Job Numbers Turn Out to Be Overinflated

James:
Good news for mortgage rates, bad news for job numbers, and how the new NAR ruling is affecting agents and buyers. Today we’re reviewing the headlines. What’s up everyone? Welcome to On the Market. If you’re new here, I’m James Dard and I’m filling in for our host Dave Meyer. I’m here with my amazing co-host, Kathy Fettke and Henry Washington. How’s everyone doing?

Kathy:
So good!
What’s up buddy? Glad to be here.

James:
How was the long weekend
Long?
I know for me, I always take the extra day on Labor Day to crunch out deals because no one else is working. You would. So we get a lot of deal flow. So it is never a three day weekend, it’s a three day scramble to get more deals done.

Kathy:
Well, I was on roller coasters with my grandson, so that’s how I spent that day and missed all the deals that James got.

James:
Well, today we’re discussing the biggest headlines that will impact investors, the latest data on home sales and mortgage rates, and what’s going on with the inventory that’s starting to increase what the revised job numbers might mean for real estate and how a new startup is shaking the buyer agent business in the real estate world and the wake of the NAR r ruling. Alright, let’s get into it. Our first headline, two things, the latest home sale numbers Say about the real estate market. I know over the past six months we’ve been seeing this slow transition and I got to say the Fed seems to have done their job fairly well over the last 12 to 24 months. As much as people don’t like to hear that, but we’ve seen a transition in the market where home sales have plunged 5.4% in June, 2024, and we’ve now seen the median home price start to come down a little bit to 4 22 600, which is an over 1% drop from last month, but it’s still up 4.2% year over year.
And we’re starting to see inventory increase. And this article kind of talks about that as far as we are coming into a more balanced market and I’ve been hearing from all sorts of investors like, Hey, there’s something going on with the inventory. Things are slowing down, it’s taking longer to sales things. But I think after these last two to four years, we forgot what balance was. This article points out that we are transitioning into a newer market conditions, which we could see some changes on the headlines. Henry, you do a lot of flipping, you do a lot of burr investing. Obviously that affects your appraisals. What values are doing and how things are changing. I mean, what are you seeing right now in your market and what you’re doing and how is this affecting as we’re kind of slowly sliding in? I think we were waiting for that big S slap in the face, but we’re kind of just making our way because inventory is now at four months worth of supply. It’s getting into more balanced market. How has that been affecting what you’ve been doing as far as your strategy?

Henry:
Honestly, it doesn’t affect it too much said differently, man. We’re coming into a more normal market. And in a normal market, if you want to be successful, you have to be good at what you’re doing. It’s just that over the past five years or so, you didn’t necessarily have to be a great flipper to make money because inventory was so low and there were lots of buyers out there. And so you could slap some lipstick on something, throw it out there and people were going to bid on it and you would be able to sell it. And so as long as you could find a good deal, you could make money. Now it’s a little more complicated than that because the market is more normal. Buyers are more cautious about what they’re buying because it costs them so much. You’ve got new home construction still happening, and so you as a flipper are competing with new home construction and you have to be cognizant of that and understand what you need to do to your properties to set them apart from the new home construction that’s out there so that you can actually move your flips.
You can really see in our market that properties that are done well and are in good locations and are priced right typically still sell pretty fast. But if you miss the mark on any of those things, if you don’t pay attention to your competition, if you don’t pay attention to your comps, if you don’t pay attention to your target end buyer, your homes could sit a little bit longer. You have to be a good operator. Now, I mean it is true. Properties are taking longer to sell if they’re not done appropriately. But if you truly do understand your market and you understand your buyer and you understand your competition and you do things within the flip the property to give yourself a competitive advantage, you can still be very successful.

James:
And a lot of this data when it comes out, it’s always a drag on information. They’re going off of June Home sales.

