2023 – The Looming Double Whammy
I’ve been around the real estate industry for more than 30 years and in that time have had the opportunity to view the industry from multiple angles. Although I currently lead a digital marketing and analytics company, my very first connection with the industry was as a lawyer and specifically as the legal hotline lawyer for the Washington Association of REALTORS. It was through that lens that I developed a deep and sincere respect for the job of real estate professionals, as well as gaining a keen understanding for how our industry operates.
I bring that experience up because industry legal issues are likely to conspire with a very challenging market to make 2023 one of the most impactful years for our industry in recent history – maybe THE most impactful ever.
No matter how you slice it, 2023 is going to be unlike any recent year in terms of competition for deals. Average annual existing home sales over the past 10 years is around 5.4 million. Industry economists estimate that for 2023, transaction volume for existing homes will be somewhere in the mid-4 million range. The last time we saw a number that low was in 2012 as we headed out of the Great Recession.
While that’s a challenge in itself, the fact that we now have 60% more dues paying REALTORS compared to 2012 will add another layer of intrigue. As the saying goes, Buckle Up, Buttercup!
While the industry has successfully dealt with (and recovered from) down markets in the past, it has never at the same time had to battle the type of existential threats posed by class action litigations as well as government involvement and regulation.
There has been much written about these lawsuits and I won’t go in depth here. In short, these cases argue that the manner and method of seller/listing agent-determined commission sharing with buyer agents amounts to illegal price fixing. The cases have been hotly contested by defendants NAR, large industry brokerage firms and franchise brands.
A few weeks ago, in a summary judgment ruling, one of the courts determined that the price fixing actions, if proven, were per se illegal. While this summary judgment ruling did not decide the case, it certainly made the plaintiffs road easier. In essence, if the plaintiffs are able to prove that a conspiracy existed among industry participants, this becomes essentially a damages case.
And while the alleged damages are enough to put the collective defendants in financial peril, the bigger industry issue is the impact on buyer’s agent compensation and the implication on the historical sharing of commissions.
So will 2023 bring a double whammy? Not enough deals to go around to properly feed 1.6 million REALTORS, forcing some to leave our industry, and on top of that, the real potential for a lawsuit to begin the great de-coupling of buyer agent compensation from the listing.
My crystal ball is as cloudy as the next person, but what I do know is that neither I nor any agent reading this can do anything about either the market or the litigation. And as my wise father always told me, if you can’t control something, don’t worry about it. Focus instead on the things you can control.
For a moment, assume the double whammy occurs. There will be scores of agents continuing to do the same thing that led to success in past environments. Like the characters Hem and Haw in one of my favorite books about orientation to change, Who Moved My Cheese, they may not be able to adapt until it’s too late.
Smart agents will, on the other hand, fully embrace the concept of building their spheres of influence, both in real life and in the digital world. I’m not talking hard core lead-gen trying to find the nearest buyer or seller. I’m talking about consistently marketing yourself so that you become the “know, like and trust” real estate professional to people in your spheres.
By doing so, you will do (at least) two very important things.
- Build market share. There are agents who will not survive this year and your becoming that trusted source will put you in a position to step into relationships previously owned by other agents.
- Solidify your value proposition. When it comes to having a conversation with a seller or buyer about compensation, your knowledge and expertise will pave the way for favorable communication around not just how much you expect to earn but more importantly, why.
2023 is going to be a wild ride, full of adventure and opportunity. I, for one, can’t wait to see it unfold. How about you?