100. Deciphering the $418 Million NAR Settlement: Commission Rethink and Smart Property Management Decode

We serve as a hub for connecting with fellow members during our sessions so you can share successes , ask questions and keep the momentum going so you can share successes , ask questions and keep the momentum going .

There was a lot of news that dropped last week with NAR reaching a $418 million settlement , and so my co-host and I are going to be breaking down the fallout from that NAR ruling and also getting our takes , talking about how the industry is going to change a bit and then , obviously , inviting the rest of the group to join as well .

Liban , how are you doing ?

I'm going to give you another go right on this piece and then and then I will explain it we'll go for it , okay yeah , so essentially , um , no longer now will sellers be responsible for both sides both the seller and buyers compensation um , previously sellers kind of we were kind of cooperating with them and hey , that 6% listing fee , the seller's agent isn't

actually taking all of that , he's giving a percentage of that to incentivize buyers to come in and show the home because of the fact that , hey , the more people you have coming in , the more likely you are to get an offer , the more likely you are to get that home sold .

So in it I think the actual definition of it was , quote , unquote , anti , and I think it was actually the fact that the listing fee I found was the actual MLS , the fact that we are putting it on the MLS .

That's what determined , hey , the buyer's agent has to have some level of compensation , because what's preventing the listing age from just cutting that individual completely out of the deal and representing both sides ?

It was basically an antitrust lawsuit saying that NAR had a monopoly on the industry and they forced sellers to pay the other side's commission and , to your point , it really revolved around the MLS itself .

So when you look at Zillow , you may not notice this , but if you scroll all the way to the bottom of whatever listing you're looking at , it tells you what the buyer's agent will get compensated for helping close that deal . And what this has allowed over the years is for buyer's agents to tell their clients hey , no worries , the fee is covered by the seller .

And so people were able to go to their cousin's , auntie's , wife's mother , who happened to have a license , and use them because , hey , I'm not paying this person , I just need somebody to kind of close this deal , things of that nature .

And so what this lawsuit , this $418 million settlement , is going to do and it's actually going to happen sooner than we realize is it's going to remove that requirement on the MLS , and more than remove that requirement , it's going to take that whole thing off . So there's not going to be anything there .

And now , in order for a buyer's agent to show their buyer a house , they need to have a commission agreement in place with that buyer before they can even get access to the house .

And so this is a major change and a shakeup from what it used to be , where you would typically meet a client at a house or an open house and hey , let's go check out a couple of houses , build a rapport and then put together a buyer's agreement . And now you've got to do a couple of houses , build a rapport and then put together a buyer's agreement .

Now you've got to do a lot of that upfront . And what I relate this to . I'm actually kind of happy about this right , and I look at it as a major opportunity because so many agents have their license right . It's not that hard to get a license . You can literally get it in about three months , and there's not less or less right .

If you're a hustler , hustling , you can get in about two weeks right , and it's one of those things where it's gonna force people to actually be differentiated , and what I mean by that is , yes , any agent can help anybody , but when you go to say a doctor , for instance , right a couple weeks ago I hurt my finger playing basketball and uh and leave on , was

you know ? I don't know if it's bad luck or first time , but we're not getting all that long story short , I was playing basketball and I and I hurt my finger , and I did not go to a general doctor for this right . What I went to was a hand doctor , the reason being they work with hands . They know how to .

Okay , let's make sure you get the full range of motion back . We're going to do these exercises , we're going to give you this type of splint and then we're going to switch over to this so you get that full flexion back , and that's why I went to them .

If I had hurt my foot , I'd go to a foot doctor , and so it's the same thing in the real estate industry that I think is going to start to shake out .

You're going to have certain agents that are , like us , investor friendly right , and what we're doing is focused on the investor market , knowing how to run the numbers , knowing how to source deals and being able to bring tremendous value to our buyer clients through that .

You're going to have other agents that focus on more of the retail right , like , hey , I helped first time home buyers just buy a house that they want to live in quote , unquote and others that focus on , you know , commercial and things of that nature , and so it's going to allow the good agents to start to rise to the top , because they're going to need to

differentiate their services and things of that nature , and so I'm , low-key , kind of excited . Now , on the flip side of that , from a buyer perspective , it's going to be a bit tougher , right .

