Brandon Mulrenin’s 3 ways buyer agents can get paid after the NAR settlement

Brandon Mulrenin00:03

The key thing is you have to focus on having a listing-focused business. You gotta continue to focus on building a listing inventory. That’s the goal. That’s the name of the game. That will continue to be the name of the game. And if you’re going to work with buyers, we as leaders in the industry have to do a better job of training our agents so that they can do a better job of serving their clients.

00:27And so I think that leaders with inside this industry have a big responsibility to step up as well so that our agents can go out there and serve the clients in a way where their value is not being questioned.

Loida Velasquez01:00

Headlines explode and your feeds on social media have probably been flooded with agent reactions. The National Association of Realtors’ $418 million settlement has definitely been a very hot topic, but what does this mean for the future of real estate? I know that there’s been a lot of questions, concerns, confusion, and there’s also been a lot of misinformation out there.

01:25So for today’s episode of Vulcan7 Coaches and Mentors, I have two very special guests that are gonna join me in on the conversation, and we’re gonna be breaking all of this down. So first, I have Vulcan7 CEO Ren Jones.

Ren Jones01:41

Hi, Loida. Good to see you.

Loida Velasquez01:44

Yes, and then we have another familiar face that you guys know very well, Brandon Mulrenin.

01:49So welcome.

Brandon Mulrenin01:50

Hey, guys. Thanks for having me.

Ren Jones01:52

Hi, Brandon. Good to see you.

Brandon Mulrenin01:54

Yeah, good to see you guys, too. I’m excited on this conversation. I mean, it’s what everybody’s talking about right now, so I think it’ll be good to get into the weeds of things.

Ren Jones02:06

I think so too. So 2024 is all about change in real estate. A few moving parts are required to get a system going again. What say you?

Brandon Mulrenin02:22

Yeah. Well, I think that the first place to start off this conversation is for the audience to just look at, okay, what are the main changes that are being proposed through this NAR settlement?

02:32One is that, if all of this gets approved, that buyer agency contracts will be mandated. It will no longer be an option for agents to go out there and show property without being under contract with a buyer. In other words, we’re gonna be in a world where agents have to list buyers the same way we list sellers.

02:56And so this is what I’ve been coaching agents to do for years, and years, and years, and years. And so from that standpoint, I think that is a very positive change that will force agents that represent buyers to do two things. Number one is to articulate their value ahead of time, and then have an agreement around that value, and decide on what the exchange of value is going to be in terms of compensation.

03:25Because up until this point, the buyers, well, all the consumers don’t really understand how commissions work. But certainly on the buy side, they were super unclear on how their agent or their representation was being compensated. And so there was a lot of confusion around that. Some people would position that as, “This is a free service.

03:45Why not work with a buyer’s agent? It’s free.” So that’s one thing. And then I think the other big implication as a result of this settlement is that offering a co-oping buyer agent commission inside of the MLS, that that will be prohibited after these go into effect in what they think is mid-July.

04:06And so I wanna talk through both of those implications. And to Loida’s point, what does it actually mean in practical terms for real estate agents moving forward? But those are the two big things that I’ve been thinking about.

Ren Jones04:20

Perfect. Yeah, let’s dig into that.

Brandon Mulrenin04:23

Cool. So let’s talk about the buy side first, and we can talk about implications on the buyer agent side, and then the buyers, people purchasing a home.

04:35So I think that the first practical takeaway for agents that are listening or watching the show is we spend so much time, the three of us and many others, educating agents on how to present their value proposition at a seller listing appointment. Well, the first practical takeaway, and this is what I’m telling every agent that I’m working with right now, is we have to now really focus on your buyer listing presentation.

05:06In other words, what is your value proposition? How are you creating value in the eyes of your buyer clients such that they will agree to pay you out of their own pocket upfront before you ever even show them a house? Because let’s have some real talk. The real talk is this: when I ask an agent and I say, “Hey, what is the value you offer to a buyer?

05:35I mean, tell me specifically, why would a buyer hire you versus your competitors?” Most agents have a very difficult time answering that question. So the first practical takeaway is we have to have a buyer consultation that is world-class that makes you the obvious choice that after you’re done meeting with the buyer, they say, “It’s a no-brainer to hire you.

