[00:00:00] Speaker A: In this episode, we talk about new legislation for how you buy and sell a home that some are calling the biggest shakeup to the real estate industry in over 100 years. Let's get started.
[00:00:10] Speaker B: Let's get some money from new money new problems. It's the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
Negotiating compensation, purchasing your first investment property, helping your family with money, the highs and lows of entrepreneurship. New money brings new problems that require new solutions. Join us as we work through them together.
I'm Brenton Harrison, and this is the New Money New Problems podcast.
[00:00:48] Speaker C: Hello.
[00:00:49] Speaker A: My name is Brinson Harrison of New Money new problems and your host for the New Money New Problems podcast. I hope that you both had a good week this week and also were able to tune in and listen to last week's episode where we shared Garrison Hayes Money story. And in this week's episode, we want to talk about a major rule change that is impacting the process of how you buy a home in this country. And when I say major rule change, that's not me being melodramatic. As a matter of fact, if you're looking on screen, you're going to see an article from CNN that says, the biggest shake up in a century set to hit real estate agents this week. Here's how they're preparing. And in the intro paragraph, it says, realtors across the US are bracing for a seismic shift in the way they do business. Starting August 17, new rules will roll out that overhaul the way realtors get paid to help people buy and sell their homes. And whether you're in the market to buy a home or sell a home, this is something that I thought we should definitely cover. Because in my experience, the process of purchasing or selling a home is one that many people may be familiar with on the surface level. Right. You know that at the base level, you're going to pay for your home. You're also going to pay closing costs. So it's not just as simple as the down payment. You may have to bring a little.
[00:01:57] Speaker C: Bit more to the table.
[00:01:58] Speaker A: You understand some parts of that process. But one area that I think is very either misunderstood or just there's no understanding at all is exactly how a realtor gets paid in that transaction. And rather than me as a non financial advisor trying to break down this rule, I thought that I would bring a few friends onto the podcast who are actually in this field, or I should say two friends and one mommy I've shared in the past when I did my parents money story that my mother's a realtor. So I have two friends and my mom who are going to walk you through the process of buying or selling a home as it was, what this new legislation is, and how it could potentially impact different versions of people in the industry. Let's get started.
[00:02:42] Speaker C: Donna Harrison, known to me as mommy. Welcome back to the new Money New Problems podcast.
[00:02:48] Speaker D: Thanks. Hey, Brenton.
[00:02:50] Speaker C: Well, we are in this episode talking about the new change, uh, to some of the transparency and the back and forth that's involved in the home buying and home selling process. But I feel like many of the people who listen to the show, or just general society, they may be unaware of all of the back and forth that can go into a realtor getting paid when someone purchase a home or sells a home.
[00:03:14] Speaker A: So, could you fill us in?
[00:03:15] Speaker C: Let's start with, uh, us, uh, buying a home. Somebody or a family is buying a home. They have a realtor. They know that that realtor gets paid somehow. But how do they get paid?
[00:03:27] Speaker D: The way that they get paid is that, um, they engage a realtor, and that realtor usually looks, um, through various sources. But the majority of the homes that they found are on the multiple listing service, which is a service in all areas, actually, that allows realtors to go on and see what homes are on the market, and also, up until now, allowed them to see what they were being compensated. If they actually brought a contract and successfully closed that contract. The monies that were being paid, whatever that percentage is on that purchase, um, was being paid by the sellers.
Um, the sellers would, uh, enter into an agreement with their representative when they listed the house to say how much commission they were going to be paying, um, for, um, selling the home. And they would agree with their realtor at that time what percentage of that commission would be paid to a buyer's representative, so that, um, the buyers actually were not coming out of their pocket at all, usually for a property that was listed in a multiple listing service because the seller was paying for the commission.
[00:04:50] Speaker C: Okay, so at a 10,000 foot view, walk us through what is changing this week.
[00:04:57] Speaker D: I would say transparency and clarity more than anything.
