All Forum Posts by: Stephen Dispensa

The reason the fed's actions have been largely ineffective in curbing inflation is because keeping central bank rates high in this situation is the equivalent of throwing water on a grease fire. Not only does it not extinguish the flame, it actually can make the fire worse. 

The price increases that came to a head during the pandemic are a result of two major factors: A shrinking workforce, and a need for large financial institutions to seek returns. The largest generation in history (baby boomers) are retiring. And guess what? They've got pensions. They've got annuities. And they've got life insurance policies. And all of the mutual funds and hedge funds and everyone else that these instruments are invested in are all under massive pressure to produce the guaranteed returns needed to keep those retirement plans afloat. So you have financial outfits getting involved in businesses that had long been left to small owners or specialized funds. This is why hedge funds are buying up single family homes, cattle farms and slaughterhouses, farmlands, etc. and driving up the cost of every day goods. Combine the pressure on returns with a significant portion of the labor force leaving certain industries during the pandemic and not returning and you've got massive upward pressure on prices. 

Then the fed comes in and raises rates. Well what does that do? The suggestion is that with capital becoming more expensive, it would drive down the demand for lending and let prices ease. However, it isn't demand for capital to invest in new businesses that has caused these price increases, it's upward pressure on returns. So what does the Fed's quantitative tightening policy result in? In real estate, it makes it a hell of a lot more expensive to own, rent, or invest in a home. 

American's spend 25% or more of their income on real estate expenses. Arguably the largest part of the household budget. And the Fed raising rates trickles down to higher mortgage rates by influencing the 10-Year Treasury Note. 

So now, the Fed has contributed to raising rates for your average home buyer, but what about people who already own a home? Maybe they purchased at a low interest rate. Well guess what? Now they don't want to sell because if they purchased a home at a sub 3% interest rate even if they were to buy the same priced home today it would cost them nearly twice as much in monthly payments. This results in less homes on the market. Economics 101: Supply Decreases and Demand Stays the same: Prices Rise. So the Fed hasn't been able to really cool off the real estate market.

What if you're a renter? Well if you live in a massive apartment building the debt that underwrites that building is likely a commercial loan wrapped into a security instrument. The loan likely comes due every 5 to 10 years. When the property owner has to refinance that debt and their payment nearly doubles, who do you think they pass that cost on to? So the Fed hasn't been able to affect the price of rental real estate.

And all of those hedge funds that are feeling the pressure of the guaranteed returns they need to produce are invested in real estate as well. And they're leveraged. And if the Fed continues to keep rates this high they won't be able to make their returns and you could see real problems in the retirement sector. 

The sensible thing for the Fed to do would be to return rates a a fairly standard 4% and keep them there and let the market do it's thing. Rates should have never been brought as low as they were in 2020 and 2021, and they should never have shot as high as they did in 2023. It's time for the Fed to admit it's error.

Calvin, 

Broker/Property Manager here in Tampa. Here's my process for setting rental rates:

1. I pull a report of comparable rentals (usually off of Rentometer, sometimes using MLS data as well)

2. I go through the comps to find the most relevant ones. I want properties of a similar size, shape, and condition.

3. I take the average price per square foot for those best comps and apply it to the subject property. I then factor in any utilities (besides water, sewer, and trash) that we are including if any to come up with a recommended price.

4. I list the property for rent on various sites including Zillow Network, Apartments.com, and Facebook Marketplace. 

If we don't have a tenant within 10 days we lower the price. 

There's really nothing more and nothing less to it. The unfortunate thing I sometimes have to explain to my client is that what they "want" in rent isn't always what the market will bare.

Long term the real goal is to put tenants in place who will respect the home and remain your tenants for a long period of time. You lose far more money on vacancy then you ever will on a lower rental rate.

The variance will be granted based off the site plan submitted at the time and the variance application. IF you wished to build a pergola or shed closer than 20 feet from the rear yard setback you would need to submit a new proposed site plan. However, you shouldn't require a 20 foot setback for a pergola or a shed, so I wouldn't think the variance should be necessary for those items.

Hey Brad, 

I do something similar. I am based in Tampa but I cover from Orlando to Spring Hill, and all the way down to Sarasota. I run an independent real estate brokerage and property management company. It would definitely depend on what kind of rental you're looking for if it's in Sarasota (want to make sure I'm the right fit to best serve your needs.) But send me a DM and we can discuss.

Steve Dispensa

Fragmentation would be the idea. Because NAR failed to protect the interest of the local members and are changing their policy, we secede and continue with business as it has been effectively done. My board has non-realtor members for example home inspectors and property appraisers. Personally if I could I would only subscribe to my MLS and have no interest in remaining a NAR or a Florida Realtor member.

Quote from @David M.:

@Stephen Dispensa actually, I think the MLS' that require NAR membership... Maybe it varies...

