contributing to the idea that, oh, well, this next generation just wants to be transient. (47:51) They want to live and rent and be able to move and have mobility and all that stuff. (47:54) That is true until you have children.

(47:58) Once you have children, your life and your priorities change. (48:00) Then bouncing from town to town every two years and living in a different house, isn't what you want to do. (48:05) It might be what you have to do, but it's not what you want to do.

(48:09) And so when you, when you know, you see the corporate media telling you that, you know, the next generation doesn't want, they're not really into homeownership. (48:16) It's like, that is, that is not an accurate statement. (48:20) And, and the sad part about it is, is that when homeownership declines, so do the neighborhoods.

(48:25) So do the areas that, that people already currently homes in, because when people become transient, you don't put down roots and you're not in the same schools and don't form the tight knit communities that you have with your neighbors and the people that you've lived around for 10 years, because everybody's taking care of their house. (48:39) Cause they all have, you know, the vested interest in that. (48:42) That's when you start to see the slow, you know, break apart of, of these, these communities that we've fought so hard to build.

(48:48) And, and that's the part that's the most concerning to me in the longterm is just that until we solve this problem of the cost of homes being what they are and, and, and, you know, rates are going to change. (49:00) Like we're, we're in a high rate environment right now, but you know, inflation, the inflation report that came out yesterday was flat to coming down, some unemployment's going up, you know, all of these things are going to lead to at some point rates changing and they're not getting into the twos and threes again, unless we have a major issue, but four or five, 6% is not unreasonable. (49:19) And, but at $500,000 median home price, which is where we may be by the end of this year, that becomes a problem.

(49:26) And, you know, just for, I did a story on this on my last market update, but are you familiar with the company real page? (49:33) Do you know who that is? (49:35) Um, yes, but so, so they're a, there's anybody that doesn't know they're a software company that their entire business model is they manage rentals essentially.

(49:46) So they, they help put out, uh, you know, your rental agreement, they help you find a lease, they pull credit, they do all the things. (49:53) One of the other things that they do is they help you raise and lower your rent as, as a landlord. (49:59) Okay.

(49:59) So if you're a landlord and you own properties, this is great. (50:02) If you're a renter, which is what more and more people are moving into, this is not a good thing because what's happening, there's a class action lawsuit right now that's going on in Seattle where, or excuse me, um, in Atlanta, where they owned something like 65% of all the available rental units in a particular market and rent since 2016 in that area has gone up 80%. (50:22) Okay.

(50:23) Because what they do is they just go across the board and everybody raises their rent 5% or 3%, whatever the number is. (50:30) And that you want to talk about antitrust, right? (50:33) You want to talk about collusion.

(50:35) You want to talk about that is what that is. (50:37) Now there is a lawsuit going against them right now, but I got news for everybody. (50:41) They're just going to get smarter on how they do it.

(50:42) They're just going to do it better. (50:44) They're just going to come up with other ways, but this is the kind of stuff that's happening to where yes, right now, dollar for dollar, it is, it is cheaper to rent a house than it is to buy. (50:54) There's no question about that.

(50:55) I don't, I mean, I don't think you can argue that.

Amy Cearnal

(50:57) No, you're totally right.

Mike Mills

(50:59) Long-term when you look at those type of trends that are occurring and you understand the, how equity works and how owning property and its value over time, there is no debate on that side that owning is always going to be the better route to go. (51:12) But when it becomes to a point where it's so unaffordable for people that they don't even have that option, that's when it gets a little concerning.

Amy Cearnal

(51:19) Yeah. (51:20) I, you're totally right. (51:21) The other thing that we're seeing is on those properties where they are tenant occupied is we're seeing a degradation of that product because there's not homeowners that are continuing to improve and there's not a lot of incentive for the landlords to do that either.

(51:36) And so then again, so now you've got a tenant in a lesser than property than what a lot of other people around them have that are owners that are continuously improving. (51:46) And so what does that do for the psyche of the community and all of that to you? (51:49) It's really tough.