Kathy:
That’s what I was just going to say. I was like, wait, you guys, the problem with data is that this is July. We’re talking about July home sales. What does that have to do with September, where we are now, and also what’s coming up, what’s next as investors? We’ve got to be looking, taking into account the data, but looking into the future as well. And so just be careful of data, especially the case Schiller, while it’s good data, at least I think it’s old, it’s old data. So how does that help us Today I think we’re going to be looking at a very different set of data just in the next report and the next report, the next report, because things have changed since July. A lot mortgage rates have come down. And so I think people are going to be blown away when they see reports from July and they’re like, ah, inventory’s increasing. This is going to be a buyer’s market. I’m going to have so many options that may not be the case in a couple of months. So take advantage of it, man, take advantage of the inventory that may be out there because I think it’s going to be a booming market in just a couple of months as rates continue to decline if they do,

James:
And I think that’s important that as investors we have to be proactive, not reactive. And Kathy, what you just said is really important because the information is from June and July and rates buyers that were buying during that time, they were actually locking in rates in May at that time, and rates were averaging around a little bit above 7% in May, and pricing was starting to peak during that time as well. So anytime you start to get peak pricing and cost of money is higher, it’s going to change things. And as rates are starting to be forecast to be lower, it’s going to change how you’re going to be doing business and what you’re going to be targeting. And if you’re staying in the reactionary, you can’t forecast correctly. And so Kathy, you guys buy nationwide, you’re going in all different markets. Your business is really built on forecasting growth, forecasting, migration and trends. I mean, what are you guys doing right now with data that comes out and it’s a little bit delayed? What are you looking to do and what do you look into to, you’re buying for the results in six to 12 months, not from two months ago. I mean, what are you guys doing or what data are you guys digging into and what markets and how are you forecasting these things? Because you can be very reactionary and lock up when you can get bad information.

Kathy:
Well, most of these headlines are really targeted towards first time or not first time, but home buyers, people looking for their primary residence. So as an investor, as somebody who’s looking to acquire property to put on the rental market, I have a different filter. If you’re a buyer, which we are, we’re buy and hold. That’s the first part of the equation. You got to find it. If there’s more inventory, this is great news. I look at an article like this and say, yay, this is my opportunity. But I want to know where as you’ve got supply and demand, you’ve got to always be looking at where are we with supply? Is there more inventory on the market? What kind of inventory or less and what’s the demand? Is there job growth? Is their population growth? And who wants what supply is out there? It’s very simple stuff, right?
It’s basic economics. So we look at on the demand side, where are the jobs going? Where are people moving, where are they needing housing? How can we help them with that need? Not everybody needs to or wants to own a home, they sometimes need to rent. So we look at it, where are those people and how can we serve them? Where is the demand for these rentals? So we’re still really focused on the southeast. There’s still a lot of growth in Texas and Florida jobs. I mean literally, I was just in Dallas this weekend and the talk is how are we going to have enough housing for all the people moving here? That’s the conversation. So we look at it, how can we help?

Henry:
And yes, you’re right, Kathy, about the data. The data is older, but my sentiments aren’t based on the data. My sentiments are based on what I’m actually feeling in my market today. So the sentiments that it’s expressing, I am feeling in the market. We are seeing higher inventory, we are seeing properties taking longer to sell. But for an investor who doesn’t have active properties to base their information on like I do, you’re right, you have to look at when the data is reflecting. But if you are an investor, you should have a good investor friendly agent. So when you see the scary information out there, the scary data, you should be able to bounce this information off of a good investor friendly agent and have them give you the numbers related to your specific market because real estate is very local and something that you might see in a headline may not really be the case for your specific market. And so if you’re seeing something like inventory is increasing, well ask your agent to run a report and let you know over the past six months what inventory’s been doing. They have access to that information and should be able to paint that picture for you close to your local market. So you don’t have to let these scary headlines do just that scare you away. You can make informed decisions based on accurate

James:
Data.

Kathy:
And I love what you just said, Henry, your business plan is different than my business plan so that it always starts, what are you trying to do? This is the question I ask anyone who asks me, what should I do? Where should I buy? Well, what results are you looking for? I’m not looking to sell. I’m looking to hold a property and provide rental housing, so it’s going to affect me. Inventory is going to affect me differently than you because you’re trying to buy and sell. So that’s always a curious thing. What’s your perfect market if you’re doing both? But for me, we’re trying to buy, so inventory, more inventory is good, especially if the demand for those properties is strong on the rental side.

