Market Conditions By City
Average Sale Price
$10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0
Atherton
Los Altos
Los Altos Hills
Menlo Park
Mountain View
Palo Alto
Portola Valley Redwood City
San Carlos
Sunnyvale
Woodside
Average sale price for single-family homes from 1/2022 to 11/2022,
1/2022 - 11/2022
compared to the period from 1/2023 to 11/2023.
1/2023 - 11/2023
Price/Square Foot Ratio $2,500
$2,000
$1,500
$1,000
$500
$0
Atherton
Los Altos
Los Altos Hills
Menlo Park
Mountain View
Palo Alto
Portola Valley Redwood City
Price per square foot ratio for single-family homes from 1/2022 to 11/2022, compared to the period from 1/2023 to 11/2023.
San Carlos
Sunnyvale
Woodside
1/2022 - 11/2022
1/2023 - 11/2023
Source: MLSListings, Inc., as of December 5, 2023 Criteria: Single Family Residential
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THE DELEON INSIGHT
A NEW ERA IN REAL ESTATE
− List Your Home for 3.5% or Less! By Michael Repka
Prior to the landmark decision in Burnett v. National Association of Realtors (“NAR”), et al, the commission for Buyer’s agents was generally set by the Seller and the Listing agent as part of the listing agreement. The commission remained the same even if the Buyer independently found the home, attended an open house without an agent, conducted an analysis of comparable properties using publicly available data, and only contacted the Buyer’s agent for assistance with the offer paperwork. Compounding the issue, the real estate industry enacted arguably self-serving rules (e.g., Model MLS Rule 9.7 and NAR Standard of Practice 16-16) prohibiting licensed real estate agents from assisting Sellers in negotiating lower Buyer’s agent commission as part of the offer/ counter-offer process. Informal discussions with Sellers have revealed that many felt compelled (or were explicitly told) to pay the 2.5% commission to Buyer’s agents. Otherwise, it was implied (or stated) that agents might refuse to show their property, fostering fear that their home would not sell. A cursory review of sales in recent years shows remarkable uniformity in the commission rate offered to Buyer’s agents. If Sellers did not believe that 2.5% was fixed or obligatory, then it would be quite a remarkable coincidence that 94.9% of the 871 listings sold in Palo Alto from January 1, 2021 to October 31, 2023 (ranging between $2 million and $10 million) offered exactly 2.5% commission to the Buyer’s agent.
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Sellers Do Not Have to Offer Commission to the Buyer’s Agent NAR has issued specific guidance that agents should always tell clients that “compensation arrangements (including commissions) are, and have always been, negotiable and set between a broker and their respective client. This includes compensation offered through the MLS to the buyer’s agent, if any.” Further, NAR has clearly stated that, “Listing brokers in consultation and agreement with their seller clients decide how much compensation to offer to serve the seller’s best interest, and it can be $0, a penny, or any other amount. NAR rules do not specify an amount. This is solely a matter that’s negotiated between brokers and their clients.”1 Irrespective of NAR’s guidance that Buyer’s agents “have an ethical duty to show” homes they believe their clients would love, even if “the commission being offered by the Listing broker is lower than what [the Buyer’s agent] wants to be paid,” some real estate agents are acting counter to the best interest of their Sellers and misstating the rule. They are inaccurately conveying to Sellers that they have no alternative but to pay a 2.5% commission (or some other figure), suggesting that agents will boycott the listing otherwise.
January 2024
However self-serving, this threat is simply not true − or, at the very least, no longer true. In the past, a listing could not be uploaded to the Multiple Listing Service (“MLS”) unless there was a unilateral and nonnegotiable offer of compensation to the Buyer’s agent (typically, as mentioned above, 2.5% for homes in this area between $2 million and $10 million). Back then, unless the listing agent paid for a significant amount of marketing, Buyers might not know about the home’s availability. Now, however, it is established that homes can be entered into the MLS, which syndicates to thousands of websites such as Zillow, Redfin, Realtor.com, and even brokerage websites such as Compass, Coldwell Banker and Intero, even with an offer of consideration as low as $0, let alone a more substantial amount like $10,000 or 1% of the sales price. In other words, even if an unethical agent refuses to tell potential buyers about a listing due to a perceived inadequacy of the offered commission, it is highly likely that the Buyer will discover the listing through online resources or conventional marketing channels like newspaper ads, TV commercials, radio spots, or online advertisements. Moreover, numerous competent agents are willing to submit offers, even if the compensation is “only” $10,000, $20,000 or 1% of the purchase price. Furthermore, innovative and client-centric brokerages, such as DeLeon Realty, will provide experienced, licensed agents to represent Buyers on their listings at no charge to either the Buyer or the Seller.
