[00:00:12] Speaker A: Welcome to the Dearwood Realty YouTube channel. I'm John Schenck, founder and managing broker of Dearwood Realty in St. Louis, Missouri. People have been asking me, John, did you see this? Did you see this? I say, what? Oh, there's class action suit against realtors. They lost. What are you going to do? Are you going to close your doors right now and run away?

It's like, no, I have no idea what's going on. None. None.

I just, I'm blown away by the whole part of the reason why I started the channel was, look, I don't understand. When I read something like, why doesn't it jive with what I know, right? And I've tried to bring that to your attention. Like, when I see things in real estate, when I see something written, and then I'm not experiencing it myself, I'm questioning things. And so this whole verdict, the whole lawsuit, all of it is bizarre to me. We'll go through it a little bit. I'm not going to spend too much time on it, I don't think, over the years.

But as far as, like, what's changing tomorrow? Nothing.

It'll be on appeal for years. And it's just one of those things where it's fascinating what is written versus what you know, and then it's kind of scary.

Let's get to the article here. It says, real estate brokerages, zillow, Redfin Tumble after jury finds realtors conspired to keep commissions high. This is on zero hedge. And first of all, Zillow, they said they were never going to be a broker, and then they decided to be an ibroker and buy and sell houses. They lost a couple hundred million dollars in a few quarters, and they decided that wasn't the best place to spend their time. So Zillow now isn't a brokerage. Or are they? I don't even know. But anyway, then we've got Redfin. And Redfin was going to revolutionize commissions, right? They're going to change the way the business is done using technology.

And Redfin, if you look, has just recently pioneered in two of their cities, two of their markets. They're going to actually go to traditional commissions.

So they're silly. And then tumble after jury finds realtors conspire to keep commissions high. Now here's the thing.

Why are the stocks dropping now when we don't even know what's going on?

I can understand getting ahead of the news, right? That might be why they're trading. But as far as, like, we don't know what's going to happen at the end. We have no say. You could make the argument. You could say John Remax is going to lose some of their affiliated franchises and they won't be able to pay as much. And so Remax won't be as profitable. But that's going to be true anyway for the next couple of years because real estate transactions are going to be at significant mean. There's all kinds of things that are confusing about this.

Some of the big brokerages that have relied on growth, I'm thinking of two in particular. They may run into problems because their whole business is related to just the number of transactions. But again, that wouldn't necessarily have anything to do with this suit.

So anyway, let's get to it. And I'm just going to kind of offer my two cent when I see it. So as we said, real estate brokerages such as Zillow, Redfin, and that's not, we've already gone over that, it says. And others tumbled after a federal jury found the National association of Realtors and large residential brokerages such as Home Services America and Keller Williams liable for about 1.8 billion in damages after determining that they conspired to keep commissions for home sales artificially high.

Now one of the things that drives me nuts is real estate. My brokerage is my business, right?

That's how I make my money. Right? When I make money, there's this assumption that every realtor is a millionaire, right? We all are millionaires. The reality is so much different, right. If you look at the average transactions by an agent in St. Louis, I think it's about eight per year. That's average. If you look at the churn, it's like 80% to 90% of all real estate agents are in the game for three years or less and they get out. Do you think that they're getting out because thEy're millionaires and it's so easy. I'm just putting that out there. Now, you have every right to dislike real estate agents. I know real estate agents that I can't stand. I also know that there are doctors I don't like and there's lawyers I don't like. There's plenty of people I don't like. So it's one of those things where if you send hate my way, I can understand because people have done bad things over time, right? And that's true in every industry. It's just easier to pin it on Realtors.

I don't even know if you knew that there was a huge class action suit going on. But there was, and it's over. And it only lasted like two weeks.

But what was interesting is whenever you have a class action suit, you go after the money, right? So they're not suing.

I mean, that would be dumb. They would get nothing because I have nothing. But you go after these national huge franchises like Keller Williams Home Services of America, which is owned by Warren Buffett, you go after the big players. And as I was looking at the defendants in the trial, as I was looking at who was being called, it wasn't a run of the mill real estate agent, right? It was Dan Keller from Keller Williams. It was the head of the National association of Realtors who's just stepped down today.

It wasn't people that are actually actively doing the business every day. It was the people being in court were the people that run the businesses, but they don't do the business. There's a big difference between those two.

So here's a quote. It says, according to the Wall Street Journal, the verdict could lead to industry wide upheaval by changing decades old rules that have helped lock in commission rates even as home prices have skyrocketed, which has allowed real estate agents to collect ever larger sums, which is hilarious to me, because during the great financial crash, right?

Did anybody argue that commissions were too high?