This is the point I'm making. What does NAR or your State Board ACTUALLY offer you? Local boards are small enough that individual realtors can effectively force changes. Why not tell all our local boards we want to withdraw from NAR? Change the MLS rules.

I'll make one other point here, and it's one I don't think anyone has consider. This is not a criminal ruling nor is it a legislative order changing any laws. This is a lawsuit settlement against NAR. What is to stop Local and / or State Boards from leaving NAR and continuing on with business as usual? To be honest, I don't really see any reason not to. The local and state boards weren't the ones that were sued.

Let's be clear, the only reason the vast majority of real estate agents are members of NAR is because they are forced to join their local boards by their brokerages. Although I'm not worried about the end result of this, I can't help but feel NAR let it's membership down massively by failing to uphold their interests. I feel like a first year law student should have been able to make a case to get this suit thrown out. So what would the point be in remaining a part of an organization that is just hamstringing the way we do business?

Quote from @Alan F.:

 I'm very tired of shopping for agents, I'm at a point that if they just do what they say they're going to do I'm happy. Average flip sale between 750k-1.2 mil. That's a 1700ft 52 yr old tract lol. I don't have "an agent" never have, hence shopping with feet.

I figured that the ruling will have little impact on REI, maybe some of the flakes will be weeded out though.

 Hey by all means do what's best for you. I'm just saying (especially at the volume you're talking) people should be FIGHTING to represent your properties.

Quote from @Alan F.:

Thanks for writing this post, its really informative. I'm only a low volume flipper so take my comment with a grain of salt. In the 20 homes ive sold the listing agent has never been open to negotiating their commission...its 6% or no soup. FWIW I've also had 6 separate times where as a buyer they refused to submit my offer. Its not really a big deal though. I see agents as just transactional baggage. Its much better for them to sell a high dollar house to a retail buyer. Will this NAR ruling really have that much affect on investors? IDK

Alan, every commission is up for negotiation and always has been. If you spend some time shopping around you will absolutely be able to find Realtors willing to list for less than 6%. The big question is what kind of service/experience are they bringing to the table? I rarely charge a full 6% but I am often working with homes that resell north of 500k. If you are selling $100,000 homes I could understand agents holding on more. But you ALWAYS have the option of shopping with your feet. 

Unless you're referring to negotiating AFTER the listing agreement was signed. In that case an agent would need some motivation to lower a commission. But if you haven't signed a listing agreement yet, why are you paying a full 6%? From the sound of your post you don't seem to be impressed with the service your agent offers.

I don't believe the NAR ruling will have much impact on investors. I predict for an agent like me that works almost exclusively with investors there will be some annoyances and haggling over commission on the purchase side. Investors (rightfully) always want to keep their costs down and there are clients who will try to put my commission on the chopping block. However, as I always say "Deals aren't found, they're made." If I'm the one out there finding and analyzing deals, I can just as easily do it for someone willing to make sure I get paid as I can for someone who tries to cut my commission. 

Point is, if you're an agent and you're actually bringing value to a transaction, none of this matters.

Rarely do I feel the need to comment on the state of my industry. I have been a licensed Real Estate Salesperson, Agent, or Broker since 2015. In the 9 years I’ve spent licensed in this industry I have never been impressed much with my peers. I haven’t been shy about my disdain for many Realtors in this business. Now our “leadership” at the National Association of Realtors has proven just as feckless and ineffective as the vast majority of its membership.

I have long thought that the NAR as well as State and Local Boards and MLS's that I have been a member of were bureaucratic cash grabs that existed solely to employ those among us that were not talented enough to actually sell real estate. It wasn't until today that I realized how useless these organizations are.

If you’ve been following the news, there have been a lot of claims going around since The National Association of Realtors Commission Class-Action settlement offer was released. “It’s the end of the 6% commission!” “This is going to make home buying MUCH more affordable!”

These statements and others touted in the media are uninformed and show a complete lack of understanding on how the real estate industry operates in the United States. Since no news article I’ve read on this ruling has been willing to summarize business practices in this industry, I may as well educate you as it seems no one else is willing to.

When selling a home with a licensed real estate agent, the first step is for the seller and agent to enter a contract called a “listing agreement”. This agreement lists pretty much everything to do with selling the home: how long it will be on the market, what price it will be offered up for sale at, how it will be advertised, who will have access to the home, and the commission rate and split. The last point is the most important one to focus on here.

In most (but not all) real estate transactions, the seller pays for the real estate commission out of the funds they receive for selling the home. When negotiating the listing agreement sellers and their agent agree on a commission rate as well as an “offer of cooperating compensation” or split.