Um, at the beginning of a transaction, if you are the listing agent, you are again, m continuing to negotiate the commission that you will receive, and at that time, you will make it clear what portion of that commission will go to a buyer's representative. If your seller agrees to pay a buyer's representative, typically m that was just a given that a portion of that commission would go to a buyer's representative. Now, you have to agree on those terms with your seller. And the biggest change is that I will not know as a buyer's representative by looking at that listing in a multiple listing service whether you are paying commission and if you are paying commission, how much that commission is going to be. I will have to make a phone call to glean any of that information and the listing agent will be able to tell me, yes, we are paying. No, we are not paying offering, or I say, yes, I am paying, or, uh, no, I am not paying. And if I am, how much I am offering.
[00:06:15] Speaker C: So let's say that you have a family that you're representing.
They want to buy a home. They find a home, or you present a home to them, you find out that the seller is not planning to pay any commission to the buyer.
[00:06:33] Speaker D: Mhm.
[00:06:34] Speaker C: What happens then?
[00:06:36] Speaker D: So the first thing that needs to happen, or should happen, is that you should have a conversation with your buyer prior to even showing them homes. And you should know what you plan on charging for representing them. They should know at that point that there is a great possibility that some or all of that commission may possibly come from them, which is a discussion you've never had to have in the past, which actually changes the whole game as far as monies for them. I don't know immediately whether that will impact us greatly, but the conversation will be there at the very beginning. And then, um, they kind of make the decision, you know, after we see a home and we know what commission is being offered, how we're trying to negotiate, so that I get paid as a buyer's representative and they get what they want. But there may be times when they're going to have to come out of pocket for some of that money, some of those monies, in a way that.
[00:07:37] Speaker C: They haven't had to before.
[00:07:39] Speaker D: Absolutely. They haven't even had to consider it, uh, on properties that are in the multiple listing service.
[00:07:45] Speaker C: This reminds me, you know, April, uh, when she and her husband moved to.
[00:07:51] Speaker A: New York, and they were saying that.
[00:07:52] Speaker C: They had to pay a fee to find an apartment that was exorbitant. And to me, I was like, my goodness, that's like paying a, ah, listing commission as a seller and you're just looking for an apartment. And it sounds like there's a possibility that that type of transaction should occur even in small town America.
[00:08:12] Speaker D: Yeah. And right now that is something that, like you said, we've never had to do before. So it does seem like it is just ridiculous. And, you know, you know, how do they do that? But, you know, as you say, in the area where she lives, it was no big deal because that was the norm. They have to pay, um, a significant percentage, uh, in order for them to even locate rental property for them. But now our buyers, wherever they are, are going to have to enter into those conversations. Yes.
[00:08:43] Speaker C: Well, that was an excellent 10,000 foot view. You will be happy to know that after we talk to you. We're talking to your friend, Tiffany Capeharthe.
[00:08:51] Speaker D: I'm sure she'll offer some. Some very good advice and insight.
[00:08:56] Speaker C: Great, mommy. Thank you for being a guest times two on the new Money new Problems podcast.
[00:09:02] Speaker D: My pleasure.
[00:09:04] Speaker E: This next person on the podcast is a person who is not only a friend, but someone whose professional expertise I trust explicitly to the point that you just heard from my mother on the podcast, who's a realtor herself. But you want a, uh, separate set of eyes when you're selling your own property. So when it came time for she and my dad. Dad to sell their property, Tiffany was the person that they engaged to list their home. So we'll get into her expertise and background a little bit more, but. Tiffany Capehart, welcome to the new Money New Problems podcast. If you could tell us a little bit about yourself and your company.
[00:09:37] Speaker F: All right, well, thank you. Brennan. Um, yeah, not only did we list, we sold the home. Sold it.
We listed and sold it. Yeah. Um, but, yeah, so my name is Tiffany Capehart, and I am a realtor with parks, and I have been in the industry for ten years. And prior to, um, working in real estate sales, I, um, was an urban planner for the city. So my background and my perspective is always from a urban planning design, housing policy, neighborhood advocate, you know, perspective. And I've brought all that year, all those years of experience into my now tenure, uh, career in real estate.
[00:10:26] Speaker E: You and I were talking offstage about this change and, you know, commission structure, fee structure. And you were saying that there were actually some misconceptions about what commissions or fees have been like in the past. So can you share with the audience what you think some of those misconceptions are?