James:
Alright, we have to take a quick break, but we’ll be right back for the latest on mortgage rates, more on the latest headlines.
Hey everyone, welcome back to On the Market podcast. Let’s pick up where we left off. I think Henry, you brought up a really interesting point is all these headlines are always nationwide. Each market varies and they drag behind different markets. Right now, if nationwide inventory is around four months of supply, which is still very healthy, it’s still a seller’s market. Like in our local Seattle market, we’re just under two. But at one point when rate shot up, Seattle’s inventory exploded because it locked up. And so there’s different timing and seasons for each market and it’s really important, what Henry just said was working with a local broker that can really understand the market and give you the right information because as this inventory shifts, it’s going to move around because we also have some good news that interest rates could be cut and we could see some rate relief in the next 30 to 60 days.
And some people are anticipating as much as a half point cut possibly in September. And as you get this information, Henry, and you start to see inventory shift in each market, like you just said, your market’s got a little bit more inventory, it’s taking longer to sell. What are you doing over the next 12 months if you believe that rates could be going down in the next 12 months, as we know real estate’s about timing and if you can buy the right rental property and time the right rate, you can get a great rental property or you can do even better on a flip. So how are you preparing over the next six to 12 months as we’re going into another shift that we’re seeing?

Henry:
Yeah, that’s a good point. And honestly James, I don’t make buying or selling decisions based on what I think interest rates are going to do, what I use the information as. So I’m using this information in order to change and or impact my underwriting because how I buy the property determines how I’m going to monetize it or how well I may be able to monetize it. And so I am buying properties and I’m underwriting very conservatively right now because of the factors that we talked about because it may take longer to sell than I originally anticipated because there is inventory creeping up. I am buying at the price points that the current economy says I need to buy at in order for them to be a deal. And then if rates come down, it’s icing on the cake. And then if rates go up, I bought them conservatively enough to hold them for longer periods of time. And so all I really use this information for is information to help me underwrite my deals a little smarter and the better I underwrite, the more room I have to either absorb a interest rate growing up or to make more money if the interest rate come down.

James:
And I think that timing can be everything in the market when these articles come out because in this article I did reference that some economists are saying that more sales will increase and inventory will decline again when rates get down to about 6%. And sometimes I feel like they’re just kind of throwing like, oh, that sounds about right, 6%. Because if you look at it in June, if we were peaking out at the highest median home price and we are going to be a point lower to what they’re saying from 7% to 6%, that actually makes housing about 10% more affordable. If that is true, then there’s also something else going on in the economy because if we’re just starting to see an increase in median home price and inventory coming down with a 10% affordability on your mortgage rate, that’s not what we’ve seen over the last 24 months. We’ve seen rates as high as 8% and the median home price keeps going up. So in theory, if the rates go down, pricing should go up a lot faster.

Henry:
Well, I think what they’re not taking into account is that if rates come down, it might break some of this lock-in effect. And so you get people who now decide they want to sell because they can afford to buy again, and that will also add to the inventory. So who knows, man, be conservative in your underwriting.

Kathy:
Yeah, I just really want to clarify again that it’s the Fed that is lowering rates most likely in September this month. That’s not really going to affect the 30 year fixed rate mortgage, which is for one to four units, which is the asset class that we play in. So for us, I think that the markets have already adjusted for what they expect that the Fed will lower rates. Who this will affect more is people on adjustable rates and people who have credit card debt. So the commercial real estate industry is just on pins and needles waiting for the Fed to lower the overnight lending rate because they are deeply affected. Many are on these adjustable rate mortgages, commercial loans, and they’re hoping to refi into a lower rate or else they won’t be able to refi. So for the commercial community, and I was just again just around them at the Limitless Expo by Ken McElroy’s, a big, big apartment guy, they are just like bring it.
But for us, we’re more tied to on the 30 year fixed rate mortgage, as we’ve talked about so many times, it’s tied more to the bond market and the bond market’s more paying attention to the strength of the US economy. And when we see job losses, we haven’t really seen the job losses so much, but when we see job growth slowing, then that’s when the bond market reacts and they already have. And we’ve already seen that in the mortgage market, so we’ve already seen the rates come down. Will we see more? It’s all going to depend on the upcoming jobs report, so we shall see, but we really haven’t seen jobless claims. I increase the way that it would truly affect mortgage rates coming down further.