From a buyer perspective , you're now going to be on the hook for that commission piece and it just depends on who you're utilizing , what agent you're working with , how much of that you're going to have to come to the table with .

I've already been coaching our team and Liban's been in lockstep and everybody else , and what we're going to be doing is negotiating hard to still regardless of what the seller has quote unquote budgeted aside to get the seller side to pay for a majority of it right Through negotiations , whether that be through credits and things of that nature .

But it's definitely a shake-up . It's not a given anymore . It's something that has to be talked about up front leban .

If you're a seller , you want as many buyers as possible , but a lot of times , as a seller yourself , you care about that net . That net is the most important thing to a seller and so it's really going to be .

Previously it was kind of a hidden hey , you're getting a lot of benefit by giving up that 3% , but now having to go up with that kind of piece is kind of difficult , because now you're going to have to say to the seller basically , hey , I'm responsible for that piece , and kind of going over that .

And so now I think it's going to make homes sit a little longer . It's primarily homes that were harder to sell , homes that weren't getting a lot of attention . Those are going to be harder to sell .

And specifically , I know , you know , we as agents we're humans just like everyone else and there is some implicit bias , and so if I see a house and they're giving out zero , and the house down the street is giving out three , I'm going to push my client to that 3% if it's the exact same thing , considering that house doesn't have anything special going on to

it , and so that's going to leave an already kind of existing inventory last even longer .

clients , offer a buyer's commission , reason being what you just said . If you want to sell it quickly and not have it sit on the market , this is a huge incentive that we can now offer , and we can do it through the phone . The main piece about this lawsuit is we can no longer list it on the MLS .

It doesn't mean we can't advertise it in other ways , right ?

And so we're going to get creative and make sure that people understand hey , there's a commission coming your way if you bring those buyers in , and those that do still offer that piece to the buyer's agents are going to have an abundance right of individuals coming through , and so it's just going to lead to another negotiation , even with our seller clients to

ensure , like , hey , these things have changed . It's up to you . Yeah , I would highly recommend that we offer X amount so that we can get them the most people in . Uh , or if we want to take this piece out , the home can sit for a bit right .

It may sit for additional , you know , 30 , 45 days where you're paying another mortgage and things of that nature , and so it's going to be a conversation all negotiable .

But I'm excited for this new chapter because whenever there's change in the market like this , it equals an opportunity and I think that some people are going to rise to the top and I think that a lot of people I've already talked to some agents that were kind of one foot in , one foot out they're fully out now .

I think it's going to happen like where we see now , oh , I don't want to pay that three , so I'm going to increase my cost by this , so I have it set aside , and so , yeah , I think that's also going to happen where home prices are going to go up a little bit , and this is actually going to be really bad for buyers who are already having a tough time

purchasing , because we already know right now it's tougher buyers , especially in markets that are really sought after , and so now you're going to have to pay a premium for a premium market and then , additionally , if you want to work with an agent who is going to get you competitive in that market , you're going to be paying additionally there , and so it's just .

I feel like it's kind of going to go higher in the in the pricing .

Right Now I would have had to have a little over 10 grand right Closer to like 11 grand , to make that work , and it's just . It's tough , right If you're not working with the right team . It's going to be tough . That's one . And then when you look from a buyer perspective and I hear a echo , kareem- you mind muttering for a second Sure .

And then when you look from a buyer perspective , right , this is one of the barriers . It's going to add another barrier to entry for those new buyers because they don't have the whole , you know track record built up .

And one thing I think about is we're already turning into more of a renter nation , right , with more individuals kind of just continuing to rent because interest rates are high and things of that nature , and so it's only going to make it more unaffordable .

And so for me , on the flip side , as an investor , I'm like , hey , man , let me continue to acquire a couple of these , because if there's going to be a huge renter pool , because now people got to save up more to even be able to acquire that first house , then I'm going to own those rentals and be able to charge that premium .

Kareem , how you doing , man ?