As one of the nation’s top Listing agents, and a California real estate attorney, I’ve gained valuable insight from the listing appointments I’ve attended since the Burnett v. NAR verdict. Adhering to the guidelines set by NAR, I've engaged in discussions with numerous potential Sellers regarding various compensation options for Buyer's agents. To date, only one Seller expressed the desire to offer no commission to Buyer’s agents, and only one opted for a 2.5% commission, citing concerns that Buyer’s agents might refuse to represent Buyers for less than $125,000 (for a $5 million property). It should be noted that this particular Seller came to such a conclusion after speaking with another agent that made those comments and was able to instill fear. In time, I expect most Listing agents will follow DeLeon Realty’s example, as well as NAR’s guidance, to give Sellers the option to offer lower commissions to the Buyer’s agent. Irrespective of the outliers mentioned above, most recent Sellers chose a Buyer’s agent commission ranging from a flat fee of $10,000 up to 1.5%. Many agents should find this range more than acceptable given the amount of work that they do in many transactions. However, highly experienced agents offering additional services or exceptional negotiation skills may command a premium above the Seller's offered amount. In such cases, Buyers can provide additional compensation through Buyer Representation Agreements or similar forms. Continued on next page DELEONREALTY.C O M
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R E A L E S TAT E I N F L U E N C E
How Berkeley Law School and the Stanford Graduate School of Business Prepared Me for Real Estate By Ken DeLeon
There are two things I love most about real estate: How much I get to help my clients, and how my practice utilizes my IQ skills, as well as my EQ skills (more commonly referred to as emotional intelligence) that I’ve derived through my educational experiences. Both Berkeley Law School (f.k.a. Boalt Hall) and the Stanford Graduate School of Business provided me with distinct tools that allow me to best represent my clients. Berkeley Law School taught me to think critically and consider all alternatives. As a result, I have been able to offer a world-class buying experience to my clients through the innovative incorporation of the following: 1. DeLeon Realty's brokerage model mirrors that of elite law firms. Drawing on my background from the major international law firm Wilson Sonsini, I have seamlessly incorporated “white-shoe” law firm efficiency into our own innovative, client-centric approach, which has revolutionized the real estate industry. Other traditional brokerages are composed of commission-based independent contractors acting as agents. These agents do not have formal training in the professional trades important to clients, and consequently they become jacks-of-all-trades and masters of none. Conversely, DeLeon’s team of salaried specialists provides much greater expertise and economies of scale, allowing us to pass along these benefits to our clients. For example, the Buyers I represent on our listings each have
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R E A L E S TAT E I N F L U E N C E
their own agent advocating for them, get access to our designers and construction consultant, and can use our moving truck, all for a total cost of 3%. 2. My expertise in negotiations comes from both professional training at Berkeley, Stanford and Harvard, as well as extensive practical experience from representing many hundreds of buyers in their home purchases. Through this experience, I have mastered the art of the deal and overcome zero sum issues. As an experienced negotiator, I have learned to leave a little for the other side and to highlight what we offer them in the negotiation, so that even while my clients come out on top, both parties walk away satisfied. 3. California has the nation’s highest capital gains tax rate, which provides great incentives for taxefficient deal structuring. Michael and I use our legal expertise in tax law and estate planning to structure agreements that can lower capital gains taxes and related tax costs, while enhancing the other deal benefits. Although these techniques are commonly used by attorneys to help their clients, many Realtors® are unaware of these tools and opportunities—often leaving considerable money on the table. By way of example, we recently put together a win-win structure that utilized seller financing, which lowered the seller’s tax burden while helping the Buyer get a slightly lower mortgage rate. 4. Being a lawyer with training from world-class institutions, and having experience at one of the nation’s most elite law firms, I developed an intense work ethic inside me that I carry forward to this day. At Wilson Sonsini, I regularly worked 75 hours per week, always being available to our clients at all hours. Whereas many in real estate fail due to a lack of self-discipline, the work ethic I honed in the intense environment of Wilson Sonsini allows me to be fully available day or night to my buyers. 5. My legal background is arguably the best background for real estate. With my expertise, I can help clients with many legal issues such as deciphering planning ordinances, helping explore SB 9 lot subdivisions, or Prop 19 transfers of their property tax basis. Unlike any other brokerage of which I am aware, all of our in-house legal services are complimentary for our clients.
