A home nestled high up in the zigzags of sprawling Beverly Hills estates played backdrop last week for some of the area’s top agents to debate, hypothesize and agonize over the latest seismic developments around residential real estate.
Broker Zach Goldsmith of The Agency Beverly Hills was the host of a panel put on by Estate Media, featuring luxury residential brokers Josh Flagg, Branden and Rayni Williams, and Aaron Kirman, which evolved into an agitated, and at times unruly, discussion on the impact of National Association of Realtors settlement on the business of being a broker. Estate Media was launched by Flagg and content producer Griff O’Brien last year.
Held at the home of Andrew Shanfeld, who runs real estate investment firm Carolwood and is also a partner in Estate Media, the event attracted around 40 people. The familiar faces in the front row included Parker Beatty, who oversees 54 Compass offices across California and Hawaii, along with Farrah Britanny and Ben Belack, both brokers at The Agency and cast members of the Netflix series “Buying Beverly Hills.”
The event came days after NAR agreed to settle antitrust lawsuits over broker commissions in a deal that will cost the organization $418 million in damages to resolve claims from home sellers — and some key rule changes that open buyer brokers’ earnings up to negotiation.
“How are we going to get paid?”
To paraphrase Leo Tolstoy, happy brokers are all alike, but every unhappy broker is unhappy in their own way.
The rule changes as specified in the settlement agreement breaks open what was previously an assumed cost for sellers to compensate buyer brokers.
The event hit on much of the uncertainty around what the rules, slated to take effect in July, will mean in practice for day-to-day operations like signing the buyer’s contracts, hosting open houses and other logistics to turn a profit in a new environment.
“How are we going to prove our worth as buyer’s agents?” asked Kirman. “I see that much like listing agents, when we go to list a house, we have to prove our worth. It’s going to be the same with buyers now — it’s not going to be a free-for-all.“
Most who spoke at the event projected the fallout from the NAR settlement would be profound, but disagreed about what the new rules will mean for their operations, how to adjust their business models and long-term impacts on the industry.
“The federal government is going to want buyers to have representation. It’s a good thing, there’s no way around that,” Kirman noted. “The question becomes, how are we going to get paid?”
The answer: buyer-broker agreements, according to Kirman.
“This is going to be the new system,” Kirman said. “We didn’t have buyer-broker agreements that were used very often; soon they are going to be used very often — the buyers are going to need to have an advocate on their side.”
Kirman is already working to implement the agreement at his firm. But beyond agreeing that brokers are likely on the edge of contending with a new reality to conduct daily business, some questions remained about the new logistics involved in working with brokers.
“I’m confused about the buyer’s contract. I think it’s super fucked,” said Sharona Alperin, an agent at Sotheby’s International Realty specializing in Beverly Hills. She added it was “just kind of fucking degrading to ask from your buyers.”
A wave of change crashing on residential real estate
Branden Williams described the NAR settlement as a part of a profound threat to the real estate industry, alongside the Measure ULA transfer taxes, demographic shifts, inflation and corporations fleeing California.
“Now everybody’s getting squeezed every which way: Attorneys have always thought we made too much money, business managers — they’re pissed,” he said.
At one point, he compared the new plight of the real estate brokers to what happened to stockbrokers’ compensation with the arrival of electronic trading platforms like E-Trade. His list of complaints wasn’t limited to the NAR settlement; it also included the increasing minimum wage and inevitable arrival of robots.
Some brokers agreed with many of his concerns, even the most seemingly alarmist parts of his forecast.
On the other end of the spectrum was Flagg, who said he did not anticipate dramatic changes to his business and doesn’t planning on lowering his commission fees.
The changes to some of the longest-held practices in the industry come amid a challenging few years for the residential market for brokers across the country. Logistics and new agreements aside, one resounding takeaway is the shifts, on top of already tight market conditions, will likely spell more competition for the industry.
“The fittest will survive and do great, and a lot of people will probably be eliminated from the business,” Kirman said.
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