So now they have sorry from a buyer's point of view now they have there's less buying power in the buyer's market because they have less 3% , less money now because they have to pay the agents . You were saying this might drive the prices up , so I was just trying to understand this better . What's your point of view on this ? How would that drive it up ?

Yeah , I'm sorry , um , but no , I think it's one of those things where , because of that , let's say , for instance , you have a home that is already in an area that is quote unquote Marietta . I'll use Marietta as an example . Marietta has really low days on market .

It also has really low inventory because not a lot of people are selling their home but there are a lot of people overqualified to buy in Marietta . I'm noticing kind of the homes that sit on the market are those first time homeowner price ranges . It's not really that second level Like , for instance , alpharetta .

I have clients that I'm currently working with in Alpharetta and the issue with Alpharetta is there's literally not enough houses for the amount of people who want to live there and there's an overpopulation of people who are qualified to buy an Alpharetta that they just don't want to buy in another market .

They don't want to buy in Canton , they don't want to buy in Cumming , they don't want to buy in these other areas because Alpharetta is very good schools , very popular area , et cetera , and so because of that , that limited inventory now is going to basically have a fight going on for it , even more so than there was already previously .

Because , to your point , they're going to say , oh , I don't have this 3% cost anymore , but there's still the same amount of people buying in that area . So the seller's looking at it like , okay , if I , if and if I was a smart seller , I would still give out that three percent .

Because now , let's say , for instance , I'm competing against some , like you know an older person who's like ah , I want as much money as I can keep if they list under right . Now you're everyone's gonna say , oh , this home is under market , now let's go after it . Bidding war .

Um , I think when I and I was in a position like this , where home was just freshly listed , we went on there , we put an offer out day seven , day nine , they had six offers above us and this was like home was on septic , needed renovations , it just didn't have an HOA . It just didn't have an HOA .

And so I think that is kind of the reason of it , because those areas that are still and that's why I make the distinction of in-demand areas , I think , to your point , areas like , for instance , that are less higher days on market , those are going to sit for a lot longer and those are the ones that are going to have to give out that 3% if they want it

sold , and I have a slightly different take on this , right , I don't think it's going to affect price increase or decrease .

I think what this is going to shift is that buyer pool , right , and who you're working with and those realtors being able to talk about the value that they're going to bring right . That's the one piece .

That was never really a detailed conversation before , but now , just like any other profession , when you're dealing with lawyers , you're talking to specialized lawyers . There's real estate lawyers , there's marriage lawyers , there's all different types , right .

So you want to talk to the right one and kind of build that piece , and so what it is going to do is it's going to eliminate a lot of realtors in the market , right .

Right now , I think there's I think we have like 20 or something , something like that about 20% more realtors than there are houses on the market right now , cause everybody got it during 2020 . I think it's going to eliminate a lot of realtors . I think it's going to push a lot of people toward just the select few , that kind of rise to the top .

That's kind of my take right . I don't think it's going to do anything to the prices .

Honestly , I think we're all going to kind of figure that piece out and I believe that the mortgage companies , knowing that they still want people to be able to afford properties , are going to come out with some potential new regulations Like right now there's caps on what percent you can get toward closing , right , all they would need to do is adjust some of

those caps and voila , you've got the fees kind of covered If somebody is able to negotiate that piece . But for the new buyers that don't realize , like hey , we should be asking for this from the seller in our offers , yeah , it's going to make it a bit more expensive .

We just need to get you into the house and so they'll like use their you know credits to say , hey , if you purchase , we'll cover x percent . Is that something that you could see happening more often , because that's something I saw that they're talking about doing , but is that legal , I mean ?

Right , like when the pandemic hit and everything slowed down , they started coming out with hey , we'll do 15 percent down based on STR numbers , right , based on air DNA numbers , which was never done before . That went away quickly . It lasted for like two months . And now I mean they're starting to do HELOCs on investment properties .

Five , four , even like three years ago you couldn't do that , you could not get a HELOC on an investment property . Now they're doing that pretty consistently . So yeah , there's many ways that they can start to kind of make adjustments . But again , this is not all going to hit until July .

So I think there's going to be so many creative solutions that come up between now and then . But , desmond AJ , welcome how you doing what's up what's up .

