NAR just lost the anti-trust lawsuit in Missouri. Here is a brief summary of the key details you need know.

• Plaintiffs were awarded $1.8 billion in damages and the judge could adjust that higher - up to $5 billion. And this is only Missouri.
• There is another anti-trust lawsuit pending in Chicago that could amount in another $40 billion in damages against NAR.
• Within hours of winning in Missouri, the attorneys for the plaintiffs filed a national anti-trust suit that some experts have estimated could result in up to $400 billion in damages, an amount large enough to bankrupt NAR and all regional MLSs.

As a title agent, you'll want to keep a close eye on this situation as it evolves and be ready to adjust your business plans both operationally and from a marketing perspective.

What Does this Mean for Real Estate Agents?

First, let's take a look at how this could affect our real estate agent referral partners. By the time all of these lawsuits make it through the courts, it will be several years from now. However, if the plaintiffs win and this win in Missouri suggests that they will, the fall out for real estate agents will be huge. I think we'll start seeing changes much sooner because organizations will start to pivot and adapt in expectation of the institutional changes on the horizon, at least the smart ones will.

·       Buyer's agents will likely charge buyers up-front flat fees for their services. They may no longer receive commission splits from seller's agents.

·       A reduction is overall real estate agent fees/commissions on both sides of the transaction will mean that real estate agents will need to work with more clients to maintain their income. Ultimately this means few real estate agents and fewer brokerages.

·       If NAR doesn't survive, real estate agents will lose a huge resource for multiple listing services, forms, and on-going education. I'm sure someone, hopefully many someone's will fill the void, but it will take time. Long term, well established and experienced real estate agents will probably do just fine operating in that void, but newer agents will struggle more. Large real estate franchises will be better equipped for provide the technology, resources and education to support new agents whereas smaller boutique firms will not. We may see a further rise in the strength, power and control of the franchises.

·       If the MLSs fall, we could see one of two scenarios. One, a dark ages of real estate listing data, so to speak. Listing data is incredibly valuable. Probably the most valuable asset in the world of buying and selling real estate. In the pre-internet world, that data was shared locally and the more people you knew, the more likely you'd be the first to know that a new listing was on the market. It gave real estate agents in the know a competitive edge over the competition and added real value to their buyers. Honestly, returning to that world would probably be good for both the agents and the buyers. However, we live in a high-tech world where very powerful players both deeply understand the value of data and have the money and skill necessary to quickly fill the void created by the collapse of the current MLS monopoly. So, the second and more likely scenario is companies like Zillow where real estate agents will list homes directly on online marketplaces. Zillow while struggling with some reputation issues, is probably the best positioned to take advantage of this potential void because they already exist with brand recognition and technology infrastructure. However, there is plenty of time before the ultimate collapse of the MLS system for new players to enter the market. Or even for NAR to spin off some of their holdings into independent entities in hopes of shielding them from the fall out.

What Does this Mean for Title Agents?

There will probably be other impacts that I've not considered, but I think I've hit a lot of the primary ones. As a title agent, why do you care? Well, aside from just understanding the industry in which you work, this will affect your bottom line. If you are currently receiving a large portion of your transactions from real estate agent-based referrals and joint ventures, a large reduction and restructuring of that workforce will mean some of your referral sources may leave the industry or close their doors. If buyers' agents are doing business differently with a different fee model and even business model, this may impact when and by whom referrals are given in flow of the transaction. For example, there have been new start-ups who have tried to offer different business models where buyers could communicate directly with sellers via their tech platform, complete their own forms with fill in the blank guides, and largely allow technology to replace the buyer's agent role allowing one person to service a much larger number of clients at a much lower level of service. That sort of tech may have buyers choosing needed services such as home repair contractors, home owners insurance, home warrantees and of course, title insurance, via a marketplace instead of personal referral. We will definitely see far more buyers representing themselves and doing without a buyer's agent entirely in order to save money, especially in the lower half of the housing market. Finally, as an industry we've already spent the last few years defending the value of title insurance as a product necessary to protect not only individual homeowner's ownership rights but as a tool that has created the most valuable real estate market in the world because of its safety and reliability as an investment. While we are currently celebrating wins with Fannie and Freddie Mac back tracking on their support of attorney opinion letters in lieu of title insurance, that win may be short lived. Title Agents are paid on a commission basis too. I've heard from colleagues in other insurance industries that are seeing pressure and changes to their commission-based pay models. Title insurance agents are sitting at the cross roads of a commission crunch from the real estate world and a commission crunch from the broader insurance world and underwriters seeing their bottom lines deteriorate with the current market contraction. We'd be fools to think that our current commissions are safe from scrutiny.

Wow, that was a lot of really heavy stuff all the way around. Please don't run off and shove your head in the sand. Now is the time to start plotting a course forward.

Here are some things to start thinking about:       

• Where are your current sources of business? Do you need to change your current marketing strategy?
• How buttoned up are your operations? The more efficiently you run, the more wiggle room you have in your commission structure.
• Who is doing your sales? Do you have someone dedicated to staying on top of shifting industry trends who will see the writing on the wall well enough in advance to steer the ship out troubled waters? Maybe you should. 
• Is the rest of your staff trained on how to leverage good customer service into referrals?
• Is your staff trained on how to upsell?
• Can you share resources with other companies to lower your overhead? For example, hire a marketing professional jointly with one or two other firms and have that person provide marketing for all three companies? What about sharing office rental space or an answering service? Get creative.

While we work in an industry deeply rooted in tradition and history, remember these are roots, tasked with providing us with stability and nourishment, not anchors, tasked with keeping us immobile. The only constant in life is change. Title Insurance is no exception. Stay informed, stay adaptable, and stay agile.

I'm Cheryl, your industry business consultant. I'm always available for 1-on-1 consultations, strategy sessions, group training and public speaking engagements. If you need help figuring how to navigate these changes and position your company for long term growth and success, reach out. I'm here to help.