05:59I agree to your fee. 100% makes sense, and I want you to represent me in the transaction.” Okay, fine. Let’s talk about what are the potential ways in which you can put a buyer under contract under these new proposed laws. Well, here’s the way I think about it, and some of these agreements are already in place in some states.

06:24So I’ve got my hands on a couple of these updated buyer contracts already, and there’s one of three ways in which I believe these boards will release their new buyer agent contracts. So you’re sitting down with the buyer. There’s three ways to do it. Number one, you can have the buyer agree that when you write an offer on the property, that you’re going to try and get your compensation paid for by the seller of the house when you write the offer.

06:52And under those circumstances, the buyer is not agreeing to pay you out of their pocket. So that’s one way to do it on the buyer agency contract. Option number two is where you, the buyer agent, would ask either the seller to pay for your commission or the listing agent to cover your buyer agent commission.

07:16But in circumstance number two, the buyer still is not obligated. That you tell Mr. Buyer, “Listen, when we write an offer on the property, I’m either gonna ask the seller or I’m gonna get it from the listing agent.” And then thirdly, which I think is gonna be the most popular one or the one maybe even required by brokerages, is that you explain to your buyer clients moving forward, “Here’s how my compensation works.

07:38Here’s the services that I provide, and here’s the way in which we can get those fees addressed. I’m going to ask the seller when we write an offer. Just the same way today, I’m gonna ask the seller for the seller to cover the fee in which I charge to represent you. And if I can do that, Ren, and if I can do that, Loida, beautiful.

08:01If not, I’m then going to go to the listing agent and have that same conversation. And if great, beautiful. But if not, then you, the buyer, are going to agree up front to pay for my representation as a part of your closing cost.” And that would be the third option that the buyer would check off on the buyer contract that both the buyer agent and the buyer would sign.

08:23That’s what we mean by listing a buyer. And so under these new rules, a buyer agent would have to have one of these contracts in place so it was 100% transparent on how they were going to get paid before a property was ever going to be shown.

Ren Jones08:40

Yeah, it seems like the only restriction’s gonna be, if you’re building it into the price, since the house is five and a quarter and you say, “We’ll pay you 545 of that, this much paid closing costs, this much compensation to the buyer’s representation,” et cetera, et cetera, is gonna be limited based on the likelihood of an appraisal

09:03as covering that difference. So-

Brandon Mulrenin09:06

Yeah. Well, let’s talk about that, because it’s a good transition to what things will look like on the seller side. Because what you just said is one way to do it. One way to do it is exactly what you just said is, “Hey, I’m gonna write an offer,” and just like we did when it was a buyer’s market, you would just put on 3% seller concessions and you…

09:24Loida, you remember those days. It was almost on every single offer you got, the buyer was asking for 3% concessions. That is one way to do it in this new world, where buyer agents are submitting offers, and they have an addendum that’s attached to that offer with a buyer agent compensation addendum asking for that seller to contribute towards the buyer’s closing cost.

09:46That’s one way to do it. Well, here’s the other thing I’ve been thinking about, and I’ve been thinking about this day and night over the last couple of days, as everybody has. And that is that probably, that may work, because there’s two ways to structure this on the seller side. Listing agents can go about this two ways.

10:06And again, I don’t have a crystal ball, right? Just like everybody else, I’m trying to navigate through this in real time. But here’s the two ways I think about this. The consumers only know what we educate them on. In other words, if you were to go and interview the five million homeowners that sold a house last year, and you were to interview all five million of them, and you say, “Hey, can you clearly articulate how real estate commissions work?”

10:39I am under the belief that most of them would have a tough time articulating exactly how real estate commissions work. They’d be confused. They would.

Ren Jones10:45

They’d be confused.

Brandon Mulrenin10:46

They have no clue. So-

Ren Jones10:46

They have no clue.

Brandon Mulrenin10:48

Yeah. I agree. Because, so Ren, you and I are on the same page. I think that the consumer only knows what we tell them and how we educate them.

10:56That’s part of our value proposition, is we’re educating them. So here’s my point. My point is, while every agent is freaking out about this settlement, the consumers aren’t sitting there saying, “Oh my gosh, babe, did you see the news about these re-” They don’t care. They’re not so attached to this information like we are.

11:16So my point is, I don’t think it’s going to be that different at a listing appointment tomorrow or in July than it is today when you have the compensation conversation.