And I actually experienced this in my last purchase , where at first we had the search set up for single families with an ADU right , because that's all of the house I was gonna be able to buy based off the financing , given that I was gonna have to put at least 15% down right To try to get the triplex 20% down at least to get the fourplex .

And I literally talked to the lender like the week prior to me sending me the text , like yo dude , like they just blew everything wide open . So it was crazy . We're literally in like a day we were looking at one type of property and then , out of nowhere , it's like I'm looking at a whole different class of properties , like my whole mind shifted .

I'm like excited again , really , cause I was like dang , like I don't know . It felt limiting in a way and I feel like the regulations can feel limiting , but then when they change them , it's like all right , like cool , thanks .

And AJ I know we shared a laugh earlier like right on cue , the internet just cut out . I don't know , lebron , I don't know what's going on , but , aj , how you doing .

But I'm glad you brought this topic up because I'm still trying to , I guess , wrap my head around like exactly what's going on . I know sellers agent usually , you know they get the three percent . The buyer's agent gets the other three percent make up the 6% total . I'm sitting here reading an article from Yahoo Finance .

It's titled NAR Settlement Causing Total Confusion in Real Estate and the headline is the National Association of Realtors has agreed to pay $418 million after reaching a settlement in a lawsuit where a federal jury ruled the organization had conspired to inflate commissions . So when I read that , I'm like , were you guys making up commissions ? What were you guys doing ?

I'm like I don't know what's going on because typically , from what I understand is that both parties get the 3% . I know when buyers agents kind of usually say like , oh , that's the seller , they're pretty much going to pay for the commission so you don't have to worry about it .

But I also have heard that the sellers will actually basically inflate the price of the home . So it's kind of like baked in to the commission is baked into the price of the home Just a little . It's just , it's a lot going on and , like I said , I'm glad you really brought this one up .

But I'm just trying to really wrap my hand around the issue at hand and understand . So then I can actually kind of speak my mind on it and what I think , how this could impact the real estate market .

It's almost like you have to be a part of NAR to be able to list properties on the MLS or to be able to even go look at properties . So you see the little like blue super lock that we get into . You've got to be a part of that to be able to access that and that's part of the membership fees that we pay .

But I mean , I haven't met anybody from the board of NER or anything like that , and I'm sure Liban has it .

But long story short , what they're saying is that for many years NER has forced , like by on the site that you list your property , forced you to put what the buyer agent compensation is , and so if you're looking through a bunch of properties , say , we find three properties , all are the same right , all of them are going to bring a 20% return .

They all make a lot of sense . It all looks about the same year built . They're the exact same property . One of them could be offering 1% to the buyer brokerage , the other one 2% , the other one 3% . Which one do you believe your buyer's agent is going to take you to ? More than likely , the 3% . If all other things are the same , the 3% .

And so what a lot of sellers are saying during the pandemic days 2020 and beyond is that they were coerced or forced to pay that 3% to the other side , as opposed to being able to just pay their agent . Right , they're like , hey , why am I paying the other side that's negotiating against us ?

We should only have to pay our agent , and so that was kind of the whole piece about the lawsuit . And that's what's going to change . It's going to take that piece off of the MLS , so it can't be advertised publicly .

It's now something that has to be put into an offer and things of that nature , and , from a seller perspective , I can understand where they're coming from . They're like , hey , man , that's another 3% I can put back in my pocket . That being said , when you look at a real estate transaction in totality , who was bringing the money to the table ?

Right , it's the buyer . The seller is the one walking away with a major check at the end . Right , the buyer's already paying for all the costs of running title , doing the appraisals , doing the inspections , bringing in other contractors . They got to bring the down payment , they've got their own closing costs and now you're tacking on another 3% for closing costs .

It can now start to really become an uphill battle for a seller to be able to get a property if you don't have the right individuals negotiating for you . Right , for us , the Acaba Home Team , I'm not actually worried about it .

I'm actually kind of excited because I think we get to flex a little bit of muscle here , right , and start to negotiate some deals creatively , which would be fun . But for the broader industry , for the 80% of folks out there , they're freaking out because , especially if you're a new agent , this was your bread and butter .