James:
Yeah, what Kathy just talked about was that if the banks are pricing in risk and when they think that there’s going to be fed cuts, they’ll start adjusting beforehand. So right now they’re around six and a half percent, so they’re starting to see it come the other way. That’s why we’re starting to see mortgage rates fall, but we could see it go down even further if other impacts, like what Kathy talked about, the job market, the credit card debt, the other financial impacts that they could have a see further fed cuts, which could mean less risk in the mortgage rates, which we could see a little bit lower rates on the one to four, and we’ve already seen ’em drop pretty dramatically in the last 30 days. And speaking of that, our next article is the US job growth revised down by the most since 2009.
Why is this time different? This is another major thing that’s going on in our economy right now. I think for the last 12 to 24 months, we have been running this back and forth. There’s too many jobs in the market and then it cuts back. Then this step on the gas hit on the brakes. And what this article discusses is that we’ve had some bad data, hence why I think our shows have been jumping all around. The US recently revised this job growth numbers down by 818,000. This is the biggest downward revision since 2009 at 824,000. There is a big difference between the job numbers for today than where they were in 2009. I do know I was an active investor in 2008 and oh nine and it was absolutely miserable and it did not feel like there was an end in sight. It was like everything was crashing in and you’re like, well, no one will buy anything. No one has jobs. There was no money out there. And the job numbers are reflective around the same numbers, but it’s a different thing. Yeah, this

Kathy:
Is amazing, James. It’s like, here we are. We’re talking 2009 versus today, 2024. A lot has changed since then. And one of those things is technology. Technology has changed a lot since 2009. So where is it in the job market? Why is it so hard to track job creation and job? To me, this is just phenomenal that we are in this day and age and they could miss this hard 818,000 jobs really, guys. So the way that they track jobs is very archaic. It is 2009 level. So we’re in a different world since then. Jay Scott has been screaming about this for a long time. They’re not tracking it properly. And I remember talking to him saying, yeah, but it doesn’t matter to me what the Fed watches. These are the numbers they watch and how they make massive economic decisions. So it is one of the reasons why rates kept hiking and why they weren’t coming down fast enough because they were looking at bad data.
So yeah, earlier in the show, James, you said they’ve probably done, the Fed has probably done a pretty good job keeping rates high because it has perhaps slowed down the housing market, but has it though? Prices have still gone up in spite of them raising rates so rapidly based on bad data, really the best way to solve a housing crisis is to bring on new supply. It’s always a supply demand issue, and they were trying to kill it with demand, and that didn’t work because there’s still enough people who can afford to buy a house. You’re just screwing the rest basically. But anyway, yeah, big miss, big miss. Hopefully they can bring a little technology, a little AI into the system and actually have some accurate numbers moving forward.

James:
Yeah, I mean it’s when you buy on bad data, we all feel the impact. And what this article references is, would Jerome Powell have done something different? He would’ve with good information, just like we would do something different. I mean, Henry, how is this affecting? When I heard this information, I was like, well, that’s not good. That’s a huge mix. But then again, I’m looking that’s nationwide. And Henry, you’re a local guy. You buy mostly in your backyard or at least around it. I know you have an anchor business in your backyard. Are we going to get a little bit of overcorrection and then in a market like yours that has a lot of healthy job growth with that big anchor business there, I mean, how are you looking at this as far as a sign for the buying for the next 12 months?

Henry:
Yeah, you’re right. For me, this is hard to pay attention to because it is very local here because I live in a relatively small market with relatively large companies around here that are employing thousands of people. And so I pay more attention to what’s happening with these companies. Are they in the midst of heavy layoffs or are they in the midst of hiring Frenzy? What James is referring to is Walmart is headquartered where I live. Tyson Foods is headquartered where I live, JB Hunt Transportation is headquartered where I live. And so these are massive companies that are supplying the entire United States with food. That’s what these companies do. And so if you look at Walmart, Walmart’s building State-of-the-Art Home Office campus here, and recently they announced that they want all of their employees who are remote to no longer be remote and get back to Bentonville, Arkansas.
So what does that do? That is going to send a entire pool of buyers to our market. They have to live somewhere. They have to live somewhere that they’re going to have to buy or rent in this area. So that is going to tell a different story than what this particular article is telling. And they are also requiring all of their suppliers. So companies who supply goods to Walmart also have to have a physical presence in the northwest Arkansas region, which means, again, more people moving to this area leading to live, and they’re typically going to be high paid employees. So that tells a different story. So you really have to understand your local market because it is, yes, the job picture may be different where you live, you have to understand what’s going on in your market and in your backyard, what’s going to affect your real estate.

James:
I think this article by CNBC, it’s anytime 2009 gets thrown in the mix, it’s really to grab attention. Do

Henry:
Any of you pay attention to anything that says 2009 or eight in comparison to now? It’s so different. I don’t even pay attention to that.