While I enjoyed law school, I loved business school! My classmates at Stanford’s Graduate School of Business were as brilliant as my Berkeley Law classmates, but in addition to IQ, they also had exceptional EQ skills. The following insights were honed during my time at Stanford: A. The ability to deeply analyze the market and individual homes. With a greater understanding of all factors impacting valuation, I can really calculate my thoughts on the ideal time to purchase a property and where the greatest deals can be found. Through data science, I am able to find out what variables most correlate with a great deal, and use that information to obtain homes below market value for my clients. B. Additionally, I have learned powerful, quantitative programs that help me forecast trends to accurately predict which areas will see the most appreciation. C. In business school, the focus was on solving pain points to provide value to clients. At DeLeon Realty, our VP of Development Matt Griffis helps our clients on a complimentary basis to orchestrate their remodel. We also have interior designers on staff to help our clients further improve their homes. DeLeon’s integrated team has varied strengths, providing solutions to nearly any issue a client may encounter. One final and considerably large benefit is the trusted relationships that I tend to instantly form with Stanford and Berkeley alumni. While my formal education is likely over, I will forever be a life-long learner, and the knowledge that I have gained from law and business school allows me to continually grow and assist my clients with every facet of purchasing a home. A better education, stronger work ethic, more experience, and a highly client-centric business model focused exclusively on Buyers has positioned me to be the best option for any Silicon Valley Buyer. Meet with me in person, or chat with my teammate Alex, a trained California real estate attorney and elite Buyer’s Agent, to understand why I am the only Silicon Valley Agent ever ranked as the Number One (#1) real estate agent in the United States, as published in the Wall Steet Journal by Real Trends. DELEONREALTY.C O M
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R E A L E S TAT E M A R K E T I N G
As technology advances, a growing wealth of technical expertise is emerging to perfect a persuasive digital presence. While traditional marketing remains a valuable way to capture mass consumer attention, when done correctly, digital marketing offers an opportunity to target a particular type of buyer who may not be looking in that exact area. Taken together, an integrated approach that utilizes both traditional media, augmented by cutting-edge digitals tools, permits us to market our properties to the broadest possible cross-section of potential buyers. Cost-Efficiency Many agents pay lip service to digital marketing because it is very affordable (or, on a limited basis, free) when compared to traditional marketing, such as newspapers, magazines, direct mail, and TV commercials. In fact, many agents have stopped paying for any traditional marketing, telling clients that a basic digital package is sufficient. However, a persuasive digital campaign is far more than merely the free platforms that feed from the Multiple Listing Service (“MLS”), such as Zillow, Trulia, Redfin, Realtor.com, and MLSlistings.com. A comprehensive digital marketing campaign facilitates a precise allocation of resources to high-performing channels and targets specific classes of buyers. For example, newspaper ads, direct mail, and TV commercials can promote a home in Portola Valley or Los Altos Hills to people who may desire a home in that
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area. On the other hand, a digital campaign can target people who have an equestrian background that will appreciate the home’s barn and proximity to a massive network of horse trails. Similarly, a digital campaign can target people with a contractor’s license who may be interested in a buildable lot or a home that needs a lot of renovations. Trackable and Measurable Insights Compared to conventional approaches, digital marketing offers a more strategic and insightful approach to marketing homes for sale. Tools like Google Analytics and Hootsuite offer immediate access to trackable data, empowering us to fine-tune and enhance our marketing campaigns. While we do spend considerably more in marketing per listing than any other local brokerage, each of our marketing dollars goes further thanks to our refined techniques and strategic approach. Improved Conversion Rates Another significant advantage of digital marketing is enhanced conversion rates through our ability to deliver tailored content to a targeted audience, refine the user experience, and employ data-driven tactics. We are able to stay responsive to changing market trends and evolving customer preferences, creating a seamless and persuasive customer journey that encourages users to take the desired action — that is, buy our clients’ homes!
R E A L E S TAT E M A R K E T I N G
Digital Marketing in the Real Estate Industry By Thy Phan, Digital Marketing Specialist
Global Reach Given the international interest in Silicon Valley homes, digital marketing gives us the unique ability to access a global audience in the most effective way. As DeLeon Realty’s digital marketing specialist, I work closely with Audrey Sun and Pamela Tao, DeLeon Realty’s dedicated Chinese Marketing Specialist, to ensure the most comprehensive digital marketing to the Chinese community. Naturally, this is on top of, and integrated with, the marketing we do in Chinese newspapers, radio, TV, and at Chinese real estate events and showcases. The geographical constraints that once bounded traditional marketing have been greatly diminished by the borderless digital realm. Showcase Properties Effectively Digital marketing equips us with the tools to present our listings using top-notch imagery, virtual tours, narrated videos, and interactive content, enabling prospective buyers to grasp the property's essence before actually visiting. This approach provides prospective clients with an immersive experience facilitated by high-quality visuals, virtual tours, interactive features, and the latest information updates.
