The Real Estate Commission Lawsuits – Twitter Version (Thanks Taylor for the Idea)
Summary – On October 31, 2024, in Burnett / Sitzer v NAR et al, 8 jurors in Missouri found that NAR and major brokerages had conspired to inflate home prices by coupling buyer and seller commissions paid to agents.
Just like that, 8 jurors got their hands on the nuclear codes and blew up the real estate industry. Armageddon! The Apocalypse.
Lawyers told the jurors that Realtors have been taking too much commission from them and not surprisingly the 8 jurors all agreed. Not only did they agree, but they also awarded damages in the amount of $1.8 billion.
How did we find ourselves in a place, a bad place, where 8 jurors got to decide the fate of the entire brokerage industry?
Somehow that feels like a bigger story.
PART 1. Background – What The Heck Happened?
1. There was a trial. NAR and the big brokerages lost. The Plaintiffs were awarded $1.8 billion. The damages are expected to be tripled to $5.4 billion. Some defendants settled.
2. The Plaintiff – The lead plaintiff is Sitzer. Sitzer was replaced by Burnett, so it is now known as the Burnett suit. Note that there are over a dozen additional copycat lawsuits in progress, but Burnett is currently the only lawsuit with a judgment.
3. The Defendants – NAR and most of the major real estate brokerages. The copycat lawsuits have extended the defendant list to include local MLS, Realtor Association, local brokerages and even large local teams. Who knows, individual agents could be next.
4. Class Action – In March 2023, the lawsuit was granted Class Action status by the court. In the Burnett case, this means 50,000 home sellers in Missouri, but the copycat lawsuits have extended the plaintiff base to effectively cover all home sellers in the US who sold a home through an MLS over the past 4 years.
5. Why is Class Action status important? It vastly expands the plaintiff pool and creates joint and several liability for all the defendants. The plaintiffs can get paid the full amount of the judgment from any one of the named defendants.
5. Anti-Trust – The lawsuit was filed alleging breach of the Sherman Antitrust Act. The jurors determined that NARs clear co-operation or participation rule was anticompetitive and artificially inflated real estate commission paid to agents. The core issue is that listing agents set the co-op commission for buyer agents and the buyer never gets to negotiate the commission with the buyer agent.
7. Why is Antitrust important? It allows for triple damages. This raised the $1.8 billion judgment to $5.4 billion – an amount that will wipe out any and all of the defendants.
8. The Judgment – $1.8 billion that will probably increase to $5.4 billion. The award still needs to be determined by the court. It could be reduced.
9. The Settlement – all the defendants in the Burnett case entered into settlement agreements with the plaintiff. There have also been settlement proposals in other copycat cases. The settlement agreements still need to be accepted by the court. There are numerous objections to the proposed settlements, the most important of which is by the Department of Justice. The DOJ is the one player that could have by far the largest impact on the real estate industry. The DOJ wants to completely decouple listing and buyer agent commission.
10. The Appeal – Homes Service has not agreed to a settlement and has appealed the judgment and filed a number of motions to overturn or reduce the judgment. The amount of surety that Home Services will need to appeal the judgment makes an appeal unlikely.
11. What still needs to happen? The appeals process needs to play out, final damages need to be determined by the court, the settlement proposals need to be confirmed by the court. The DOJ needs to feel happy. Anything cam still happen.
12. What does this all mean? Nothing is final or official, but change is coming, especially to how buyer agents are paid buy-side commission. Most changes are contained in NARs proposed settlement. We’re still in the “wait-and-see” period. Hold tight!