This “offer of cooperating compensation” defines how the commission will be split up between the agent for the seller (listing agent) and the agent for the buyer. For example, if the seller and their agent agreed upon a total commission of 6%, that 6% can be split evenly 3% to the listing agent and 3% to the buyer’s agent. OR it could be split 4% to the listing agent and 2% to the buyers agent. Or ANY different combination. The seller could negotiate with their agent a total commission of 4% with 2% offered out to the buyers agent. See it doesn’t matter, there are no rules governing this. It’s a negotiation just like any other aspect of business.

This is the first area where our legal system has failed free enterprise in this case. Ruling that offering buyers agents a guaranteed commission split was price fixing makes NO sense as this amount was always negotiable during the listing agreement negotiation. Also, it could even be negotiated LATER in the process. MANY times I’ve had to cut my commission in order to get a deal through. Why judges and the DOJ feel they have a right to intercede here is beyond me.

Once that listing agreement is finalized the property is listed on a local MLS which all agents who are members have access to. They can sign in to the MLS website and view properties for their buyers. Included in the property listings is the "offer of cooperating compensation". On their MLS they can see if a seller is offering out 1.5%, 2%, 2.5%, 3% commission etc.

The claim in these lawsuits has been that agents are steering buyers away from properties that are offering lower commissions. There could be some truth in this, however this is accounted for generally in the laws of agency. Even the loosest laws of agency in states require obedience on the part of every agent. If a buyer wants to see a home, the agent needs to make the effort to show it to them regardless of the commission being paid out. And if an agent refuses to show a home? Well there’s another 1.5 million Realtors in this country that would be happy to show you the property. That’s the beauty of free enterprise.

Furthermore I fail to see how eliminating guaranteed buyer agent compensation being advertised on the MLS would protect buyers interests. I often work in commercial deals that aren't listed on the MLS. When discussing these properties I simply call up the listing agent and ask what offer of compensation is being offered and make sure to write it into the contract. I also have worked on off-market deals where my buyers had to pay my commission. The conversation is quite simple "Hey, they're not willing to pay my commission so you're going to have to. I want 2.5%"

The truth is that the rule changes are not going to produce the “desired effect” of limiting commissions or making home buying more affordable. They will however produce significant income for the lawyers who filed these suits. The good news isn’t for home buyers or home sellers.

I have long found that other agents in this business don’t have the basic understandings of property law, contracts, and construction that are necessary to truly advise their clients on the purchase of a home. Most Realtors I know are happy to take their commission and step away from deals when things get tough.

When I got into this business, my mantra became “the only deal that matters is the next one.” Meaning, don’t worry about what you are making today. By doing the right thing by your clients you will always set yourself up for success tomorrow.

One of my first big deals in this business involved a sale of a friends home on Long Island. Prior to selling, he was concerned that a second floor bathroom in his house may not have been permitted. He contacted the local building department who ruled that the entire second story of his home was illegal.

At this point I could have said forget it and walked away from the deal. I was in over my head. Did I know anything about construction, zoning, code enforcement, etc? No. But I hit the books, researched everything I could and I drew up a case for an administrative variance and presented it to a state engineer. He overruled the local building department. The second floor was legal and they were forced to give my client a CO for the bathroom, allowing the sale to proceed.

When I first relocated to Florida one of the first buyers I met was a young couple looking for a fixer upper. Within 10 minutes of meeting them I knew they weren’t going to buy a home from me anytime soon. But I still took the time to show them every house they wanted to see. I needed to learn how the showing process in Florida worked and there was nothing wrong with getting reps in. I took the time to answer every question they had.

Sure enough, they weren’t ready to buy a home yet. But a year later I got a call. Were they finally ready to buy their home from me? No. But they had become house flippers in the past year and had financial backing. They needed to buy 20 homes from me by year end. That one couple jump started my business in the State of Florida and put me on the path to where I am today.

But not every story works out. I had some friends who used a friend of theirs as a buyers agent a few years back. She sold them a home with a faulty foundation, malfunctioning plumbing, and hidden mold behind a wall. As bad as that all sounds, ALL of these issues could have been taken care of before closing and repaired or her buyers could have backed out of the deal. Had I been their agent, I would have never let them put in an offer on a home with such obvious defects.

After closing when all the problem became apparent their agent disappeared. Refused to take their phone calls and help in any way. So they reached out to me. I helped them figure out what needed to be done and helped them put together their case for their lawyer as there were multiple parties they had to sue. I also used my construction contacts to help them repair their home in the most affordable manner.

So for those who say that today's settlement is bad news, you are correct. It is bad news for agents who don't provide value. It is bad news for agents who don't bring anything to the table besides a lawn sign and an MLS account.

But today’s agreement isn’t just good news, it’s GREAT news for hardworking ethical agents.

These new rules WILL push people who didn't belong in this business out. These new rules WILL probably eventually eliminate NAR and local boards as there will no longer be any point in joining them. These new rules WILL allow those of us who do the hard work and take proper care of our clients to generate even MORE business and negotiate our own rates.

I don’t know about you, but I’m worth a minimum of 3% on every deal I touch.