and stay updated with evolving trends. Global technological advancements have sparked a significant change in perspective, particularly in the realm of digital advertsing. Although DeLeon Realty already had a digital presence significantly more robust than typical real estate agents and teams, they hired me to bring their listings to an entirely new level. Working closely with Michael and Audrey, along with all of the members of the DeLeon marketing team, we bring our listings to the broadest possible audience. When choosing to list with us, the market for your home will be significantly strengthened in both the traditional and digital landscapes. After studying all of the competing agents and teams in Silicon Valley, I am confident that no other agent or team has a full-time dedicated digital marketing specialist. I love digital marketing. I went to school for it, and I have dedicated my career to marketing in this area. I am so glad that Michael Repka shares my view that a significant investment in marketing our homes via cutting edge digital tools and platforms will result in higher sales prices for our clients.
To lead in the ever-changing world of digital marketing, it’s essential to embrace innovation DELEONREALT Y.C O M
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THE DELEON INSIGHT
Embracing the Pacific Northwest: Why Silicon Valley Residents are Flocking to Bend and Portland, Oregon By Rachel Repka
Silicon Valley has long been synonymous with technological innovation, fast-paced living, and skyrocketing real estate prices. However, a growing number of residents in the Bay Area, including several of our clients, are now finding solace and opportunity in Oregon, particularly in Bend and Portland. Since 2017, Oregon has consistently ranked among the top five states for migration from California.1 This exodus is fueled by a combination of factors, such as incredible scenic beauty, flourishing industries, affordability in real estate and living expenses, a lesscongested environment, and a commitment to a wellbalanced lifestyle that has become a mecca for outdoor enthusiasts. Last month, Ken DeLeon, Michael Repka, and I visited Bend and Portland. The lush green trees and mountains warmly greeted us as we took the short flight into Bend, and then the even shorter flight to Portland. After spending several days exploring the region and meeting with several real estate agents, we gained profound insight into the allure that these cities hold for our clients. Oregon’s Somewhat Favorable Tax Benefits Unlike some other states that offer tremendous tax benefits over California, Oregon is only modestly more favorable than California when it comes to income taxes. Specifically, Oregon has a moderately high top income tax rate of 9.9%, compared to California’s exceptionally high top tax bracket of 13.3%. However, when coupled with more affordable real estate, lower cost of living, and the fact that Oregon is only one of five states nationwide that boasts no sales tax, people still find sufficient economic and tax benefits to justify a move to the Beaver State. Key Industries and Political Climate The political climate of Oregon is another factor that resonates with Silicon Valley residents seeking a change. Both states share a liberal political climate. In the last presidential election, 56.4% of Oregonians voted for
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the Democratic Party, 40.4% voted for the Republican Party, and 3.2% voted for an independent candidate. Like California, Oregon shares a progressive ethos. The state is known for its environmentally conscious policies, commitment to social issues, and a collaborative approach to governance. This political climate aligns with the values of many Californians, making Oregon an attractive destination for those seeking a progressive and inclusive community. Oregon's thriving industries and the presence of major companies play a crucial role in attracting Silicon Valley residents. The state is a hub for technology, biosciences, business services, food and beverages, forestry and wood products, and outdoor gear and apparel – thus offering a diverse job market.2 Top companies such as Intel, Tektronix, HP, Kaiser Permanente, Genentech, and Boeing contribute to the region’s economic vitality.3 In addition, Oregon’s prominence in the outdoor and athletic industry is a draw for those passionate about such pursuits. Iconic brands like Nike, Columbia Sportswear, adidas North America, Letherman Tool Group, and LaCrosse Footwear have established their headquarters in the state, providing ample employment opportunities.4 The Irresistible Allure of Bend Bend has emerged as a sought-after destination for those seeking a harmonious blend of nature, affordability, and a vibrant community. Affordable Real Estate Prices One of the primary draws to Bend is its relatively affordable real estate market. Bend offers a diverse range of housing options at more reasonable costs. From charming single-family homes to modern condominiums with scenic views, Bend provides a variety of choices that cater to different preferences and budgets. The median sales price of homes in Bend is $735,000.5 Below is a sample home in Bend.
