What Should I Tell Clients? Question Leads To Free-For-All At NAR Midyear

What Should I Tell Clients? Question Leads To Free-For-All At NAR Midyear

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An incident at the National Association of Realtors’ midyear conference last week put into stark relief the confusion surrounding the trade group’s settlement of multiple antitrust lawsuits aimed at the real estate industry.

At NAR’s MLS Forum, held on May 6, comments from panelist Anthony Lamacchia, broker-owner of Lamacchia Realty, prompted tense murmuring among some 750 attendees, most of whom were multiple listing service executives, and at least one attendee left the room after loudly announcing he was doing so.

What did Lamacchia say? On a panel about leading through change, Lamacchia said he had been getting questions from his agents about what they were supposed to tell their clients given upcoming changes due to NAR’s settlement, including a ban on listing brokers offering buyer brokers compensation on the MLS.

“I have some listing agents in my company — 35 years in the business, $40, $50, $60 million a year in homes sold —  that said to me: ‘What am I supposed to tell the client?’” Lamacchia said.

“Tell the client what you believe to be best for them because that is your job. When they ask you, ‘Do I really need to offer compensation anymore?’ Do you need to? No. Do you have to? No. Have you ever had to? … Hey, prospective seller, you could forgo offering it. You could not have a willingness to pay … but if you do that, you’re going to turn away a lot of buyers. A lot of buyers aren’t going to be interested in looking at that home when they hear from their agent, ‘Hey, you want to see what home? Oh, A B C and D? And the agent realizes that Home C  … doesn’t have the willingness to pay any compensation to people.”

The more Lamacchia spoke, the louder the grumbling in the room became and it was at this point that an attendee shouted, “Leaving the meeting!”

Lamacchia continued, “That agent is going to have to talk with their seller about that. They’re going to have to talk to their client about that. If the buyer’s agent is doing a good job, they’re going to have to talk to their client about that.”

Charlie Lee

Then Lamacchia noticed that Charlie Lee, NAR’s senior counsel, had run up to the stage and was pacing in front of him.

“Am I making you nervous?” Lamacchia asked Lee.

“Um, no,” Lee replied. “I think that’s great insight and I think, you know, this is about consumer choice and I think that’s what your point is, right?” That remark prompted nervous laughter from the crowd.

Lee continued, “But I think that we will not get into the particular ways that all these conversations can go, right, because it’s going to depend on the circumstances. It’s going to depend on the consumer. It’s going to depend on the transaction. And so I would just say, let’s not get into those particulars. I don’t think that’s necessary.

“But we could just talk about how we enforce and … the transparency and clarity that consumers want and that the brokers want to provide.” Some in the audience clapped.

Lamacchia responded, “If we’re scared as an organization to talk about these things, I don’t know how we’re going to help our Realtors do a good job.” Others in the audience applauded, illustrating that there was no consensus in the room.

The panel, which was not livestreamed, then moved on, but word of the incident spread and has since prompted commentary from industry consultants Rob Hahn and Greg Robertson and a video from Lamacchia himself. Lamacchia has previously made similar remarks, including at a HousingWire debate with Michael Ketchmark, lead plaintiffs’ counsel in multiple commission suits.

Michael Ketchmark

“This is a classic example of training agents to use the fear of steering to fix prices,” Ketchmark told Inman of Lamacchia’s comments at the MLS Forum.

“NAR was right to shut it down. This price fixing scheme is so entrenched it will take lots of training and education to overcome. But the law is the law. Like it or not.”

Inman reached out to NAR asking whether the trade group considers Lamacchia’s comments steering, whether brokers should be training their agents as Lamacchia is doing, whether it stands by Lee’s response, why Lamacchia was invited to be on the panel and whether Lamacchia is an NAR surrogate designated to speak to the media on NAR’s behalf.

“The Realtor Code of Ethics requires Realtors to protect and promote the interests of their clients and put their clients’ best interests before their own,” a NAR spokesperson told Inman in a statement.

“Realtors are obligated to have honest and transparent conversations about broker compensation, ensuring their clients know how much they are being compensated, who is paying them, and—for sellers—the benefits and costs of the types of marketing that can be done for a listing.