11:27That’s the context in which I’m gonna have this conversation right now. Go ahead, Ren. You wanna add something?

Ren Jones11:31

Yeah, I mean, you list it for 6% commission or 7% commission and they start negotiating and you say, “Ed, I may end up sharing some of my commission in this deal.”

11:44If they ask us.

Brandon Mulrenin11:46

Yeah. So under that context-

11:50I think that listing agents will structure the way in which they list properties one of two ways. One is that the listing agent will communicate and focus on presenting their value proposition the same way they do today, and they will collect and secure their listing fee at the listing appointment.

12:12So for simplicity’s sake, let’s just talk about a 6% commission. One way they can structure this is they say to the seller, “Mr. and Mrs. Seller, I charge 3% to sell your home. That’s what I charge.” Now, that’s what they’re gonna focus on obtaining at that listing presentation. Then that listing agent sets an expectation who says,

12:37“Mr. and Mrs. Seller, when a buyer who’s represented through a buyer agent submits an offer, it is very likely that that buyer agent is going to ask for some type of compensation. Nobody works for free, and so they’re going to ask for some type of compensation which can be negotiated as part of the offer.”

12:59And you set the expectation with your seller that this is just what is most likely going to occur. And then what do you end up having? You have a listing, an exclusive right to sell contract with a listing agent for 3%, and buyer agents submitting offers with a 2.5 or 3% commission that could be negotiated, and you end up with a five or 6% commission at the end of the day.

Ren Jones13:22

I think so. I really do think so.

Brandon Mulrenin13:24

That’s one way. That’s one way to do it.

Ren Jones13:25

You could say, “I’m charging you 3%. There’s a good chance that my team or my company may be bringing the buyer, and I’m adding on another 2.5%, so we’re at 5.5% right now, and that’s parked there for people in my company.”

13:43Or, number three, we might get an outside agent from another company bring in an offer and asking, and instead of giving them your money, we give them part of mine.

Brandon Mulrenin13:53

Well, let’s talk about that. Okay. So we talked about one way. And so the first way is for agents listening, that shouldn’t be that different than what we already do today other than

14:04the listing agent just securing their fee up front rather than negotiating the full commission and then offering part of that commission in the MLS, which would be prohibited. That’s the only difference. But we still end up roughly in the same place. Okay. That’s one way.

14:20The other way is to keep things exactly the way that they are today. In other words, I’m already having conversations with brokerages that I’m coaching right now who are going to make this their stance, in that our agents are gonna list properties at a full commission the same way we do today, 5.5 and 6%.

14:42Because that’s what sellers have been doing already, and so we’re gonna go into a listing appointment, and we are going to present the same way we do today. We’re gonna list a property at five and a half or 6%, and then when offers are submitted, rather than them ask the seller to contribute money back, they’ll ask us to contribute money back, the same way we are doing it today.

15:09The same way we’re doing it today. So under these new circumstances, we still go and list a property at five and a half or 6%, rather than putting in any buyer agent commission that’s owed to the selling, the listing agent, the same way it is today. And we use part of that commission to offer to an agent who brings us a buyer.

15:28That’s the other way to do it.

Ren Jones15:29

That’s it. And the only thing that really goes away, and it does go away in a big way, is somebody that’s only been in the business a few months, they’re working with buyers, talking to their friends, who do you know, showing property. They’re holding a couple of open houses.

15:43There’s no free ride. There’s nothing that says, “Bring a buyer and you’ll make $25,000 if you can bring a buyer to this.” You have to be a lot more competent. You have to do a pre-state. You have to sell the buyer in on what you’re worth. So that newer agent is going to struggle unless they get involved in a different way.

Brandon Mulrenin16:05

Yeah. And so after thinking about this for weeks, I mean, I’ve been talking about this for years, quite frankly. I’ve been following this lawsuit since 2019. I don’t think we end up in a place that is that different. It’s just that how we get there I think will be the only

16:24thing that’s up for question. But we end up in pretty much the same spot we are in today.

Ren Jones16:29

It raises the professionalism, in your opening statement, the professionalism on the buy side, because they have to say, “These are all the services, and this is a contract, and I’m asking you to sign this so that I can represent you.

16:44And you’re getting all of this work.” Because before it was very, very casual. “Let’s go look at homes.” And it was loosey-goosey, and this really improves the standards of our profession.