Kathy:
I just think it’s funny. And because people, it gets people’s attention, that’s what headlines are meant to do, get your attention. So everybody’s afraid of another 2009, and most people don’t obsess over economics like I do or we do, so they don’t know. They’re just constantly waiting for that next shoe to drop. And so yeah, it’s a great click bait, but I don’t know. I don’t pay attention to

James:
It. Henry just made a great point. It’s different. They might have one similarity, but right now the GDP has been up for over eight quarters in a row, whereas it’s back in 2009, it had been negative for four straight quarters and unemployment was at 5%, whereas right now it’s at 1.2%. And so it’s just one piece of the puzzle. And I think that’s something I’ve heard from investors, and I’m sure it’s being talked about, and especially like Kathy, you were just at that conference talking about the commercial world going, Hey, we’re waiting for rate relief and we’re seeing all this opportunity coming our way, but it’s just a piece of it, right? The jobs report, a lot of people thought because the jobs report, oh, they made a big mistake, they’re going to do an overcorrection. A lot of the rate hikes were just a battle inflation.
It wasn’t really about the job growth. Yes, they wanted to cool the labor market, but it was to get inflation under control, which is working. But now the consumers need other relief when credit card debt is anywhere between 25 and 35%. For some people, that is absolutely crushing people’s disposable income, which they need because we have seen also cost of property, and as investors like Kathy, if we’re seeing some sort of rate relief, you buy in a lot of different markets that have higher costs sometimes. As far as Texas goes, we’ve seen insurance costs skyrocket, Texas, Florida, those really good strong rental markets. And in those markets we’ve seen actually some of the highest inventory increases. Florida has seen it jump up quite a bit because of the insurance costs and living expenses. Do you think if the Fed does start cutting rates and we do start to see relief in the credit card, the disposable income type of expenses, do you think that that could loosen actually shrink inventory and get those markets kind of ramped back up again?

Kathy:
Well, I think people are going to feel a lot better. There is a Gallup poll called economic confidence up slightly in August, which is a little bit shocking. I think you would have to read the article to understand why, but the bottom line is there is a small uptick in confidence that the economy is going to get better. But overall, the article explains that Americans are still frustrated because of high costs, but do I think it will affect the areas that I’m in? Again, we’re not experiencing that uptick in inventory in Florida and in Texas because we’re not in major metros. We’re not in the metro. We’re in the suburb area where a lot of people are moving to. So would I invest in downtown Dallas? No. Would I be investing in downtown Tampa where there is an increase in inventory? No, we’re in the suburbs where people are moving and there’s still tremendous demand.

James:
Well, I think the real question is, will the Fed overcorrect knowing they had bad data? I know for me, if I buy a piece of real estate and my data was bad, I have to make some pretty major shifts to get that deal to pencil outright. Like Henry, what do you think? I know you buy a lot of deals, sometimes the numbers don’t quite hit the way we thought, and it requires a big pivot. Sometimes you’re even selling things, right? And say when you’re planning on keeping it, I mean, what do you think? Do you think they’re going to overcorrect?

Henry:
Oh man, I wish I knew how the Fed would think, but yes, in my business, absolutely I would have to overcorrect because the financial implications would be huge on me. So I don’t know. It just depends on how the Fed feels like the financial implications will be on the economic factors that they want to impact.

James:
And I think it’s going to come down to what happens with unemployment GDP growth, and if we start to see that shift, I could see a little bit more of an overcorrection, but this is just one piece of the puzzle. That’s what everyone has to remember. It’s just one piece they all tie together. You got to look at the full picture. Yeah,

Kathy:
If I were to bet, I would say it would be a 25% rate cut in September and maybe 50 later. But my guess is the Fed isn’t going to meddle too much with the elections and we shall see.

James:
Okay, time for one final break, but stay with us. There’s some major shakeup in potential shifts in the future of how homes will be bought and sold right after this. Hey investors, let’s jump back in. But speaking of cuts, we could see some commissions getting cut. We might not see the rates getting cut, but we could see commissions getting cut.

Kathy:
That was a good segue by the way. That was well done. That

Henry:
Was well plate, sir. Least

James:
I can do something right. Our next article by TechCrunch, it says, after winning a landmark case against real estate agents, this startup aims to replace with a flat fee. So after getting this lawsuit going, justice sits, sir is seeing this as an opportunity, and they are launching a low cost tech buying platform called Landon, and this is where instead of offering commissions out and paying brokers on fixed commissions, it can be a flat fee service where buyers have the option to a la carte from anywhere between $49 home tours to $199 offer prep, and you can also just get a flat fee commission at 1,799 bucks. I like that they threw the 99 in there to make it sound a little bit better. It’s that marketing. That’s

Henry:
Classic marketing.