Mike Mills

(51:51) Well, and if you're a homeowner in that area that affects your property value, that affects the neighborhood that you're in. (51:57) So you don't want, I mean, there's a reason that when neighborhoods turn rentals, you see people moving and getting out of those areas because it's not because of the people, it's because of what happens to those houses.

Amy Cearnal

(52:08) Yeah. (52:08) Spencer was almost like knocked down the other day. (52:11) He went to go do an inspection and, or to be there for an inspection.

(52:17) And the neighbors saw him coming up, you know, in kind of realtor clothes and car and came up and were like, is this going to a landlord? (52:25) We can not have a rental in this neighborhood. (52:27) I mean, just really like in his face.

(52:30) And he's like, you know, that's not for me to say. (52:33) I'm not, you know, I'm not getting into that with you right now. (52:37) And they were pretty belligerent about it because they get it.

(52:41) They don't really have any right to say either. (52:43) I mean, that's, you know, kind of the beauty and the curse of the American home ownership system is that really that is in that bundle of rights that that new owner has to make that choice of what do they want to do with it. (52:54) But you know, I get the point.

(52:56) I want to be that person sometimes, you know, with our neighbor's houses and that kind of thing. (53:00) But you know, really there's just not, there's not that flexibility. (53:03) We got to roll with what happens.

(53:05) And some of that is going to be more rentals as we continue to go.

Mike Mills

(53:09) Well, I think all of this, the biggest loser in all of this ultimately is the consumer, honestly. (53:15) But I think as far as the real estate profession as a realtor, I do believe it's probably a good thing. (53:22) Just like what happened to lenders back in 2008 was a good thing because now you have to be more professional.

(53:30) You have to have your ducks in a row. (53:32) That's a protection for the consumer in many ways, right? (53:35) It's got its pluses and minuses.

(53:37) But the days of, you know, just being the fly by night here or there, sell a house or two without being fully engaged in what you're doing, not only is that going to go away, but if you do that, you're probably at risk because there's a lot of lawsuits that can come your way if you're not covered with this stuff. (53:55) So having the understanding of what is coming your way and what these changes are, are paramount. (53:59) And it's going to be that way all the way.

(54:01) I mean, from here on out, like you, you have to know this stuff that's coming in. (54:04) You can't just kind of halfway do real estate anymore.

Amy Cearnal

(54:07) I think you're totally right. (54:08) It's interesting that you bring up that 07, 08 side of the mortgage industry. (54:13) I have been talking about that a lot and about what Dodd-Frank did to some of the independent companies and how it was to do mortgage.

(54:21) It was a very different world. (54:23) And then we had the regulation come in and it made the cost of doing business more. (54:29) There's a great book by Speed of Trust by Stephen M.

(54:31) R. (54:31) Covey that talks about that as we increase some of this litigiousness and as we increase some of this government interaction, it increases the cost of the overall transaction. (54:41) That's likely what we're having here.

(54:43) That's what happened in 08 with the mortgage crisis. (54:45) And now here we are in a very similar situation that real estate agents do. (54:50) There is a path forward, but we've got to show our clients how we can serve them.

(54:55) And our clients also have to buy into that and say, yes, I need that help going forward. (55:00) I'm ready to work with you and go forward with that. (55:03) And that's where I will be interested to see what you're saying, like what kind of third party companies are going to come up?

(55:09) What kind of different service levels are going to come up on the real estate side? (55:13) And what do the companies look like as they go forward on some of this too? (55:17) Do we have the same type of companies than we do?

(55:19) Because I mean, from the mortgage industry, it is wildly different than we were dealing with in 07-08.

Mike Mills

(55:24) Yeah, well, and it's changing still. (55:26) I mean, it's evolving every single day. (55:28) There's contraction in all areas of it.