[00:10:45] Speaker F: Yeah. So, um, talking about fee commissions and fee structures for realtors, there's been this understanding that there's set rates and there's not. Commissions are negotiable, so you can negotiate your commission with your realtor.
[00:11:02] Speaker E: So when would a scenario, prior to the changes that go into effect, give me a scenario where you might adjust up or down the fees that you're receiving in your line of work.
[00:11:17] Speaker F: Yeah. So for instance, like, if I'm working with a client that's selling their home and they're immediately buying another home, so, you know, they're selling their first home and then they found a move up, a house they're moving into that's bigger, another part of town, different school district, you know, I'll sell their home and then I will be helping them buy. So I might say to that client, hey, because I am also getting a commission on the, on the purchase, I will reduce my listing commission on the sale of your home just to kind of give you a break since I know I'm getting paid because you're doing two transactions. Right. Also for loyal clients, if you've purchased and sold with me multiple times, I might say, hey, as a thank you, I'll cut you a small discount in the, in the commission rate. And when you get into a deal or transaction, you might be in negotiations wherever. Now the two realtors, to help their clients get across the finish line, might have to say like, hey, in order to make this deal work, we have to cut our commissions a little bit. And that's not something that we like to do, but that's something that happens in deals too. So there's a lot of different scenarios where commission and fees are adjusted, um, for the client.
[00:12:32] Speaker E: So if this is something that has always been possible, when this rule comes out, this legislation change, what do you think is the true impact? If there has always been the ability to negotiate, what's really changing?
[00:12:48] Speaker F: So what's really changing is currently in the multiple listing service, or the MLS. That is where all realtors put their properties. So then all other realtors can see what is for sale, what is pending, what has sold in one generalized system. And in that system, you put in the commission rates that you're willing to share that compensation with other agents. So when I sit down with a seller, I say, okay, John Smith, I'm going to sell your property on 123 Main street. And, you know, not to talk in exact numbers, but say, I'm going to charge you six apples. And from my six apples that you're going to give to me, I am going to give a buyer's, uh, agent three of those apples for bringing a ready, willing and able buyer that can close the sale, you know, can buy your property. And so those three apples were advertised through the MLS system. So when a buyer came to look at 123 Main street, that agent already knew, like, okay, if I, if my buyer transacts this house, I'm going to get three apples. It was in the system. But the, the crux of the lawsuit was that buyers felt like, well, my realtor is only showing me 123 Main street because they're getting three apples. They're not showing me 8910 Main street because that's a, that realtor is only giving two apples. So that was the crux of the lawsuit. Right. That is no longer going to be shown in the multiple listing service. So when buyer comes to look at 123 Main street, that agent's going to have to call me and say, hey, I'm going to show 123 Main street on Saturday.
It really works for my buyers. We're excited about it. Are you offering buyer's agent, or is the seller offerings, you know, buyer agent concessions or commissions? And then I will be able to tell them yes. And I don't have to tell them how many apples. They just know that the seller is offering some type of, you know, some, some type of apple, and they need to put how many apples they would want in their offer. Okay, now, every agent can, an agent can get very specific and say, yep, we're only offering two apples, three apples, whatever. But I think for me, in the way that I'm going to do it and say, hey, go ahead and put the apples that you want in your offer, and, you know, we can negotiate from there.
[00:15:20] Speaker E: So now let's look from the consumer side. If you are buyer, seller, where do you think are the potential opportunities or pitfalls if you're on the consumer side of the fence?