James:
And I feel like we’ve seen this before. Redfin has tried the flat fee model in the past, we’ve seen for sale by owner platforms. I mean, right now it’s kind of follow the trend with America, pull the service out. If you call into a business right now, you don’t get to talk to someone. You get routed overseas and you go through like 17 call centers before you finally get to talk to someone, they can actually get your question answered. How do you see this shaking up the real estate business? Henry, you work with brokers all day long. You are heavily entrenched in those relationships. I mean, what do you think? Are you going to go hire a flat fee broker to work for you so you can save yourself a little bit of money?

Henry:
Absolutely not. I’m not, no. So let’s take kind of sleaziness of this guy’s suing them and then starting this business opportunity based on what he’s created from the lawsuit away from it, and just look at it at its own merit. We have this opportunity now because the lawsuit has happened and things are changing, and so now there is this opportunity, and whenever there’s opportunity in the business world, this always happened. People try to fill that opportunity with new business ideas and concepts, and then at some point, one of these ideas sticks. People love it, and then that becomes the new norm. So this is just, if he didn’t do this, somebody else’s going to, we’ve even talked about this previously on other shows where we talked about, Hey, there’s probably going to be some sort of flat fee, a la carte model where people can pay for the services that they want, and so he’s given it a shot.
Will it work? Who knows? Will people like it? Who knows? But I think you’re going to start to see this is a model and you’ll start to see some other creative models come in. And then when somebody loves something or when something seems to work for the general public, then that might end up becoming the new norm. So he’s shooting the shot. We’ll see what happens. But is this a service that I would do? No, I am comfortable paying the 3% because I understand what all goes into having a really good quality agent list and sell your properties. And I understand how to evaluate agents to make sure that they are doing the things appropriately that are going to help you list and sell your property. But I have experience, right? I understand these things and I’m willing to pay for it. But for the non investor, just normal person out there looking for a home, I can see them absolutely using this flat fee service.
Now, what I think we’re missing here is that normal person may not know which of these a la carte items makes sense for them to actually pay for. They may forego some things that are really, really important because if you look at what typically impacts a home sale, it is going to be price, it is going to be condition, and it is going to be marketing. And so if you’re saying, well, I’m going to pay for A, B and C, but I’m going to forego some of these additional marketing things, I don’t really know what they are, how they help me, well, then you could really be hurting yourself in trying to get your property sold. So you just have to pay attention to, you still need to be educated on what the home buying process is from start to finish, so that at least if you’re going to use an a la carte service, you can not hurt yourself by not paying for things that are absolutely essential.

James:
No, and I think I’m all for options. People should have options. What do you want to do? But I think the huge mistake that people make is a lot of people’s perception of real estate brokers is they look at homes online and they email ’em off, they show ’em write an offer and get paid a big fat check. And there’s so many things that go into the actual business and what you’re hiring right there. I mean, I look at this as they definitely need a legal, a la carte piece put in here. Yes,

Kathy:
Totally.

James:
Real estate is heavily litigated. People’s perceptions of what they’re getting and what they signed up for are often many, many times different. And I know Kathy, you’ve been buying for years and years and you have a big referral network and you work with a lot of different brokers nationwide. You get to work with all sorts of different types of brokers. And I would say that the better brokers have less litigation and the newer ones that are just trying to push something through or might be getting compensated a little bit less, put in less time, which less time meet sloppier paperwork, sloppier expectations, and can lead to these costly litigations. How do you think this is going to affect the broker service business? I mean, again, you work with brokers I think all over the nation.