It's as if just because the market has done well for three years, the best it's ever done, maybe, in the history of the United StateS, that's when they decided, well, real estate agents are making too much money, which is also hilarious, because, again, people drop out of the business left and right. So if you think that, I mean, it blows my mind.

It says, Home Services of America, a subsidiary of Warren Buffett's Berkshire Hathaway, says it intends to appeal. Today's decision means that buyers will face even more obstacles in an already challenging real estate market, and sellers will have a harder time realizing the value of their homes, a company spokesman said. Keller Williams said it's inconsiderating appeal. It's going to be appealed for years. It's just going to be dragged out for years and years and years.

Then it says, under the current system, sellers pay their own agent a commission, typically 5% to 6% of a home's selling price, which is in turn shared with the buyer's agent. Over the course of the trial, plaintiffs attorneys argued this model has suppressed competition by making it difficult for buyers and sellers to negotiate for lower rates, which is hilarious to me. It's hilarious. We have a thing called a listing agreement. We have to get it signed. It has to contain a certain number of things.

[00:08:22] Speaker B: Okay.

[00:08:23] Speaker A: You're always welcome to negotiate the commission. The issue is people may not be as receptive on the other end.

[00:08:31] Speaker B: Okay?

[00:08:32] Speaker A: So that's false to me because it can always be negotiated. Now, that doesn't mean that someone's going to, that doesn't mean an agent is going to take what you're offering. For instance, if you say, Sean, I want your services and I'm only going to pay you $25, no, I'm not going to do it there. You negotiated, it just didn't work out.

So that's part of the issues is it's not realistic. It's not what happens in everyday, in my everyday life.

And there's all kinds of other issues about this. But I don't want to cause any sort of, I don't want to be in anybody's way or anything. But all I'm saying is that the way this is portrayed versus the way it is is two very different things. And it's annoying because different States have different laws on how you conduct business. So you can be sued in Missouri and that could be a different set of laws than what's like in California or what's in Illinois or what's in, I mean, it's just like to lump the whole nation into this lawsuit.

It's bizarre.

It'll be interesting to see. Now you say, well, what's going on now? Nothing, because we don't know. We don't know what the judge is going to say.

But I can tell you just from experience that the market can be very messy. And I think what has happened is people have been, people have purchased houses, people have tried to sell houses, and they haven't had the best of experience either with their agent or with what happens in the market. And so they use those experiences to say, oh, no, the whole industry is just totally a mess, when actually the industry is pretty darn efficient. I mean, I'm pretty impressed for the most part.

If a house is listed, it can be sold within a day, within hours.

That's as efficient as the stock market.

[00:11:01] Speaker B: Okay?

[00:11:02] Speaker A: I mean, that's how great it's gotten in the marketing. So I find it annoying. But you have to understand, like, in every industry, lawyers will go after who's making money, right? That's their number one thing. They need the money.

So this is going to go on for years.

Will it change the business? Maybe.

But at the end of the day, you get paid for your time. That you work.

[00:11:33] Speaker B: Okay.

[00:11:34] Speaker A: And myself, I've taken a number of buyers around for years who have decided not to buy.

[00:11:45] Speaker B: Okay.

[00:11:46] Speaker A: And that's a zero in my bank account. All right. So it's not like, for me, it's not an issue of if they come back with all kinds of rules and everything that are anti ability to make any profit. It's not any different than it is right now. We still take risks and it's just the way it is.

But as far as, did it make splashy?

Absolutely. In fact, like I said, I had plenty of text. Let's get to this last.

I didn't really read the last part of here. It says the new scent real estate brokerage stocks tumbling redfin and Zillow both plunged as much as 10% before recovering some losses. Traditional broker Remax was down 3%.

I just think that was an overreaction.

We don't know what's going to happen. We have no idea.

So, John, what's going on with this lawsuit? I have no idea.

How is it going to change the business? I have no idea.

Does it matter at the end of the day? I mean, yes. Could it drive me out of business? I suppose, but any number of things could drive you. I mean, when you run a business, you just know that any number of things could run you out of business at any mean. That's just the nature of any business for to, I'm probably going to get stuck on a banned list on YouTube again. Soft shadow banned. But think about the vaping industry. That industry was gone overnight when they decided that vaping was bad for being targeted children.

So this is the way things go, right? This is the way it is. You take risks in life. Sometimes they work out, sometimes they don't. So what I would say is what's going to happen? We'll see.

[00:13:43] Speaker B: We'll see.

[00:13:43] Speaker A: That's the best we can do. And we'll go from there. So with that, I want to head on out. Thank you for watching. Thank you for listening. And I'll catch you on the next one.