Upheaval For Agents

David Goldsmith

All Powerful Moderator
Staff member

What a ban on noncompetes could mean for real estate​

Common contract provision hurts workers, according to the FTC​

Brokerages may have fewer arrows in their legal quiver if the Federal Trade Commission makes good on its new goal of banning noncompete clauses in employment contracts nationwide.
The contract provision restricts managers and executives from benefiting rival brokerages by switching jobs, usually within a defined geographic area or time period once a contract ends. Noncompete clauses do not typically affect agents, who are independent contractors.
“The higher you go in the food chain, the more common they are,” said New York real estate attorney Adam Leitman Bailey, who said he sees, and litigates, both sides of the issue.
Noncompete clauses “constitute an unfair method of competition,” according to the FTC, and have forced some real estate professionals into de facto unemployment — albeit compensated.

Steven James and Brad Loe waited out year-long noncompete clauses after leaving Douglas Elliman to join Berkshire Hathaway HomeServices as CEO and director of sales, respectively.
“People should be free to work where they want and associate with who they want,” said Jonathan Sack, an employment attorney in New York City opposed to broad noncompetes.
“Parties are free to contract,” said Sack, but trying to enforce overly broad restrictions can be “a total disaster.” Once a noncompete clause is found invalid for one worker, others working under the same restrictions are more likely to be freed. “They can be very difficult to enforce,” he said.

WeWork had to release 1,400 workers from an overly broad noncompete clause and reduced restrictions on a further 1,800 people after New York and Illinois attorneys general challenged the company in 2018.
The result has not stopped other real estate companies from trying to enforce noncompetes.

Cushman & Wakefield sued rival brokerage JLL in October after two former salesmen changed jobs, claiming they had violated the noncompete provision in their employment contract. Cushman also sued over a non-solicitation clause, which aims to stop workers who have changed jobs from recruiting others to join them at the new company — in this case, non-producing supportive staff.

Sack defended the ability of teams of workers to relocate, likening them to a musical quartet that needs the talents of each individual to function as a whole. Proving damages can also be tricky, he suggested, because the beneficiary of someone changing companies — such as a landlord who wants to close a deal — is unlikely to testify against their own broker.
Compass became a target of litigation for poaching managers of rival brokerages in order to build its company in the late 2010s. While Compass claims not to use noncompete clauses, it has gone to court to enforce non-solicitation clauses.
In one such dispute in California, rival brokerage The Agency countersued Compass to argue that its non-solicitation provision was illegal. Noncompete clauses are unenforceable in California due to state law, but the ban does not cover non-solicitation agreements.

The FTC’s noncompete agreement ban must still undergo a 60-day public comment period, though a final proposal is unlikely to proscribe non-solicitation. Nor will it ban other contract provisions that real estate professionals may enter into, such as clawback agreements that require agents to repay commission advances if they leave a brokerage prematurely.
Job seekers may lack leverage to negotiate specific language with employers, but real estate professionals who spoke with The Real Deal advised retaining an employment attorney to ensure noncompete restrictions are narrowly tailored. Several people spoke harshly of noncompete clauses but objected less to non-solicitation agreements. They asked to remain anonymous in order to preserve their relationship with an employer.

Bailey said he recently viewed a noncompete clause that would restrict a real estate professional from working for rival firms in New York City, the Hamptons and Miami — a geographical range he felt was too broad.
“If you’re paying people millions of dollars, you don’t want them competing against you in a year or two,” said Bailey. “But are they needed at brokerages? I think the free market should reign.”
The FTC claims that as many as 30 million Americans toil under noncompete clauses, dampening their total earning potential by as much as $300 billion per year.

David Goldsmith

All Powerful Moderator
Staff member

NAR hit record membership in 2022, but expects a drop​

Realtor count hit 1.6M at year’s end despite cooling housing market​

The ranks of the National Association of Realtors continued to grow last year, but membership may be poised to drop in 2023.
There were slightly more than 1.58 million members of NAR at the end of last year, according to Inman. The figure was a 1.37 percent jump from the previous year, when there were just shy of 1.56 million Realtors in the trade group.
It was the fourth straight year of record membership for NAR. Growth in the organization was not nearly as explosive as it was the previous year — the group grew by more than 21,000 people last year, that’s barely a fifth of the 100,000-person jump seen in 2021.
Florida is the biggest hub of Realtors in the nation, counting 223,000 people among its membership. California, Texas, New York and New Jersey round out the top five states for Realtors.

The state with the biggest rise in Realtor membership was West Virginia, which grew by 5.3 percent year-over-year to more than 3,300 people. The biggest decline came in Nevada, where membership dropped nearly 2.6 percent to more than 20,000 Realtors in the state.
The prominent real estate trade association may be in for a reduction this year. NAR’s finance committee anticipates membership will drop to 1.43 million in 2022, including a decline of more than 10,000 members by the time May rolls around.

A cooling housing market could be one reason for a reduction in membership in the coming year: fewer home sales means fewer Realtors able to be part of transactions and make money in the wake of a downturn from interest rate hikes by the Federal Reserve, which sent mortgage rates almost double their levels at the beginning of 2022.

“Some real estate professionals do well even in down markets, while others struggle even in hot markets,” NAR chief economist Lawrence Yun said. “Overall, though, reduced sales — like what occurred in 2022 and are forecasted in 2023 — can lead to more shakeouts.”
Meanwhile, some who entered the industry during the pandemic — when the market rapidly heated up and jobs in other industries were more precarious — may have the ability to move to another industry as the economy continues its recovery.