[00:15:33] Speaker F: So for buyers, you know, as. And I'm just going to make it plain for your listeners, as a black agent, you know, um, we, or as realtors, we work our sphere of influence. Okay? And I'm a black woman, so my sphere of influence mostly is, you know, other black minority people. Right? And we also know that, you know, black brown minority people have a harder time buying real estate. And not necessarily sometimes for just financial reasons, but also, like, there's a m mental block around buying real estate because it's not something that we grew up talking about. So we have a lot, there's some barriers to entry for the black community and latino communities and other brown communities. And so we work a lot. My team and I do work a lot with first time home buyers, people just buying their first home. And they need a lot of what we call concessions. They need down payment assistance. They need closing cost concessions. Right? So when we go into a deal, we are already asking of the seller a lot. Like, we're asking you to pay closing costs, which could be 2% of a purchase price. We're asking for interest rate buy downs because interest rates are a little higher. So that changes that two to 3% to maybe asking for 6% of a, you know, of a purchase, uh, of a purchase price. So we're asking for a lot already. And the idea that a buyer has to also ask, hey, can you pay my buyer's agent the additional, you know, one. One apple that they need in order to make them whole? That's a lot. So I think it's going to impact buyers that need that assistance. The interesting part in this is that for sellers, it's better for sellers, because now sellers can more so have a, uh, stronger negotiation point when it comes to fees and commissions. But like I said, depending on the market, I'm in a few transactions where I'm like, my job is to work for my seller, right.
And I don't want to lose a buyer over an apple or two. So I want to make sure that the buyer's agent, um, is taken care of. And so I need to then, you know, chop some of my apples in half and make it up on another deal, you know. So now that's because we are more so in a soft, you know, like a buyer's, uh, market. Now, if we move more so into a seller's market, right. And there are three or four buyers, you know, offering on one property. Yeah. The one with, the fewer that has to pay out, the fewer apples is going to win that deal. You see what I'm saying? So.
[00:18:31] Speaker E: Exactly.
[00:18:32] Speaker F: You know, I hope that. I know that.
[00:18:36] Speaker E: It was a valuable answer, and I appreciate the expertise. So, Tiffany, once again, thank you for joining. Uh, we appreciate you being willing to share your insights, and like the rest of us, I guess, take a look at how this shakes, uh, out over the long term and see what happens.
[00:18:53] Speaker F: It'll be fine. It'll be fine. Change often brings, uh, you know, it often it makes us have to be better.
[00:19:04] Speaker E: I will say, you know, well, here's to being better.
[00:19:10] Speaker F: All right.
[00:19:13] Speaker G: This is the new money new Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen. We'll be right back.
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[00:20:10] Speaker G: You'Re listening to the new Money new problems podcast. Subscribe
[email protected]. welcome back.
[00:20:21] Speaker E: All right, this next person that I wanted to bring on is John Swift. And I will let John introduce himself. But he's a person who gives the perspective from the side of a big builder, not someone who is building one house, but someone who may be building an entire subdivision and choosing to partner or not partner with a realtor to get those houses sold at a larger scale. So, John, welcome to the podcast. If you could tell us a little bit about your company, and we'll hop into your perspective on this rule change.
[00:20:51] Speaker H: Yeah. Thank you for having me in the brief, uh, introduction, Brendan. My name is John Swift. I'm a local real estate developer. Been building and developing real estate since 2005 and still do deals in and around Nashville to this day. And what we've been able to ascertain in terms of what the new law is in terms of commission is to see where, you know, I think the, um, effect of it in terms of sales velocity, quality of sales, gonna have a lot to do with, we believe, the integrity of each individual agent. A normal transaction for us, being, uh, where we develop and sell real estate. So effectively, we put out product. And so agents a lot of times interview us for the opportunity to list the product. Well, if it's us, uh, as a developer, conversely, the agent comes and they have an opportunity for us, then, you know, it's going to be contingent up on us, uh, or anybody else that they would present this opportunity to. And whether or not we gave them 2%, 3% on whether or not they bring us the deal, and whether or not we get the opportunity to purchase it from them. The reason why that's important to them on the front end is because most people that bring you deals, they're going to probably ask to list the property on the back end. After we develop it, we want to be the listing agent. So if we refuse them, at that point, commissions of less than 3%, then there's probably going to be a high chance that you're not going to get that opportunity again. If it's us interviewing an agent to sell our product, then most of the time we're conceding that. Now, we certainly can negotiate that and say, well, we only want to let you list for 2% because we have 100 houses that's going to come out of this development. And most of the time, most agents are probably going to accept some type of discounted percentage. The problem that uh, we see potentially with this and how this is going to shake up the market is if two agents don't agree. And certainly we put a listing agent out and they're trying to market our product. And so now it's upon them to go and negotiate with the buyer's agent. If a buyer's agent can't agree with our listing agent on what a commission is or their structure is something that they would satisfactory to them, well, they may take that qualified buyer away from our opportunity and go seek, you know, product, uh, elsewhere. And so where, uh, normally this rule wasn't in place. And so that buyer's agent is probably going to come in customarily expecting 3%, which would be, you know, build or be charged to the seller. That may not be something that the selling agent presents to them and that could be something that the owner or seller is aware of or not. Because if your selling agent or whom you've hired to represent you decides, well, you know what, this is a lucrative deal.