THE DELEON INSIGHT
the city hosts numerous galleries, theaters, and music venues, ensuring that residents have access to a constant stream of cultural experiences. Additionally, Portland’s commitment to sustainability is evident in its extensive parks and recreational areas, providing ample opportunities for outdoor activities, from hiking in Forest Park to biking along the scenic Willamette River. The city’s food scene is another highlight, with an abundance of local and diverse culinary options. Food carts, farmers’ markets, and acclaimed restaurants offer a gastronomic adventure for residents with varying tastes. Laid-back and Progressive Environment Portland’s laid-back and progressive atmosphere fosters a diverse and inclusive community. The city embraces a unique ethos, where individuality and creativity are celebrated. Locally-owned businesses, craft breweries, and a commitment to environmental sustainability contribute to a lifestyle that prioritizes community engagement and a sense of belonging. In conclusion, as Silicon Valley residents seek a change of pace and a more balanced lifestyle, Bend and Portland emerge as beacons in the Pacific Northwest. The combination of reasonable real estate prices, manageable living costs, an abundance of activities, and a laid-back lifestyle positions these cities as ideal destinations. If you're interested in exploring more about Bend and Portland, feel free to contact me at 650-543-8520.
https://www.census.gov/data/tables/time-series/demo/geographicmobility/state-to-state-migration.html 2 https://www.oregon.gov/biz/programs/homeareas/byboregon/ targetindustries/pages/default.aspx 3 https://www.greaterportlandinc.com/research-center/major-employers/ 4 https://www.greaterportlandinc.com/industries/apparel-and-outdoor/ 5 Prices reported by Beacon Appraisal Group for October 2023 for single family residences, https://beaconappraisal.net/wp-content/ uploads/2023/11/BEACON-REPORT-November-2023.pdf 6 Price for September 2023 for residential property, https://pmar.org/ shareables/ 1
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THE DELEON INSIGHT
A Guide to Interviewing and Selecting Your Ideal Buyer’s Agent By Michael Repka
Ask any experienced listing agent and they will tell you that there is a huge chasm in quality between good Buyer’s agents and average agents, let alone weak agents. Some agents demonstrate professionalism, reliability, and resourcefulness, contributing positively to deals, while others hinder transactions due to unreliability, inexperience, or lack of trustworthiness. As one of the top Listing agents in the nation, I have personally seen the full spectrum of Buyer’s agents: from exceptional agents that instill much confidence that the transaction will close smoothly and on time, to scary agents that Sellers should avoid if at all possible. Unfortunately, many Buyers are unable to discern these differences. Frequently, Buyers erroneously assume that their chosen agent is a top producer, well-educated, experienced, knowledgeable, and well-regarded within the industry. As a starting point, people that are very good Listing agents are often not good Buyer’s agents, and vice versa − the skillset is actually surprisingly different. That is one of the reasons Audrey, Francis and I work exclusively with Sellers, whereas Ken and his team work exclusively with Buyers. Similarly, a Buyer’s agent that is very knowledgeable and well-connected in one area may be a fish out of water in a town just 15 miles away. Yet when a potential client speaks with an agent, some agents will explain that they are good at everything, everywhere. Afterall, according to many agents, it is always a good time to buy or sell. So, the question remains: How should a potential Buyer determine which agent is really best for them? The process of buying a home involves numerous complexities, and a skilled Buyer's agent can streamline the journey, ensuring that their client finds the perfect property at the right price. Before delving into the interview and selection process, it's crucial to understand the role of a Buyer's agent. Unlike the Listing agent, who represents the Seller's
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interests, a Buyer's agent works on behalf of the Buyer. Their responsibilities include guiding the Buyer through property searches, negotiating offers, handling paperwork, and providing valuable insights based on their knowledge of the local market. Additionally, an experienced and resourceful Buyer’s agent can assist their clients with property related questions for years to come. Even long after the sale closes, a good Buyer’s agent can help with everything from finding a vendor to do some tree or roof work, to responding to a legal or tax notice. Research and Recommendations The first step in finding a suitable Buyer's agent is conducting thorough research. Although seeking recommendations from friends, family, and colleagues who have recently bought a home is a common starting point, many clients don’t have enough experience in buying homes to know just how great an agent can be. Therefore, we recommend starting with an objective list of the top agents ranked by actual Buyer-side sales in the specific area you are targeting. Third-party objective services such as Broker Metrics® provide detailed lists of the sales in various areas. If an agent can’t, or