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A shock reverberated through the real estate industry last week when the National Association of Realtors settled a lawsuit by home sellers who claimed the group's long-running practice of setting 5 to 6 percent standard commissions on home sales amounted to price fixing. The NAR agreed to end its rules requiring that standard commission and for the commission to be split between the seller's agent and the buyer's agent. Real estate agents, already struggling with a market where few homes are available for sale, will almost certainly see their commissions shrink as they compete for listings.
The settlement needs approval from federal court. And this is only one of many lawsuits over real estate commission standards. But the fact that the NAR, the standard-bearer for the industry, has capitulated on this issue almost certainly means that real estate agents will be forced to compete by cutting their commissions.
Many in the profession have blasted the settlement as an attack on their profession and a disparagement of their hard work and expertise. But Barbara Corcoran has a different view. The Shark Tank star and executive producer made her name and her fortune with her real estate brokerage in New York City, and though she's not in the business anymore, it's an industry she closely watches and seems to care about deeply.
In a wise and compassionate Instagram post over the weekend, Corcoran argued that the settlement will benefit home sellers -- though likely not home buyers. She said that the NAR's decision to settle will undoubtedly shake up the industry, but that industry shakeups aren't necessarily a bad thing. And she said something we all know but often prefer to forget: "Change is nothing new."
Change is nothing new. She said this about real estate specifically, but it applies just about everywhere. Whatever business you're in, I'm willing to bet that both your company and your work life have been upended in recent years by changing technology, globalization, social upheaval, climate change, artificial intelligence, or all of the above.
Corcoran's post provides a needed look at the big picture and a useful reminder that even change we don't want can bring benefits that aren't obvious on day one. And she reminds us of something else we already know: The ability to adapt quickly to a changing landscape is a necessary ingredient for success.
I love the thoughtfulness and emotional intelligence that went into this post, so let's take a closer look at exactly what she said:
The changes brought on by the NAR settlement put power in the hands of the homeowner. Agent commissions are sure to become more competitive and the cost of selling a home will go down.
It was smart to note who will benefit most from this settlement -- people with homes to sell. She went on to say that it's "hogwash" to expect that this will benefit buyers, and that the dominant factor in the market right now is the dearth of homes for sale. Then she made a prediction: "If interest rates come down a point by year end, we'll see home prices up another 10 percent as the buyers rush into the market." That reasoning seems logical to me.
Next, she displayed empathy.
That said, it's a scary time for real estate agents. The decades-long certainty about the 5-6 percent commission is over.
She immediately followed that with a reminder that change is inevitable and not necessarily bad.
But whenever there's an industry shakeup -- and I've seen many -- good things come out of it that we can't see from where we're standing now. It forces innovation and the creation of new business models.
She ended with words of encouragement.
What I know for sure is that real estate brokerages and their agents are some of the most resilient people in the world. They're creative and tough, and this opens the door for agents to use that resilience and creativity to come up with new and better ways to service their home sellers and customers. I have no doubt in my mind they will do exactly that, and I can't wait to see what they come up with.
If I were a real estate agent facing an unknown future in an industry that's drastically changing, Corcoran's words might make me feel just a little less frightened and alone.
"Top real estate agents have always understood that the only way to control the local real estate market is to control the listings," Corcoran told Inc. by email, when asked to comment. But with this settlement, she said, "the competition is going to get tougher as they compete on what listing commissions to charge home sellers. The agents will also have to advise sellers on the sticky business of compensation to incentivize the buyer agents. The next few months will be very confusing for everyone as things are sorted out."
The settlement won't lead to lower costs for home buyers, she added. And with the rule requiring a commission split between buyer's agent and seller's agent now gone, home buyers will have to choose between paying buyers' agents from their own funds or else forgoing representation and dealing directly with the sellers' agents.
"What will not change at all is that the top listing agents will continue to control the real estate market," Corcoran said. "Great agents will find a way to both absorb and lead the change and they will get stronger. I've hired and managed them most of my life, and they are the most creative and resilient people I know."
As a professional writer and journalist, I've spent my whole career in an industry that's been shaken to the core again and again by one disruption after another. From my perspective, Corcoran's words strike just the right tone. She's not sugar-coating anything. She says from the start that the NAR settlement will hurt agents' livelihood. Then she reminds them that change is inevitable and that they already have the resilience and the creativity they need to adapt to that change and thrive.
In my book Career Self-Care, which Corcoran endorsed, I explore issues of how to stay optimistic and keep moving forward at work and how to stay mindful, even in rapidly changing times. Her post is a great example of the mindset you need to do that. It's an example every business leader should follow.
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