Above, Ryan Schneider
Making the decision to be the first company to settle class action lawsuits last September has and should continue to give brokerage giant Anywhere Real Estate a major leg up on moving forward regarding how buyer agents conduct their business, according to President and CEO Ryan Schneider.
Responding in-depth to questions following the company’s quarterly earnings report April 25, Schneider touched on how he sees things progressing commissions-wise as well as other topics following the National Association of REALTORS® (NAR) settlement of the now-historic Burnett class-action lawsuit.
“We are sharing things across our six brands, leveraging the scale we have,” he said. “Because we made the decision to settle the litigation many months ago, we’ve been working longer on this than anybody else. We were thinking very hard, and actually had plans of how we thought buyer agreements could be more part of our future way back in September. And so we’re optimistic about our ability to have our agents be better than the competition in utilizing this.
“I think buyer agency agreements are great. They’re going to help us actually lock in some business that probably slipped through our fingers beforehand. And I really have confidence in our agents’ ability to communicate their value. So the sharing of best practices, leveraging the history we have, and time advantage in terms of our focus and roll-out of these things are examples of both what we’re doing, but also why we’re excited on a relative basis for what we can do.”
The diverse Anywhere brand portfolio, which includes some of the most recognized names in real estate (Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Coldwell Banker Commercial, Corcoran, ERA and Sotheby’s International Realty), works to the company’s advantage in this instance, noted Schneider.
“Our business skews luxury, and that is a place where there’s probably historically been both more complexity and negotiations,” he said. “I’m hearing from a lot of agents that they’re totally untroubled by continuing to communicate what they’re doing, but it’s also a great pool of learning for us to share with our broader agent population.”
Schneider predicted that lower-producing agents may leave the industry due to the challenging market conditions and changes in commission structures.
“We’re already seeing that as a company, and I don’t think it’s tied to anything recent from a litigation or regulation standpoint,” he said. “People leave the industry in tough markets, and we’ve been in the lowest-unit market here in like 30 years. So it’s pretty tough out there if you don’t have listings or buyers.
“And after the NAR settlement I told our agents and franchisees that I expect more agents to leave the industry because there will be ones who aren’t good at articulating their value the way I think our agents are. In terms of affecting our economics, I don’t lose a lot of sleep over it because the trend of our best agents doing most of the deals is not new.”
How buyer-agent agreements and contracts will evolve was something Schneider couldn’t say for sure, while noting that 20 states have already locked in to them.
“No place is doing it like the future yet in a full way, but there are the states that use buyer agreements and then there are a few others where they’re kind of commonplace,” he said. “So the idea of buyer agreements for us is not necessarily a new thing. However, we need to build and the industry needs to build, buyer agreements in the states that don’t exist. And even the buyer agreements that do exist need to be updated for some of the NAR settlement and some of the things we wanted to do from our own settlement. We’re in the middle of doing that.
“It’s a big pool of experimentation. We have a couple of thousand franchisees in the U.S., and many of them have already rolled out the buyer agreements, or they’re in a market where there are buyer agreements, and the best-practice sharing is a huge thing. We’ve launched a lot of training on not just the agreements themselves, but on articulating (agent) value and pricing and things like that. We’ve been working on it longer than anyone else because of our settlement timing. And we knew this would be an important thing for the future.”
Schneider wasn’t sure what changes could occur regarding how commissions are paid.
“It’s very complicated,” he admitted. “I don’t think anyone actually knows, but what I keep talking about with my employees and my agents and my franchisees and reminding them is that negotiating home sales is not a new thing. And could agents be paid more by buyers? Sure, that’s absolutely possible in the future. But can offers to buy a house include, ‘Hey sellers, we want you to pay this (commission) just like we want you to credit us for the furnace not working right or something that needs to be replaced?’
“There are a lot of rules that have not yet been written, whether they’re MLS rules or settlement rules. But I would like to think that we’re as thoughtful as anybody about planning for those scenarios, thinking how it affects our cost base or other strategic moves we might do, thinking about how we communicate with agents on them and share best practices.”
The consolidation question
One point Schneider made was crystal clear, it being that company consolidation is likely inevitable.
“I’ve said it publicly and I thought it was inevitable even before some of the litigation or regulatory developments of the last year,” he said. “What happened last year is only going to accelerate that, especially if there is pressure on the commission side. This is a scale business. And obviously if there’s ever revenue pressure, one way you’ve got to deal with that is to get even more efficient on how you deliver your high-value services and focus on the cost side. Consolidation is one way to get there, so I think it’s inevitable. Providing good technology is another reason.
“Consolidation right at this moment is a very strange thing because we’re in a tough macro (market), but there’s also the overhang from litigation payments and litigation that’s still ongoing for a lot of companies. And with the uncertainty on the revenue side, I am incredibly cautious looking at consolidation today. But I think it’s inevitable, and the bigger-scale players are going to have a lot of advantages. I’m hoping that a company like ours can differentiate over time on that.”
Finally, Schneider related thoughts on the discontinuation of displaying offers as compensation on MLS listings, and the future of MLSs.
“I think it’s too early to speculate on what we’re going to do; we’ll see,” he said. “We’ll see how these different ecosystems will work (with rules) yet to be written. And remember, there are like 700 MLSs, so you have 700 people writing rules. There’s no guarantee that the actual technical rules are going to look the same across the United States. So we’re in a little bit of a wait and see, both on what we’re going to do and what it means for the future of the MLSs.
“But I do think there’s going to be more innovation in the industry. There are portals in this industry. There are large brokerages, there are MLSs, there are a number of third parties who work within this ecosystem from a data standpoint. We’ll all have a lot more clarity in six to 12 months on how the ecosystem will evolve, how each of those different players will play in the ecosystem, and even how companies will make different choices.
“We’re not just watching the issue closely. We clearly have some hypotheses and are doing some game theory about what we do think we want to do. And again, the most important thing is we’re charging ahead with our agents and their customers to make sure they’re set up for success with buyer-agency agreements, which we think are great and are going to be helpful to us.”
