New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here.
A lot has changed in the real estate industry over the past several years.
The COVID-19 pandemic accelerated the path to a fully digital transaction. An astronomical boom in buyer demand in the early months of the pandemic pushed the market to unforeseen highs before beginning to correct in mid-2022, causing a shift the industry’s brightest minds are still trying to fully understand.
Amid all of that, another major shift is possibly on the horizon — something that has greater and longer-lasting consequences than the cyclical ebbs and flows of home prices, buyer demand and mortgage rates: Two federal battles over buyer-broker agreements and commissions.
If homesellers Christopher Moehrl, Joshua Sitzer and Amy Winger and Scott and Ronda Burnett win their lawsuits, brokerages could be required to refund sellers the $1 billion in commissions they paid to buyer agents since 2014, and homebuyers will need to reconfigure the true cost of homeownership.
Better Homes and Gardens Native American Group Chief Marketing Officer Barry Jenkins sat down with Inman before his appearance at Inman Connect New York this month. And like many others, he said he’d rather keep the same compensation system. However, as the past three years have proven, Jenkins said he realizes anything could happen — and with that in mind, he’s more focused on creating resilient agents than worrying about the outcome.
“Whether those changes are good or not, I’m going to leave that to legal experts and consumer advocates. I know that could be considered a nonanswer,” he said. “[But real estate] has changed a lot because society has changed a lot [and] I’ve had to be obsessed with what buyers and sellers want to see.”
“I feel very strongly that the only way in 2023 agents can keep up the production they have enjoyed is to learn how to talk to people at different stages of the buying journey,” he added. “This is going to be the year when agents have to go deep.”
Inman: I noticed this is your first time coming to Inman Connect, which must be exciting. What are you most looking forward to?
Jenkins: I’m excited about connecting with thought leaders. Thought leaders don’t always stand on stage, right? Sometimes they do, but often they’re in the crowd learning right along with you. And Inman events, particularly, draw that dimension of the business and the people leading other corporations and real estate tech startups. So it’s just a cornucopia of personalities and people, and I’m really looking forward to connecting with everybody.
Yeah, that is a really great part of the conferences. This will be my first time being back in New York since 2020, so I’m looking forward to the same things as well. So, as you and everyone else know, the past several years have posed a lot of challenges for the industry. What’s been your experience? How has your viewpoint of real estate evolved since 2020?
[Real estate] has changed a lot because I think society has changed a lot. I run a large real estate team, which includes running our digital marketing platform and coming up with new ways to be appealing to consumers. How can we capture their attention?
I’ve had to be obsessed with what buyers and sellers want to see. What we saw the consumer appreciate the most always revolved around some kind of relationship forming. That doesn’t sound profound, but when you take relationship forming, and somehow inject it into a website design or a lead capture funnel or drip campaigns, it changes a lot about the way that the business speaks with the consumer.
So we saw that there’s been just a shift with people valuing the relationship side of the business more now than I think they ever have, because if they wanted to do it, virtually, they could. But now they want that [personal] interaction.
Yeah, I’ve heard that sentiment from a lot of people over the past couple of years. The pandemic has proved we can get things done well virtually, but there’s little that can replace in-person interactions. So, let’s shift to your ICNY session topic — buyer-brokerage agreements.
Give me your thoughts on the current lawsuits and how you see them potentially changing the transaction process.
Whether those changes are good or not, I’m going to leave that to legal experts and consumer advocates. However, I do know the real estate industry, as a whole, is a huge piece of the American economy. And not necessarily because of party affiliation, but the president, whoever that will be in 2024, is going to have a big part to play in deciding whether or not they’re going to touch the real estate industry in such a fundamental way.
I know that could be considered a nonanswer. But look at what we’ve seen with mortgage interest rates and [the Federal Reserve] saying ‘We’re gonna raise rates to slow the economy so that we can balance out inflation.’ Among other things, they knew they were manually cooling off the real estate industry for the benefit of the greater economy. So, I could see that same approach [with the current set of lawsuits].
So that being said, I prefer that we not do wide, sweeping changes to brokerage agreements. I mean, there are ways it could be good, but there are also some ways it can be really bad.
