The National Association of Realtors' (NAR) antitrust verdict will have a profound effect on how homes are bought and sold. The trial saw NAR and major real estate companies unsuccessfully defend themselves in an antitrust case. The judge ruled they collectively conspired to drive real estate commissions higher and levied a fine just north of $1.7 billion, which could be tripled under antitrust legislation.
Will there be changes to the way commissions are handled in the future? Undoubtedly, although most changes won't happen overnight. This is everyone's opportunity to prepare for what's coming.
Here is an outline of what I think some of those effects will look like and how builders can begin to adapt.
The Best Agents Will Continue to Be the Best
I'm putting this one first because most initial reactions I hear from builders are excitement that they may not need to compensate buyer's agents anymore.
The 80/20 rule has always been in effect, and, in many markets, it is closer to a 90/10 rule where 10% of the agents are involved in 90% of the transactions. Builders paying attention have concentrated their networking and connection efforts on these top producers, and now isn't the time to stop.
Specifically, how agents are paid will need to change. However, the best agents will continue to be the best. They will still attract clients with their expertise and ability, as well as their overall reputation and marketing efforts. Take advantage of the noise and confusion over the next few months to strengthen your relationship with these teams and offices of superstars because they will need encouragement and support.
Indirect Costs May Be Higher
Commissions are a direct cost. This means that they are paid per unit as an expected cost. Many builders factor in a given cost percentage now based on what percentage of their homes are tied to an outside agent.
While the immediate future will be turbulent with lots of testing of different methods that might cause costs to jump around, the trend will be for commissions or payments that are part of a specific translation to lower as free-market dynamics play out.
I expect the return of lower commission options for consumers and a big push toward compensation by hourly rate, like how most lawyers are compensated because the buyer will be "on the hook" to pay the agent unless someone else offers to help cover the costs through negotiation.
However, indirect costs may go the other way as builders fight for the attention of these top agents and teams. These costs could be more marketing than sales-related, meaning strategic planning and execution between builder teams will be the difference in the effectiveness of these indirect costs.
Most Consumers Will Still Want Representation
Due to the infrequency of how often people buy a home and the significant financial impacts, most consumers will still prefer to have a trusted adviser assisting them.
If they are responsible for paying directly for this service, they will become infinitely more concerned about keeping their costs lower. This will mean even more upfront research will be done by buyers, with them providing a much shorter list of final options for their agent to help them vet out.
This is a familiar message: Your online presence as a builder or developer will become even more critical for consumers. If a large portion of your walk-in traffic today comes from agents taking their clients for a visit, pay incredibly close attention to this point.
If costs increase with time spent by their agent, clients will not be interested in visiting homes they are considering on the margin. You want to be their first, second, or third choice, or you may as well not exist.
Investment in your digital content and interactive tools—and the website that houses them—must become equal in spend with your digital advertising efforts to stand out. The detail and specifics beyond just visuals are necessary as well. The more questions can be answered by interacting with your content, the better. It's not just about increasing emotion or desire anymore, as your content will have to help further down the customer journey than ever before.
Self-touring options will also increase as the ability to see homes in person without needing your agent to accompany you on the initial visit will be a differentiator among those who fully adopt this approach.
Publish Everywhere
The most technical of my recommendations is to ensure your website can push out all of your content to other platforms and networks. As the amount of deeper content increases, it will become an increasing burden on marketing teams to make sure the most accurate data is syndicated to all networks without having to edit them separately.
Yes, even the MLS of the future is part of this list. Today, most builders have to fill out paper or electronic forms to add or edit listings. Content often must be manually uploaded, or you need to pay a third party to capture content and upload it with mixed results.
Suppose you've researched a car purchase online. In that case, you already may know where I am headed. The manufacturer's imagery, descriptions, and content detail is on another level from your local car dealer. Home builder content on their websites and what appears in the MLS or some listing platforms are often widely different in accuracy and quality. This can't continue to happen.