won’t, provide a list of the top agents in a given city or area, you can rest assured that they would not be on that list. It is important to focus exclusively on Buyer’s-side sales because many top agents work primarily with Sellers. In fact, Ken DeLeon is the only top agent in California who works exclusively with Buyers. Interviewing Prospective Agents Once you've compiled a list of potential Buyer's agents, go to their website to read about their approach, background, and services. It is common for agents to “adapt” their answers to match what the particular client wants to hear, but their website is often a more straightforward picture of the agent’s true area of focus. For example, if you call an agent and tell them that you are looking to buy a home in Palo Alto, then they may say that they specialize in Palo Alto Buyers. On the other hand, that same agent may say that they specialize in
January 2024
Making Your Decision After interviewing all of the potential Buyer's agents, evaluate their responses, demeanor, and overall compatibility with your preferences. Consider factors such as communication style, market knowledge, and negotiation skills and training. Remember, the goal is to find an agent who not only possesses the necessary expertise, but also communicates effectively and aligns with your personal preferences. San Mateo listings when speaking with a potential Seller in that area. However, the public-facing website is less malleable. After narrowing the field down to three to five potential agents, savvy Buyers will make up a list of the questions that matter most to them and ask each agent to respond to them directly (ideally in writing). Some of the questions may include: 1. Do you work mostly with Buyers or Sellers? 2. How long have you been an agent in the ___area? 3. How many Buyer’s sales have you done in the ____ area over the past 5 years? 4. How well do you know the ____ area? Do you have any videos or publications that highlight that neighborhood or city? 5. What is your educational background? Which schools? What degrees? 6. What is your commission rate? 7. Do you provide summaries of the disclosures drawing extra attention to the most important items? 8. Do you provide guidance on post-acquisition renovations? If so, what is your professional training and educational background that make you qualified to provide this guidance? 9. Do you have legal training to give advice on the contract and the disclosures? 10. Who covers for you if you are unavailable at any particular time? Although many agents are trained with “scripts” that may distort reality a bit, Buyers will be able to discern the truth through detailed questions. Buyers should treat these interactions as job interviews because they are hiring someone to represent their interests in a significant financial transaction.
It is also crucial to assess the chemistry between you and the prospective agent. A strong rapport and clear communication style can foster a positive working relationship throughout the home-buying process. Trust your instincts and choose an agent with whom you feel comfortable and confident. Checking References and Reviews Before finalizing your decision, contact the references provided by the agent. Ask about their experiences, the agent's responsiveness, and the overall satisfaction with the services rendered. Additionally, review online testimonials and ratings to gain insights into the experiences of other clients. Negotiating Terms Once you've identified your preferred Buyer's agent, negotiate the terms of the Buyer/Broker Agreement. Clarify commission rates, contractual obligations, geographic areas of coverage, length of time of the agreement, and any specific conditions you want to include. A transparent and mutually agreedupon contract sets the foundation for a successful partnership. Selecting the right Buyer's agent is a crucial step in ensuring a smooth and successful home-buying experience. By conducting thorough research, interviewing prospective agents, and considering factors such as experience, communication, and negotiation skills, you can make an informed decision. Remember that a skilled Buyer's agent is not just a guide through the intricacies of the real estate market, but also a reliable ally prioritizing your interests above all.
DELEONREALT Y.C O M
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R E A L E S TAT E L A W
Landmark Verdict: National Association of Realtors and Two Major Brokerages Found Guilty of Colluding to Inflate Commissions A Decision That Could Radically Transform Silicon Valley Real Estate By Michael Repka, Esq.
In a pivotal legal development, a Kansas City, Missouri jury issued its verdict on October 31, 2023 finding the National Association of Realtors (NAR), HomeServices of America (which includes the Berkshire Hathaway and Intero brands, amongst others), and Keller Williams guilty of conspiring to inflate or artificially support high commission rates. This verdict arose from the Sitzer/Burnett Buyer broker commission lawsuit. Subsequently, similar lawsuits were filed against Compass, eXp, and other brokerages, including one in California. Impact of Antitrust Lawsuits The decision in the Sitzer/Burnett case will almost certainly have a profound impact on the real estate industry – even beyond the massive $1.78 billion verdict (which could be tripled, as is applicable to antitrust cases). This decision should result in dramatic changes to the way real estate agents conduct business and are compensated nationwide. Although disingenuous, or unrealistically optimistic, some agents will argue that nothing will change as a result of these lawsuits; however, it is almost guaranteed that the enhanced competition between agents will push total commissions down and the
