GAAR responds to real estate changes from lawsuit

There's were major changes recently to home buying, which were brought on when earlier this year the National Association of Realtors and other major real estate brokerages agreed to pay $950 million to settle federal lawsuits that alleged the brokers forced homebuyers to pay inflated commissions during home sales.

The guest on this week's Business Outlook podcast was Morgan Cannaday, the president of the Greater Albuquerque Association of Realtors.

In addition to the money settlement, the real estate industry also agreed to policy changes that aim to bring more transparency around how brokers and agents are paid and what services they will provide.

Business Outlook podcasts are released on Monday afternoons and are available on YouTube, Spotify, Apple Podcasts and SoundCloud.

Here's a preview of the conversation, edited for length and clarity.

To start off, can you introduce yourself?

"I am Morgan Cannaday. I'm the president of our local Realtors association. I was born in Washington, D.C., but I have lived in and loved Albuquerque since the mid '90s, proud graduate of St. Pius High School and New Mexico State University, and came back to Albuquerque in 2012 to pursue a career in residential real estate."

This year you are the president of the Greater Albuquerque Association of Realtors. Can you tell us about that organization?

"So GAAR is comprised of over 4,200 Realtor members that service the greater Albuquerque area, and I was elected to serve as our president this year."

One of the reasons that we're here today is because there are changes that have happened to buying and selling homes. Can you tell us what the changes are?

"So these recent changes are a result of a settlement with our National Association of Realtors from a class action lawsuit. And that settlement was announced back in March and took effect on Aug. 1 here locally.

The two big changes for consumers to be aware of with that settlement would be how compensation is being communicated now and negotiated and written buyer-broker agreement.

So to start with the latter, prior to touring a home now, potential home buyers will be required to sign a buyer-broker agreement with the Realtor showing them that home. The intent of this is for transparency and clarity through the process. So that agreement is meant for that Realtor and buyer to agree to what services are going to be offered and what the compensation for those services are going to be.

It is not meant to lock consumers into a long-term contract. The term of that agreement can be negotiated, so if that potential buyer just wants to sign that agreement for that specific home on that specific day, they can negotiate that with their Realtor.

The other big change that's happening is how compensation is being communicated. Prior to August, any offer of compensation from the listing side to the buyer's broker was communicated in our MLS, our multiple listing service, and now that's being taken outside the MLS, and needs to be communicated and negotiated between parties as part of the contract."

So what was the traditional way that things worked before Aug. 1?

"So compensation has been and will remain negotiable. I think with this rule change, we will see more buyers opting to pay for that compensation themselves, for their Realtor representative, to make their offer more competitive, especially in multiple offer situations, so that that seller is not having to take on that cost."

Because typically the seller would pay the commission?

"More times than not, there was some type of offer of compensation in our MLS to a buyer's broker. If that was sufficient for that buyer's broker, then their buyer would not have to come out of their own pocket.

Obviously, they still have to come with their down payment and their closing costs if they're getting a mortgage and that kind of thing. But I think we will see that that shift a bit now."

Why does somebody need a Realtor?

"For the vast majority of consumers, the purchase of a home is the largest financial decision of their life.

So I think it's extremely important and within their best interest to have someone that has the knowledge and experience and data to help guide them through that process, not only to be able to provide them with the data of what that home is worth, but also through the steps of that transaction, as far as knowing what inspections are available and knowing how to navigate and, above all else, having someone negotiate the best contract for you on your behalf."

Most people who are buying a home are not contractors, homebuilders, Realtors or real estate brokers. What do we not know that you can provide us with?

"I think the first step is going to be the data, being able to calculate and figure out what a home's true value is so that we're avoiding any issues with the appraisal later on, because we know when we're making that offer what that home's actual market value is.

Again, the rest of that is those extra steps of knowing what inspections to get or that are available to you as a home buyer and how to negotiate any repairs or issues with the seller."

What are the biggest trends in the Albuquerque housing market?

"I think the most exciting thing is a reduction in interest rates. We are sitting at 6.35%, which is a 15-month low for us. To put that in perspective, at our high last fall, we were at 7.8% for a 30-year mortgage.

This reduction is hundreds of dollars a month in a buyer's monthly payment, thousands of dollars a year that they're saving just with this lower interest rate.

So I think we're going to see a lot more buyer interest in the market because they're going to have more buying power.

We are still seeing a very low amount of inventory coming on the market. So that is still a point of frustration for buyers. There's just not enough homes on the market for them to choose from."

In 60 seconds or less, what do you like the most about living in Albuquerque?

"Oh my gosh. We're interviewing for a position at our Realtor's association right now. So I've been speaking to a bunch of people out of the state (about this).

Green chile, without a question of a doubt.

But I also live right at the base of the foothills, and I have rescue dogs. So being able to walk outside every morning and go for a hike in the beautiful Sandia Mountains, there's nothing, there's nothing that can be that nice."

You have rescue dogs. I have a rescue dog.

"So I joke that I have an urban farm because I have two rescue dogs and a rescue pig. I also foster dogs, so at any point there's at least four animals running wild in my house."

Wow. Do your neighbors like you?

"I would like to think that they still approve of me as a neighbor, yes."