NAR rule changes spawn new LI brokerage model

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While new rules for members of the National Association of Realtors and its affiliates have caused confusion and angst for real estate agents, they have also given rise to a new brokerage model that operates outside those rules. 

The rule changes that went into effect in August came as part of NAR’s $418 million settlement in March to resolve several class-action lawsuits that challenged the industry’s cooperative compensation structure. Perhaps the biggest change is the new requirement that forces agents representing buyers to enter into written representation agreements upfront that details their services and what they’ll be paid. 

That’s one of the main reasons that real estate industry veteran Joseph Sabella launched his new RealPro100 brokerage firm, which is not a member of NAR or its Long Island Board of Realtors (LIBOR) affiliate, allowing it to circumvent the rule changes that came with the NAR settlement. It also lets agents avoid the costly dues and fees charged by NAR-affiliated brokers, associations and their connected multiple listing services, which combined can eclipse $1,000 annually. 

RealPro100 offers two basic plans. In its referral plan, licensed agents can make referrals to the broker of their choice and earn 85 percent of RealPro100’s 25 percent referral fee for a $100 annual membership. In its other plan, which requires a $300 annual membership fee, agents can have their license held with RealPro100 and work with buyers and sellers to earn an 85 percent commission split.  

In both cases, the agents avoid having to pay the more costly NAR-affiliated membership fees, which Sabella said creates a less expensive alternative to traditional brokerage firms and is especially attractive to those just starting out. 

“They may not want to make that big investment while they get their feet wet in the business,” he said. 

Of course, LIBOR membership comes with many extras, including education and training, dispute resolution, member discounts, access to OneKey MLS and more. But besides the cost savings, RealPro100 isn’t bound by NAR rules, which gives more freedom to agents on either of its plans. 

“With the NAR changes and the fact that a potential purchaser has to sign a contract before they can see any properties with a buyer’s agent, it may be in an agent’s best interest to refer that potential buyer to us, because we can service them without a contract, only an agency disclosure,” Sabella said. “We always abide by New York State law and right now the state doesn’t require a buyer to sign a contract before seeing properties with a buyer’s agent.” 

The new brokerage firm also offers a free service where brokers can park their inactive or lower-producing agents with RealPro100 and receive referrals for any business they do. Sabella said agents receive the benefit of paying no fees or dues and the broker still gets the benefit of the business those agents produce without the overhead costs to house their licenses. 

Though the new brokerage is not a member of LIBOR or OneKey MLS and doesn’t have access to its listings, Sabella said RealPro accesses Long Island listings through public-facing platforms like Zillow, Trulia and Realtor.com. It also syndicates its listings through New York State MLS, which are picked up and available to consumers through those online platforms. 

Dawn Pfaff, owner of New York State MLS, which was founded in 2009, said it is an alternative MLS that was founded to give a choice to real estate agents in their listing service. She said her company runs the multiple listing service in the Hamptons and has about 32,000 members across the state. Pfaff also founded a national platform called My State MLS in 2015, which has about 64,000 members across the country. 

“We never associated with NAR. We’re actually the only competitor to basically every MLS or NAR-associated MLS out there giving real estate agents a choice on how to list properties and a choice to their home sellers,” Pfaff said. “There are a lot of brokers who want to opt out of the National Association of Realtors right now, and that’s kind of the business model that Joe is going with.” 

Sabella began his real estate career in 1985 and joined a national firm two years later, where he earned awards for listing and production. Between 1989 and 1996 he managed two offices, before branching out to design web-based products to help other brokers recruit agents. 

Over the last two years, LIBOR membership in Nassau and Suffolk counties has dropped by 1,450, a decline of about 7.3 percent, which Sabella said can be attributed to the NAR rule changes and the lowest home sales volume in a decade. He said RealPro100 fills a gap in the Long Island real estate industry. 

“Our company was created not to compete with the brokerage community but to offer an alternative,” Sabella said, “a place where agents can make referrals and maintain their licenses without the expense of joining associations.”