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quality of service up. Simply put, informed Sellers will no longer pay 5 to 6% to list their homes for sale! Irrespective of the fact that the defendants have vowed to appeal, the odds are against this decision being reversed. And, in reality, it does not matter if it is reversed because many local brokerages are having Buyers sign agreements whereby the Buyers commit to pay their own agent, albeit often at reduced rates. Additionally, DeLeon Realty is currently signing listing agreements that do not require the Sellers to pay a 2.5% commission to the Buyer’s agent representing the Buyer. After a thorough and straightforward discussion of this case and the various options available, most of our Sellers are electing to only offer Buyer’s agents $10,000 or $20,000, with the Buyer paying their agent any additional compensation. If the Buyer does not want to pay any additional commission, then DeLeon Realty will provide a Buyer’s agent at no charge to either the Buyer or the Seller and even waive the $10,000 or $20,000. In other words, many DeLeon Sellers are paying less than 3.5% to list their home, and they are still getting access to all of DeLeon Realty’s industry
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leading home prep, staging, included inspections, marketing and legal services. Plus, for Sellers that sign listing agreements now, DeLeon Realty will honor these dramatically reduced listing commissions even if the federal court decision is overturned on appeal. The Court Decision That Changes it All Following more than two weeks of testimony from both the plaintiffs and defendants, the jury in the Sitzer/ Burnett case reached a verdict after less than three hours of deliberation. During the trial, the plaintiffs argued that, despite the existence of antitrust rules and regulations, the defendants intentionally disregarded their own rules to maintain higher commission rates. Put another way, the real estate industry may speak in favor of antitrust principles, but its actual practices are inconsistent with such rhetoric. Not surprisingly, spokespeople from NAR and HomeServices have already expressed their intention to appeal the ruling, which assumes they can post the massive bond that would be required. Therefore, the legal process might not reach a resolution with this verdict alone. Alternatively, the defendants could (and likely should) negotiate a settlement to end the uncertainty of a lengthy appeal. Before the ink was even dry on the Sitzer/Burnett decision, class action plaintiff attorneys targeted additional defendants, filing another lawsuit against several smaller national brokerages including Compass, Douglas Elliman, eXp, and Redfin, amongst others. On December 11, 2023, Compass, RE/MAX, Keller Williams, eXp, and Anywhere were also named in a similar lawsuit filed in U.S. District Court in California. It's worth noting that the Sitzer/Burnett lawsuit originally included RE/MAX and Anywhere Real Estate (including the Coldwell Banker, Century 21, and Sotheby’s brands, amongst others), as defendants. However, RE/MAX reached a settlement of $55 million in September and Anywhere Real Estate (formerly known as Realogy) settled for $83.5 million earlier in October. These settlements constituted resolutions in this lawsuit, as well as two other commission-related lawsuits (Moehrl and Nosalek), for these two defendants.
Likely Impact on Silicon Valley Real Estate Irrespective of the fact that the Sitzer/Burnett case was decided by the United States District Court for the Western District of Missouri, the conduct addressed is consistent with the way real estate sales are handled nationwide, including in Silicon Valley; therefore, it is likely this decision will impact our local real estate market. This begs the question: How will the Silicon Valley real estate industry respond and adapt to this decision? First, it is likely there will be substantial changes to the way Buyer’s agents are compensated and by whom. Buyers will likely negotiate the terms of the relationship with their agents and may have to pay them directly. Further, the heightened level of transparency and competition will likely result in downward pressure on the overall commission paid to Buyer’s agents and/ or an increase in the level of services provided. This will, in turn, drive many less-experienced agents out of traditional commission-based sales roles. Some will likely leave the industry entirely, whereas others will shift to soon-to-emerge companies that will prepare Buyers’ offers on an hourly or fixed-fee basis. Problematic “Traditional” Commission Structure Under the most common structure employed by Realtors® in the United States, a homeowner seeking to sell their property would contact one or more agents to discuss the potential listing. After selecting an agent, the homeowner and the Listing agent would agree on the commission amount, which was influenced by factors such as the agent's experience, the services they provide, the breadth and depth of marketing, and various other considerations. However, the listing agreement also stipulates the commission to be paid to the Buyer's agent. Notably, one of the aspects detrimental to the real estate industry's case was the requirement that a listing couldn't even be added to most Multiple Listing Services’ ("MLS") databases unless the listing included a promise of commission to the Buyer's agent. Further, Continued on next page DELEONREALT Y.C O M