OK. Let’s dive into that. In preparation for our chat, I read my colleague Andrea’s stellar coverage of the current lawsuits on the table. In those stories, people talked about the pros and cons of the current system, which benefits buyers — especially first-time buyers — and puts extra financial responsibility on sellers, who’ll have to use their profits taken to compensate buyers’ agents.
So, how do you assess the pros and cons of the current system and the pros and cons of a potential new system?
When you look at compensation, who is paying for all of this stuff? The seller is, but the seller is paying it because they just got a bunch of money from the sale of their house, and that money came from the buyer’s side, which is normally a mortgage that was borrowed from some lender.
If we take the house, the sale of the house and the mortgage company’s money and all that out of the loop, what we’re asking a potential buyer to do is to increase the amount of cash they need to find a buyer’s agent, and I just don’t see that working. I just don’t see it.
I think we’re over-connecting the homeowner to their home, and that’s weird because it is their home. But the home is real estate — it’s an entity and it has its own value. For example, look at Los Angeles real estate. The [property] tax is going up to like 4 to 6 percent to help solve the homeless problem (Californians passed Measure ULA in December, which is a four to 5.5 percent mansion tax on residential and commercial properties worth more than $5 million).
But it’s coming off of the sale of the house. It’s not saying, ‘Hey, Mr. or Mrs. Seller, we’re going to fine you $4,000 because you sold your house.’ No. It’s, ‘We’re going to take $4,000 or 4 percent from the equity,’ and so with that example in mind, I think it makes more sense to get [commission funds] from the sale of the home than out of the buyer’s pocket.
So, I think your point touches on consumers’ understanding of how a real estate transaction works. I certainly think consumers come into the process more educated than in years past, but there’s still quite a bit that can be confusing. Do you think buyers and sellers have a good grip on how things work? If not, how can the industry further demystify the process?
I don’t think they have a good grip on it. But I do think that current agency and disclosure law at the state level, has been obsessively geared towards disclose, disclose, disclose. When in doubt, just tell everybody, right?
The issue of them knowing who’s getting the money is not really about who’s getting the money. It’s about making the assumption that whoever I’m being paid by, I’m going to represent their interests. And if I’m obsessively disclosing my interests, for example, who I represent, who’s paying me — if that’s a very clear fundamental, then they don’t need to necessarily know the mathematics behind commissions and things like that.
I think that we can help the consumer know who’s in their interests. I think there’s a lot we could do there to make sure these licensed professionals know exactly what disclosure means. So the original intent of people saying we need to teach the consumer more about who’s getting paid comes down to consumer advocacy and protection, which is essential.
However, I think we can meet that original intent of consumer advocacy and protection without having to change the entire way that the real estate transaction is conducted.
Staying in the vein of consumer interests and needs, what do you think the consumer will need most in 2023? We, of course, don’t have a crystal ball, but it seems like this year will be quite the rollercoaster. How can agents and other industry professionals adequately understand and meet buyers’ and sellers’ needs?
I actually wrote a book called “Too Nice for Sales,” which was published [in 2022]. And I published it because I felt strongly that quality good people aren’t selling a lot, and they weren’t selling a lot because not everybody knew how to place an order for a house. And I’m using that phrase on purpose. Like, ‘Hi, Barry, can you show me 123 Smith Street tomorrow?’ And I say, ‘Yes, I will see you there at three.’ It’s very transactional.
I feel very strongly that the only way in 2023 agents can keep up the production they have enjoyed is to learn how to talk to people at different stages of the buying journey. Let’s not forget that Zillow and Realtor.com have effectively changed their business to a referral-based model.
So, instead of agents buying leads, they’re getting referrals. The volume of leads to these markets has gone down because they’re using a referral model. I spoke to a team yesterday that did $110 million [in 2021], and they only did $40 million [in 2022]. They’re trying to figure out what to do next, and it’s because the consumer at the bottom of the funnel has just been eaten up.
I think 2023 is going to be the year where agents have to go deep. They’ve got to go deep on what they currently have — their sphere of influence, their database, their past clients and the leads they’ve been purchasing over the last several years. They’re going to have to figure out how to go really deep from a marketing standpoint, both in messaging and stylistically.
The agents that really roll their sleeves back and focus on what they have built over the last few years are going to do amazing. I think the agents that are waiting to be told what to do will have a really tough road ahead of them.