We want to keep all this to ourselves. So if I can tell my owner or seller that I haven't been able to come into agreement, well, for the sake of greed, you may be losing potential qualified buyers. Thus your mark. Your property is staying on the market longer, costing you money, costing you entrance. If you're just a homeowner and not a developer, it could be preventing you from moving on to another situation that you need to tend to. It could be for an estate sale. All of these things could take you longer if you don't have the right agent as your listing or selling agent. In a hot market, there's a number of buyers. So most selling agents or buying agents, they're not going to, you know, mess around and struggle and fight over, you know, points when they've got a number of buyers and they know if they don't take that opportunity in that transaction, there'll be somebody else. So, you know, I think it's, it's overall, what this is doing is saying, you know, it's intended to give more control to the sellers. It's what I've been able to ascertain where traditionally you probably was expected, high end 6%.
This is saying you're not obligated to do that, but uh, there leaves room for conflict in the fact all of it's contingent upon a successful negotiation between both buying side, selling side to reach some agreement and an outcome that's positive, uh, overall for the owner of the property.
[00:25:21] Speaker E: Now, now let's flip this and say that you're on the buying side and you're depending on your realtor to bring you to these properties. And most people, I uh, think, you know, are going to be completely unaware that this, that there's this negotiation going.
[00:25:36] Speaker C: On because it hasn't gone on in the past.
[00:25:39] Speaker E: How do you think that could impact a buyer in terms of the properties that they are being shown and is there anything that you would recommend to a buyer in terms of how they should talk to their realtor?
[00:25:51] Speaker H: Yeah, transparency number one. Same thing. I mean, uh, you know, they don't, they're not, you don't have product when you're the buyer. You're pursuing product. But I think if you're on a timeframe, hey, I'm a reload relocation. I need to have this transaction done. I need to find, get settled, something, you know, my kids are trying to get ready to enroll in school, whatever it may be. Yes. That infects you because if your realtor is steering you towards properties solely because on what they can get in terms of a negotiation of commissions, then they're probably not doing you the best of service and providing you good advice and so you could miss out on properties that you ultimately want and, you know, again, you want to avoid that. So I think how would I, I guess some things you could do to prevent the possibility of that happening is, you know, be informed and stay, have some line of communication to where, if you're interested in a property, your agents communicating, uh, with you, well, they're still in the times that you're showing the property or your agent showing it to you. Well, there's going to be some representative from the seller there and there's no law against, you know, you um, being made aware of, hey, we really love this home. Um, are you and my agent, you know, in alignment in terms of, you know, commissions here? Um, you know, I don't think the other agent or I don't think there's a law that prevent them from telling you if your agent isn't forthcoming enough to tell you, you know, um, no, I'm only getting 2% here. We can't, you know, it's put me at a disadvantage. But I want to make sure you get the home. So I'm still going to stay with the transaction. The only way you're going to know is if you get involved in that process somehow and inquire, um, you know, again, this speaks to the integrity of the agent, uh, to where you shouldn't have to do that, because they really shouldn't do something like that, as far as, you know, only showing you properties where there's more money involved for them.
[00:27:48] Speaker E: Well, wise words from a wise man, John. You know, I always appreciate you. You done me m many fake a favor over the years, and I appreciate.
[00:27:55] Speaker B: Uh, thanks for being on the podcast.
[00:27:58] Speaker H: Uh, no problem, man. I'm glad to be here.
[00:28:03] Speaker B: From new money, new problems. This was the new money, New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