Like , you don't get listings as a new agent because you don't know what you're doing . Right , you're trying to figure it out . Right , you're like , hey , I'm just going to go show this house and , if they like it , no-transcript or things of that nature , this is one of the best deals on the planet , right ?

Sports agents and other specialized folks are getting like 10 , 15% , realtors are 3% and a lot of time . They're spending a good portion of that time running numbers , driving all the way around and doing a lot of things where it's not paid for work , and so for those younger agents I do get nervous for them being able to actually survive in the industry .

That was kind of a long winded . Did I help answer that question ?

My buyer's agent ?

But if there's a delta within that , that piece would come to you to pay . And we're working with clients right now where we have that agreement in place . Now , I think we did it with your deal , we've done it with a bunch of deals where we've been able to get a bunch of credits to take care of that piece .

But if we're unable to do that , that would fall back to you , which kind of makes sense in the commercial world .

Like when we're buying the commercial land and we're buying that 12 unit I bought a couple of years ago , when you move to five plus units or to anything that's commercial , like office or big complexes , typically each buyer pays their own broker and pays their own agent .

It's only in the residential space that they tried to make it a little more amenable for the buyers , because this is your first home right . A lot of people , this is their biggest investment in their life and they're not going to do multiple .

This is the only one they're going to buy , right , maybe one more , and so they try to make it a little easier for those folks to get in . But now it's going to go more to the commercial space where everybody has to pay their own advisors . And so to that point , now you have to have a conversation .

It can't just be hey , this is my cousin's , uncle's daughter that has a license , so we're going to roll with her to go get this house . Okay , is she worth it ? Right Now you got to have a conversation Like what is this value that this person's bringing Right ? Is it contacts ? Is it whatever ? Right , and understand that piece before you enter into agreement .

And that was really as a result of the seller being very savvy , right , he's been around the block and you know it was off market , so he understood the parameters of the deal . And I would say too , having gone through that and having to come to closing with that check , I would much rather see that over time baked into the home price , right .

Because then , like , I'm not coughing up that delta , you know , and even though you're talking about , you know , percents or half percents hey , man , it adds up , right . So , like I would rather probably pay that over time and like be okay with the seller baking that into the home price , especially if they're willing to give me a credit on that 3% .

Now I don't have to bring that out of my pocket at closing day , but I'm already closing and probably going to renovate and maybe furnishing . So that's my two cents on it .

But what I was trying to do is like , hey , let's put this at asking but get 25K in credits so you can come to closing with just the down payment . I've explained this so many times , right , Like four or five times . She wanted to go that direction . It's fine , right . But now she's coming back around like , oh , I get it . Now I understand .

I'm like , yeah , like , literally , you could just bake this in and come with just the 10% . You don't need to bring another . But whatever , so , long story short , we're going to be working hard as a team to bake all of this in , because it makes sense If you could just come with the down payment . That's ideal in every way .

I'm literally getting ready to close in a month and a half on a duplex . This is going to be a new house hack that we got under contract . I'm excited about it . We've built it in where we already have the credits for closing . We took the full 6% . We just added it on top of the purchase price . If it appraises , cool .

If it doesn't , we're going to negotiate that thing down . But the reason I did it that way is I want to be able to , similar to Desmond , buy down the interest rate and then also cover closing costs .

On top of that we're getting another 6% toward closing , which I just built on top of the thing . And so when you look at the whole like project , I'm actually not bringing anything close .

When you think about it , I'm putting money out and then I'm getting money back and then I'm using the extra to do like a build out of , like an in-law suite , and so , long story short , I'm actually just paying for the build out of the in-law suite .

When you think about it , like when you look at , okay , how much money is going out , how much is coming in . So , yes , you just got to negotiate .

And this is going to be a quick conversation with the agent , like , hey , you know my client likes this , but unless you're covering the full commission , they're not willing to kind of move forward on this piece . Right , and so these are going to be conversations that are had kind of behind doors .

But when we put in the actual offer , we're able to put in the special steps hey , seller , to cover X . And it just becomes another item that's negotiable as opposed to and this comes back to the lawsuit as opposed to just a given Before , it's just a given , hey , they're going to X amount , it's going over to the buyer agent .