(55:31) Companies are consolidating. (55:34) Unfortunately, there are fewer and fewer companies out there that are willing to do this stuff for many reasons, cost, litigation, the amount of volume right now, all that stuff is coming our way. (55:47) But it's just, and it's the nature of what this stuff does.

(55:50) This is where it heads. (55:52) Whenever there's change like this, there's going to be some pain. (55:57) But the other side of this is that, and this is always a hindsight 2020 thing, but the amount of opportunities for those people that are innovative, that can look at this situation and go, there's something here that I can do that's set me apart from everybody else.

(56:17) And maybe that's not buy and sell homes. (56:18) Maybe you come up with an app that helps you sign contracts better. (56:21) Maybe you come up with a QR code that helps people, whatever, not come up with a QR code, but you know what I mean?

(56:27) Just something that fits into this world of real estate that you know so well, but it's another avenue for you to have success and make a business. (56:37) And I think that there'll be a lot of people that fall by the wayside because of all these changes. (56:43) And there already has been, and it's going to continue.

(56:46) NAR, I don't know if you saw, NAR's membership actually didn't fall that much this year. (56:49) It went down a little bit, but not what was expected. (56:51) We'll see what happens January of 2025.

(56:55) But so far there's, people are keeping their licenses. (57:00) So there will be people that lose out, but there will also be a segment of people that do really, really well with all this change because they attack it from a different point of view. (57:10) And you just have to decide as an individual who you're going to be.

Amy Cearnal

(57:14) Yeah, absolutely. (57:15) And I am totally with you. (57:16) There are going to be some really cool opportunities (57:18) in this business and there's going to be some really well-served clients that really get (57:23) essentially a benefit of a more creative populace of real estate agents that aren't just going down (57:28) the path, this to this, to this, to this, but they really are taking it, taking this business (57:32) seriously and making sure to level up what they are doing for their clients as well.

Mike Mills

(57:35) Yeah, no, I can't thank you enough for coming and going through these. (57:41) There's just constant changes that are happening all the time. (57:44) And I think too many people want to stick their head in a hole and not look at this stuff coming forward and decide to make these changes and decide that they're going to do something different.

(57:55) They're operating from a fear-based mentality and you just can't do that right now. (57:59) Or unfortunately you just need to find something else. (58:01) But having folks like you that understand this, that have gone elbow deep into all this and know what's coming and being able to explain it to everybody and essentially give the idea that, hey, look, it's going to be okay.

(58:14) There's going to be things that happen and some of it's going to be painful, but it's going to be fine. (58:19) We're all going to live. (58:20) We're all going to survive.

(58:21) You just have to find your way through it. (58:22) So I really appreciate you doing this for me and hopping on and telling us all about this. (58:27) And anybody that wants, again, want to find out more, please join Amy for her live Zoom on Monday because she's going to go into all of these forums in greater detail.

(58:37) I just wanted her to come out and give us an idea of what's coming so you guys could be aware. (58:41) And then we got to navigate through this new world. (58:45) So knowledge is power, so you got to get it out there.

(58:48) Yep.

Amy Cearnal

(58:48) Yep. (58:49) Sounds good.

Mike Mills

(58:50) Well, thank you, Amy. (58:51) Anything else you want to leave us with before we go?

Amy Cearnal

(58:53) No, I appreciate everything that you're doing to keep us all informed. (58:55) Thanks, Mike.

Mike Mills

(58:56) Okay. (58:57) All right. (58:57) Well, everybody have a great weekend.

(58:59) It's finally stopped raining. (59:01) Now we're probably going to get into the 130 degree heat coming up soon, I guess. (59:05) I don't know.

(59:06) Hope the heat dome doesn't hit us again in North Texas, but it looks like it may be coming our way. (59:10) So y'all have a great weekend. (59:13) I'll be back on Tuesday with another market update and we'll see you guys next week.

Amy Cearnal

(59:18) Bye, guys.