Brandon Mulrenin16:56

Yeah. And I just think that most exclusive buyer agent contracts will have some sort of format like I outlined a few minutes ago, where it just says upfront to the buyer, “Hey, here’s what I charge, and you’re agreeing to pay that worst case scenario.

17:12But I’m gonna go to the seller or to the listing agent to try to get this fee covered on your behalf.” But at the end of the day, the buyer is agreeing to pay for representation just like any other professional service.

Ren Jones17:24

Right. That’s it. That’s it.

Brandon Mulrenin17:25

So that’s the way I see it. I don’t know. Well, so how do you guys see it?

Ren Jones17:30

Skills, skills, skills, skills is gonna be required at the highest level in our industry. It’ll stretch us and make us better.

Loida Velasquez17:38

Yeah. Well, exactly. And I’m glad that we’re talking about this and that you have just broken down all of the different options and ways that buyer’s agents would be able to get paid because I have seen so many agents reach out or message me, especially newer ones, that think, “Oh my gosh, we’re not gonna get paid anymore.

17:56What are we gonna do?” And it’s like, “No, you’re freaking out, and you’re just not informed correctly about how you’re gonna get paid.”

18:04And we see the headlines on the media, social media, and it’s like, “Oh, 6% is gone.” And it’s like, no, you have to do your homework first and stop believing what you see because, just like you mentioned, Brandon, I feel that especially for listing agents now, it’s like,

18:20“You know what, Mr. Seller, we can still offer the buyer’s agent their… nobody works for free.” So just like you said, Ren, skills, skills, skills. I like to say skills pay the bills, and if you have no way of communicating correctly or being an authority or a professional to your client, then they’re not gonna see the value in paying someone else.

18:44But if you are able to articulate it correctly, they’re gonna see, “Okay, even though I don’t have to, it’s in my best interest to offer compensation to a buyer’s agent.”

Brandon Mulrenin18:57

Yeah, I mean, listen, I think that the thing that people are missing right now is sellers aren’t obligated to do anything right now.

19:05There are agents right now that list property at 3% total commission. Total.

19:14And they are offering nothing for a buyer’s agent. There’s companies and agents that do it right now. So I just think that it’s been sensationalized, to your point, Loida, that there’s a magnifying glass on this, and it’s just different.

19:29But at the end of the day, we’re gonna be in a professional’s market, which I think is a great thing for the industry. We just have to have more transparency, and we have to do a better job of articulating our value to our consumers that we serve so that there isn’t this confusion that’s happening right now.

Ren Jones19:49

Discounters have been in our business for over 30 years, and they’ve always been just a fraction

19:54of the industry. And they’re not gonna go away, but they’re not gonna go big. They’d become the Walmart of real estate, and it hadn’t happened yet.

20:03If people wanted the Walmart of real estate, it would’ve happened.

20:07So whenever you have disruption, when COVID hit, a lot of agents went deer in the headlights and didn’t do anything. And all the ones that got involved, because there’s lots and lots of people in the real estate industry who wanna work out systems. This is how it’s gonna play next.

20:26Let those people that like to be on committees work out all the details for you, and then you just focus on a masterful buyer presentation, as you talked about, Brandon, and then listing more property. Generally speaking, just list more property.

Brandon Mulrenin20:41

Yeah, I mean, and that’s just the key thing, right, is you have to focus, and all three of us have been saying this forever.

20:50You gotta continue to focus on having a listing-focused business. I was looking for a document, but I can’t find it. You gotta continue to focus on building a listing inventory. That’s the goal. That’s the name of the game. That will continue to be the name of the game. And if you’re going to work with buyers, we as leaders in the industry have to do a better job of training our agents so that they can do a better job of serving their clients.

21:16And so I think that leaders with inside this industry have a big responsibility to step up as well so that our agents can go out there and serve the clients in a way where their value is not being questioned. What I was looking for, though, in just a second, is there are already documents.

21:35One I was looking for, you can find this right on NAR’s website, the buyer agent concession addendum already exists, so you guys can all download this already that you’ll make part of your offer contract that outlines exactly how you ask for your compensation, and that’s all. All the agents, Loida, that are just freaking out about, “We’re not gonna get…”

21:57That’s not true. That’s not true. It’s just how you get paid will be different, not if you’ll get paid.