“Realtors must not, under any circumstances, conceal information about or access to a certain home based on the amount of compensation being offered by the listing broker. The Code of Ethics is one of the defining characteristics of being a Realtor and is how we earn and maintain the trust of our clients in every home transaction.”

What is steering? According to the U.S. Department of Justice (DOJ) statement of interest in a case known as Nosalek, “As long as sellers can make buyer-broker commission offers, they will continue to offer ‘customary’ commissions out of fear that buyer brokers will direct buyers away from listings with lower commissions — a well-documented phenomenon known as steering.”

Both Hahn and Lamacchia said they heard that more than one MLS executive left the room during Lamacchia’s remarks, but neither saw this first-hand.

Rob Hahn

“Many people trained by antitrust attorneys are advised to immediately leave any meeting where anti-competitive behaviors are discussed or advocated, while announcing their protest, to avoid future liability from having been at the meeting — something relevant for the ‘conspiracy’ element of an antitrust lawsuit,” Hahn wrote.

“One of my sources described what Lamacchia was saying as ‘a masterclass on steering,’” Hahn added.

In his video, Lamacchia said the notion that he was promoting steering is “completely false.”

“Never, ever when I was on stage did I promote the idea of steering, did I promote the idea of a buyer’s agent steering, did I promote the idea of a listing agent scaring their seller into offering compensation or offering a higher amount of commission,” Lamacchia said. “Never. I never even touched on that.”

He said his intent was to teach “that agents should always adhere to their fiduciary duties” and act “with the best interest of their clients in mind.”

“So if a seller asks that question, a good listing agent … is going to explain to the seller that ‘Hey, if you don’t either proactively offer compensation, or you don’t at least have a willingness to have a discussion about compensation should it be in the offer that you receive on your home, there’s going to be some buyers that are going to be turned off from your home.”

Listing agents, he said, have a fiduciary duty to disclose “information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price” and “any information that might affect the sellers ability to obtain the highest price and best terms in the sale of the property.”

A buyer’s agent also has a similar fiduciary duty to disclose “any information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms,” according to Lamacchia.

“What if it has a failed septic and the buyer doesn’t have the money to come out of pocket for a failed septic or a failed well?” Lamacchia said. “What if the house has something to it that will make it not pass FHA guidelines to get an FHA loan? Buyer’s agents are obligated to give the buyer a heads up about that. The same holds true with commissions.”

In a May 9 tweet, Lamacchia argued that it would be buyers who would steer themselves, not buyer agents.

“Buyers drive the process and buyers will almost always take the path of least financial resistance,” Lamacchia wrote.

Hahn predicted that this viewpoint will land Lamacchia in legal hot water, given that the majority of commission lawsuits thus far have argued that listing agents use the threat of steering by buyer agents to convince homesellers to agree to a far higher commission rate than they would have otherwise.

“Steering is not merely the buyer agent refusing to show or promote a home,” Hahn wrote.

“That’s the front half. The back half, the one that was the successful cause of action in sellers suing their listing brokers, is using the threat of steering to get commissions higher. Since that is what Lamacchia is teaching his agents to do, and is preaching to the industry at large, I think it is important to go point out some truth. Please ask your own attorney whether that strategy is good to pursue.”

Reached for comment, Lamacchia told Inman, “[Hahn] is gaslighting everyone about things I say and really about our industry.”

But a May 15 episode of Industry Relations, a podcast Hahn co-hosts with Robertson, indicated that Lamacchia and Hahn aren’t as far apart in their views as initially appeared.

While Hahn doubled-down on his view that using the threat of buyers staying away from homes to get sellers to pay compensation to the buyer agent was steering, he also said, “You do have a fiduciary duty to tell your client when the decisions they make could impact the sale of their home and one of those decisions could be whether they offer compensation or not.”

But balancing those two issues is “tough,” both Hahn and Robertson said.

“This seems like what NAR exactly is for,” Robertson added. “Give me the best practices. Give me the policy to manage the balancing of fiduciary responsibility and steering.”

Hahn replied, “You would think. That would be useful. Instead we have a clown show with the broker liaison.”

Asked for comment, NAR sent the statement above.

Inman has reached out to Hahn and will update this story if and when a response is received.

Editor’s note: This story has been updated with a statement from NAR.

Email Andrea V. Brambila.

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