Now , it's not a given , now it's another item that you have to negotiate and you've got to put it in the deal to make sure that all parties are aware .

So I've seen some where it's like , hey , 4% to get this one sold by January 31st , x percent for this , and kind of go from there .

But I feel like , based off your negotiation skills , if you could go in there and negotiate 6% , especially if you're representing yourself , I don't know how you would do that and I feel like that's like probably the toughest negotiation to do .

Right , you're representing yourself and then trying to argue like I need my agent to get paid , but I'm my agent , like hey , he's worth it Like trust me Listen , let me talk to the client and I'll get back to you .

At the end of the day , one of the things that I try to preach to the team and that we're doing now and so , yeah , you just got to at the end of the day , one of the things that I try to preach to the team and that we're awesome at is you're going to negotiate hard with the other side , but you do want to make sure that they'll pick up your phone

call , right ? You don't need to be an asshole about it , right ? Make sure that they're going to pick up your phone call when you call , but you should negotiate hard for your clients . Robbie , how you doing man ? What's going on ? How are you ?

It was raining that day too , so it's like I knew two hours , I knew by like three o'clock . I wasn't gonna , I wasn't gonna make it . So sorry to miss it , though .

But it'll be kind of a part two to what we did last year , right ? Except it's going to be even better because we've got some pretty cool stuff coming in there . So I'll keep you posted over the next couple of weeks , but I'm excited , cool , cool . And Justin , as if we didn't see each other twice today , how you doing , man .

That's out of town , that's out of state . May as well be in Florida or Nashville or anywhere . So I'm trying to see if I can trust somebody from like Upwork or Fiverr to hire them for the day to do like a walkthrough . And is there like that type of job , like does this thing exist ?

Or do I have to explain and train someone from scratch to try to understand what I'm trying to accomplish ? This is the hurdle that I'm facing , right ?

And so time , hey , can you do this for me ? I'll give you 50 bucks , whatever you decide , you know , with them , and then the agent will probably end up wanting to work with you because they'll want to work with you long time . Or they'll say hey , you know , instead of doing our job , how about you buy ?

So you know they'll have more incentive in that regard .

I gave her , like some apps to take pictures , you know , before and after things of that nature , and so if you can find a solid agent out that way , it should be able to cover for you . That's one way . And to Liban's point , you just pay him like a project management fee .

We'll call it but that's what you're looking for , right , like a project manager for , like putting everything together .

So I wonder if I can still approach an agent even though I did not get the deal through them . They're not getting any commission from the deal or something . I have someone else that I paid to source these deals and do the initial contact with the landlords , with the owners .

So I'm already , but that person is offshore so they , unfortunately they can't go and do the walkthroughs and videos and stuff like that .

So there my question is is it not weird to reach out to an agent in the area and be like , hey , this is a situation Can you do like a walkthrough and can you be like my eyes on the ground until , like , through that , like setup phase ?

And LeBron knows like we're in these workplace chats with the other agents in eXp and constantly , especially folks that are not on a team they're looking for , like hey , can somebody show show a house in Jonesboro on Sunday Cause I'm going to be out of town ? And they'll pay another agent right To go and get the door open for their clients .

I've been practicing not having to go , so I've been treating the property that's an hour away as if it's four hours away . I only go like once every three , four months , but I do have eyes on the ground so I have somebody that I trust and I send them over . They take pictures , videos also my handyman , so it's the same person I am struggling with cleaning .

I will say that . But as far as like having someone to go , it's fine and in terms of managing like the guests , that hasn't really been like a big deal for me , maybe because it's just like one spot . But I'm giving myself up to like three to four , and then I'm like I can't handle it . Go ahead , Robbie .

We came back , we shared some documents and then she's been ghosting me for the last two days . So this is why I'm you know I'm moving on . I said I'll get her till Friday . I communicated that . So if I don't hear back on Friday , I'm going to assume that you know you're no longer interested . I'm applying that pressure .

You're paying real estate agents right to do these tasks , so , like I think those kind of things add up the gas , right , adds up . You're probably going to want to go at some point . So I would just say , maybe consider that right , like I would maybe , you know , challenge you to call every apartment complex in the area right .

