Newfound's Perspective on the NAR Settlement and the Path Towards Industry Transformation

Newfound is eager to share its insights and outlook following the recent settlement in the Sitzer|Burnett case announced on March 15th by the National Association of Realtors (NAR). This is a pivotal moment for the real estate industry and, more importantly, consumers nationwide.

As CEO of Newfound, I previously authored a letter addressing the initial judgment in the Sitzer|Burnett Case. Today, we build upon that foundation, aiming to demystify the implications of the NAR's settlement and underscore Newfound's unwavering commitment to spearheading a consumer-first approach in real estate.

Embracing Change for Consumer Benefit

This settlement introduces meaningful adjustments to the existing framework of industry practices, subtly shifting towards a more contemporary, consumer-focused approach.?

While not overturning the status quo overnight, it underscores the importance of fairness, transparency, and choice, paving the way for an evolution in how transactions are conducted. However, these progressive steps inadvertently spotlighted a larger, looming issue. There is a profound unintended consequence of pushing buyers toward a problematic dual-agency scenario that now demands urgent attention. More to come on that.

At Newfound, we embrace the role of leading the charge in advocating for consumer value within the real estate sector with enormous pride and dedication. We recognize the complexities that lie ahead in this transformative journey. Nevertheless, we have the strategic foresight and innovative spirit to navigate this evolving landscape with conviction.

Key Settlement Highlights Every Consumer Should Know

Direct Negotiation of Cooperative Compensation: The settlement allows for cooperative compensation between listing and buyer agents, but it mandates that such arrangements are directly negotiated between selling and buying parties, eliminating broad, MLS-listed standards. This change is set to take effect in mid-July, pending the settlement's acceptance.

Diverse Buyer Broker Compensation Options: Buyer brokers can be compensated through various means, including fixed-fee commissions paid by consumers, concessions from sellers, or a portion of the listing broker's compensation. These options highlight an evolving compensation structure that caters to different consumer needs and preferences.

Mandatory Representation Agreements: Buyer brokers and their agents participating in the MLS must establish written agreements with their clients, outlining the services provided and their associated costs before touring homes. This requirement fosters transparency and ensures consumers are well-informed about their engagements.

The Industry's New Horizon

The Sitzer|Burnett ruling marks a watershed moment, heralding an era where the real estate industry in the United States might echo practices observed in markets like the UK, Australia, and Europe. We foresee a landscape where:

• The rise of flat-fee and a la carte services grants consumers unprecedented choice and flexibility.
• Direct interactions between buyers and listing agents become more prevalent, unlocking potential savings and potential conflicts.
• A trend towards commission compression, propelled by enhanced cost transparency, normalizes total commission rates between one and two percent.
• A significant reduction in agents occurs, a necessary evolution towards a more efficient and consumer-focused industry.

Newfound's Proactive Steps Forward

In anticipation of these shifts, Newfound is not merely adapting but actively innovating to redefine the real estate experience:

Introduction of a Buyer Rebate Program: Effective April 1st, for our core brokerage brands (Houwzer and Trelora), we will start rebating half of the buyer's agent commission back to the client. This initiative preludes our consumer-oriented commission structure, which will launch in July, in line with industry changes.?

A La Carte Pricing through HomeRise: Our flat-fee, limited-service brand, HomeRise, caters to those seeking customizable real estate services. Launching in April, HomeRise will extend its a la carte options to buyers, empowering them to select services tailored to their unique journey.

A Recruitment Drive for Exceptional Talent: Understanding the critical role of skilled agents in this new era, we're looking to enrich our team with professionals who share our vision for a revolutionized, consumer-centric real estate marketplace and want to build a stable career as the industry enters a period of unprecedented pruning.

As we stand at the brink of this industry-wide transformation, every real estate brokerage faces a pivotal decision: to wholeheartedly adopt the essence of this settlement or reluctantly push back, clinging to outdated norms in an effort to preserve commission compensation over the interests of consumers.?

Newfound stands ready not merely to adapt but to spearhead this transformative era. Our dedication lies in cultivating a real estate landscape where value, transparency, and consumer choice reign supreme. Join us in leading the charge towards a consumer-centric market, or risk being left in the wake of progress.

Mike Maher

CEO, Newfound