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ATHERTON Atherton Median Sales Price & Price/Sq. Ft. Ratio
Atherton Inventory # of New Listings
$2,500
$15,000,000 $10,000,000
15
$1,500
10
Sale Price, Median
$0
5 0 Ja
D ec -2 2
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
Apr-23
May-23
Feb-23
Mar-23
Jan-23
$500
Dec-22
$0
20
$2,000 $1,000
$5,000,000
25
Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$3,000
$20,000,000
Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23
$3,500
n23
$25,000,000
Price/SqFt Ratio
LOS ALTOS Los Altos Median Sales Price & Price/Sq. Ft. Ratio
Los Altos Inventory # of New Listings
$6,000,000
$2,000
$5,000,000
$1,500
$4,000,000
$1,000
$2,000,000
Sale Price, Median
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$1,000,000
40 30 20
$500
10
$0
0 D ec -2 2 Ja n23 Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23 Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$3,000,000
50
Price/SqFt Ratio
LOS ALTOS HILLS Los Altos Hills Median Sales Price & Price/Sq. Ft. Ratio
$2,000 $1,500 $1,000
Sale Price, Median
Price/SqFt Ratio
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Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$500 $0
16 14 12 10 8 6 4 2 0 D ec -2 2 Ja n23 Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23 Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$2,500
Dec-22
$8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0
Los Altos Hills Inventory # of New Listings
R E A L E S TAT E M A R K E T P U L S E
MENLO PARK Menlo Park Median Sales Price & Price/Sq. Ft. Ratio
Menlo Park Inventory # of New Listings
$3,000,000 $2,000,000
Sale Price, Median
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$1,000,000
60 50 40 30 20 10 0 Ju l-2 3 Au g23 Se p23 O ct -2 3 N ov -2 3
$4,000,000
$1,650 $1,600 $1,550 $1,500 $1,450 $1,400 $1,350 $1,300 $1,250
De c22 Ja n23 Fe b23 M ar -2 3 Ap r-2 3 M ay -2 3 Ju n23
$5,000,000
Price/SqFt Ratio
MOUNTAIN VIEW Mountain View Median Sales Price & Price/Sq. Ft. Ratio
Mountain View Inventory # of New Listings
$3,000,000
$2,000
$2,500,000
$1,500
$2,000,000 $1,500,000
$1,000
$1,000,000
$500
Sale Price, Median
$0
30 25 20 15 10
5 0
De c22 Ja n23 Fe b23 M ar -2 3 Ap r-2 3 M ay -2 3 Ju n23 Ju l-2 3 Au g23 Se p23 O ct -2 3 N ov -2 3
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$500,000
35
Price/SqFt Ratio
PALO ALTO Palo Alto Median Sales Price & Price/Sq. Ft. Ratio $2,500
60
$2,000
50
$1,500
40
Sale Price, Median
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$500 $0
30 20 10 0 D ec -2 2 Ja n23 Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23 Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$1,000
Dec-22
$4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0
Palo Alto Inventory # of New Listings
Price/SqFt Ratio
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PORTOLA VALLEY Portola Valley Median Sales Price & Price/Sq. Ft. Ratio
Portola Valley Inventory # of New Listings
$8,000,000
$2,000
20
$6,000,000 $5,000,000
$1,500
15
$1,000
10
$500
5
$4,000,000
Sale Price, Median
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$3,000,000 $2,000,000 $1,000,000
$0
0 D ec -2 2 Ja n23 Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23 Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$7,000,000
Price/SqFt Ratio
SUNNYVALE Sunnyvale Median Sales Price & Price/Sq. Ft. Ratio
Sunnyvale Inventory # of New Listings
$2,500,000 $2,000,000 $1,500,000 $1,000,000
Sale Price, Median
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$500,000
$1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
100 80 60 40 20 0 D ec -2 2 Ja n23 Fe b23 M ar -2 3 A pr -2 3 M ay -2 3 Ju n23 Ju l-2 3 A ug -2 3 Se p23 O ct -2 3 N ov -2 3
$3,000,000
Price/SqFt Ratio
WOODSIDE Woodside Median Sales Price & Price/Sq. Ft. Ratio
Woodside Inventory # of New Listings
$20,000,000
$3,000
$15,000,000
$2,000
$10,000,000
$1,000
Sale Price, Median
Price/SqFt Ratio
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Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
$0
Dec-22
$5,000,000
$0
Large spike due to Ken DeLeon successfully representing buyer of a $40M property
30 25 20 15 10 5 0 Ju l-2 3 Au g23 Se p23 O ct -2 3 N ov -2 3
$4,000
De c22 Ja n23 Fe b23 M ar -2 3 Ap r-2 3 M ay -2 3 Ju n23
$25,000,000
$1,500,000
$1,000,000
$3,000,000 $1,350
$2,500,000 $1,300
50
$2,000,000 $1,250
$1,500,000 $1,200
$1,000,000 $1,150
$500,000 $1,100
$0 $1,050
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
Ju l-2 3 Au g23 Se p23 O ct -2 3 N ov -2 3
$500,000
De c22 Ja n23 Fe b23 M ar -2 3 Ap r-2 3 M ay -2 3 Ju n23
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
May-23
Apr-23
Mar-23
Feb-23
Jan-23
Dec-22
$0
Dec-22
$950 $900
70 60 50 40 30 20 10 0
$1,250 $1,200
$1,150 $1,100
$1,050 $1,000
Ju l-2 3 Au g23 Se p23 O ct -2 3 N ov -2 3
$2,000,000
De c22 Ja n23 Fe b23 M ar -2 3 Ap r-2 3 M ay -2 3 Ju n23
$2,500,000
40
30
20
10
0