Or , you know , do something crazy right in in the local area and maybe try to get lucky there .

As opposed Cause , like even I had to arbitrage it was on the West side of Atlanta and like , dude , I was so tired of fricking going up there I'm like that's to say , I was going and doing the work , I wasn't really hiring anyone like it was me and abby , my girlfriend , going and , you know , doing most of it .

But even like 20 minutes away , like after about a month , I'm like man , like I'm ready for this to be over too .

With there being so many surrounding counties , I feel like there has to be one where it works and there's probably multiple um and that might be a point of adjusting the analysis right . And like what numbers are you running and like what does that look like ?

So this is the question so , do you use home warranties ? Do you feel like it's worth subscribing to as a homeowner ? Typically , these subscriptions cost hundreds of dollars per year and I personally never end up using them , not to mention the service fee to actually get a professional out to dispatch to go do . The service . For me is $125 .

And it may vary depending on what service you're actually using . Additionally , I hear horror stories of these companies not actually paying out for the repairs . I have paid for American Home Shield over the past couple of years due to fear of big ticket items breaking , such as a water heater , ac unit , hvacs , the like .

So , to cap this all off and summarize it , the main questions are would you recommend investing in a home warranty or simply tucking away the money as a CapEx expense ?

Like , some people will buy AppleCare and they still won't even use AppleCare . They just go buy a new phone , like I know that sounds insane , but people buy the insurance and they forget that they have it . So I would say just sucking that money away .

That way , if you don't need to use it , you don't have to use it , but you have it there in case you do have to make the repair . So some people would think like , oh well , I'm going to save a percentage by just subscribing to the service . But , like , you actually lost money if you never had to use that service .

Like you mentioned , you know Warren Buffett has a phrase never lose money . Like you mentioned , you know Warren Buffett has a phrase never lose money . So there you go . It's simple . I like that and to like a lot of these . Like , say , if you buy a refrigerator , right , buy it with a credit card , then you get an extended warranty .

That being said , the one caveat is if you are newer to this since your first home and you're just a retail buyer , homeowner type of deal , it may be a peace of mind thing , right , especially if the systems are old but the systems have been maintained .

I'm all for putting money aside and , especially as you continue to grow the number of units you have , now you can start to combine I'm not saying combine the same account but across the board , have X amount of dollars to cover all your units and you're good .

If you have five units and you have , you know , 15 K set aside an escrow account to cover all five units . No matter what goes wrong , you're going to be fine . If a water heater goes out , that's a $1,300 to $1,600 expense , depending on the plumber that you use . Hvac is about $3,000 . Furnace is about another $3,000 .

You're going to know that these things are getting to that point . I don't spend on the home warranties , got you ?

That's when I'll say OK , I do it because it's free . At that point , For sure .

Um , I felt a little bit silly over the past couple of years , um , paying for American home show and it's like 500 something a year . So I spent over a thousand dollars and I still haven't even actually used them . And I'm sitting here thinking I'm like , well , wait a minute . Like you know I'm I'm pretty experienced at this point .

You know I have multiple homes , I kind of know the game a bit . So if I'm already proposing that , hey , like it probably makes sense to just put this money away as opposed to just giving it up . And that's a sunk cost , it's gone , it's . You know you can never get that back . You know what I'm saying . So I just really want to ask that .

And then , especially , like you know I mentioned in there , I've heard like horror stories . You know . You know I mentioned in there I've heard like horror stories .

You know you pay for this service and then it's kind of like you have to fight tooth and nail to actually even get the claim through , because you know they're asking all these questions and things like that .

Now , again , I haven't been through this process and I hope I'll never have to go through that process , but it's just a little bit concerning what I see online about these you know , insurance or home warranty companies , so that definitely makes me feel a bit better that a couple of you guys are basically agreeing that , hey , you should probably just tuck that

money away . And I think , with that being said , that's probably where I'm going to start to move , moving forward , because my renewal is actually up on April 8th , so not going to renew it .

I think everybody should cause it's a large investment . But they do the same thing like , oh well , how did it happen ?