Kathy:
Yeah, yeah. Well, I have personally worked with brokers who were not worth that $199 prep session. Fair enough. Offer prep session, what even is that? But $49 to show a home. Sure. For someone to get up and go. And it’s dangerous often for realtors, especially female wants to be sitting in a home alone, 49 bucks. Sure. But there’s also technologies that are going to allow people to go look at the home without anyone showing it. There’s cameras and codes to get in and so forth. But yeah, that’s a fair enough. That’s pretty way too low. I think $49 to go look at a place, but $199 for an offer prep session. I got to tell you, there are agents who don’t even deserve that because the way it basically works is they have preset contracts that are really meant to protect the agent. They are written by nar, national Association of Realtors, and they’re very long, lots of pages.
Why do you think it’s to protect the agent, not to protect you? Maybe a few of the lines, but I couldn’t agree more with Henry and James. If I were an attorney, I would start a company that protects you from a legal perspective because agents aren’t even really allowed to say very much. They are so protected against lawsuit that they can’t really advise you the way they might like to, or they just don’t know. So I think the bigger opportunity out there is for a legal firm to be able to help people really understand how to read that contract, how to protect themselves, how to have a contract that actually protects the buyer. That would be amazing because it doesn’t. And also to make sure that the seller is fully disclosing all the stuff going on within that property. That’s generally where the lawsuits happen is they lie.
They don’t tell you that. They know that they covered up something with paint so that now you don’t know that there’s mold underneath it. So making sure that the disclosures of the seller are really robust and that you really know everything that’s going on with that home. But with that said, the company that can really offer a legitimate service to the buyer I think could be huge. But I don’t see this particular model. It says you can cough up $1,799 for two offer prep sessions. What does that even mean? What does that, no, I don’t know if this landan company is going to make it, but we’ll see. They obviously were able to shake up the world, the industry with the lawsuit, so maybe they can shake it up with this. We’ll

James:
See, my question is going to be, is a $49 flat fee? Will housing prices vary quite a bit. If you go look at 50 houses and you’re in a more affordable market and you don’t get any because you’re writing your own offers and you’re not reading the situation, you could be spending even more money just looking at houses and wasting time. And I think that’s what is important about this service is real estate negotiation. The buyer brokers, I see a purpose in it. The purpose is if it’s very, very competitive, a lot of the deal is done before the paperwork is written. Like Henry, when you’re writing offers on properties, you’re usually having a conversation before you just blindly hit them. And that’s what this is going to kind of take away. If you’re booking a showing for $49 walking through and you go, okay, I like this.
I’m going to hit ’em low, but I really want this property. And you offer just a little bit low, you don’t know how to read the situation, you don’t know how to negotiate it, you could just be missing houses on repeat. And what can happen is you can just be on the sidelines forever. And so that the art of the negotiation and the deal is so important, and it doesn’t matter what it is. It could also not just be about price. It could be about terms. Are you buying new construction? A lot of people think that’s easy, but builder addendums are long and they are over encumbering, and there is a million things that you want to negotiate in those terms. And if you don’t know how to negotiate them, you could be getting what you don’t want. And that’s when it’s important to hire a professional that knows how to read through that paperwork that knows what the process is that can thoroughly explain the process to you so you can negotiate accordingly.

Kathy:
Totally.

James:
Yeah. I know I get a little fired up about this one. Obviously I’m a broker. We do a lot of business, and I will say I have zero concern about people paying me our commission because of the service that we offer. And I think that is always important. I

Kathy:
Think that’s the question is how do you find that person? Because all I was saying is that I think the average real estate agent does not have those negotiation skills. I could be wrong, and I could get a lot of hate mail for this. You’re

James:
Not wrong. I concur, Kathy, I concur. I truly think this is going to affect more the flat fee brokerages and the low cost brokerages than anything else. I mean, if someone wants a low cost commission, they’re going to go for the lowest cost possible, and that’s going to sideline those businesses, which is a big percentage of brokers out there. But if you lean into it, I mean, Henry, you lean on your broker a lot.

Henry:
Yeah, I mean, I think this is good for good brokers, right? It’s going to weed out. The people who aren’t great at their job are going to not make money, which is going to make room for the actual good brokers to make a good commission on their properties. People will start to see the value in the good brokers. It’s just going to take time for people to realize it.

James:
Well, this has been a great conversation, guys. I mean, we got a lot of changes coming up the next 12 months. I think real estate’s

Henry:
Crazy.

James:
Real estate’s crazy. We got job numbers are changing. Interest rates could be making a sudden shift and brokers could, I mean, they might need

Henry:
A side hustle. They might need some rental property. Yes,

James:
They need a side hustle. So everyone, make sure you turn it into on the market because we’re going to be covering all these for the next 12 months and how to predict and how to change your business. So this was an awesome conversation. I want to thank you everyone for tuning in, and we will see you guys next time on the Market.

Dave:
On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.