In yet another pivotal moment for the real estate industry, oral arguments were made yesterday before a three-judge panel at the United States Court of Appeals for the District of Columbia Circuit in the ongoing battle between the National Association of REALTORS (NAR) and the Department of Justice (DOJ). The panel, consisting of Circuit Judges Henderson, Walker, and Pan, will now deliberate and make a ruling in the future, a decision that could significantly impact the industry.
The case centers on NAR’s attempt to prevent the DOJ from reopening an investigation into the organization’s commission-sharing policies. The dispute revolves around a 2020 closure agreement, which NAR interprets as barring any future investigations. However, this interpretation faced scrutiny from the judges, particularly Judge Florence Pan, who questioned the permanence of the agreement.
Representing the DOJ, Frederick Liu argued that there was never an intention to indefinitely halt the investigation. He emphasized that during the negotiation process, the DOJ’s antitrust division did not make explicit commitments to end the probe permanently.
This legal showdown is crucial for NAR, an association with more than 1.5 million members. Just last month, NAR, along with other defendants, lost a nearly $1.8 Billion anti-trust lawsuit here in Missouri (Sitzer v NAR) and NAR is currently facing multiple other antitrust lawsuits, including a substantial class-action suit in Illinois, potentially leading to damages of $40 billion.
NAR’s attorney, Christopher Michel, stressed the significance of the closure agreement, arguing that reopening the investigation would render it meaningless. Judge Justin Walker, however, highlighted the inherent risk NAR took in depending on the continuity of the DOJ’s personnel after the election.
The decision by this appellate court will be closely watched, as it could herald significant changes in how real estate transactions are conducted, affecting agents, buyers, and sellers alike. Stay updated with St Louis Real Estate News for the latest on this critical legal development.
In a remarkable turn of events, just minutes after the jury sided with the homeseller-plaintiffs in the landmark Sitzer | Burnett trial, attorney Michael Ketchmark wasted no time in launching another legal salvo against the real estate industry. This new class action lawsuit, filed on behalf of three new homesellers, aims to further scrutinize the practices surrounding agent commissions.
The Defendants
This new lawsuit expands the list of defendants to include: Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna, and Douglas Elliman. Notably, the National Association of Realtors is once again named as a defendant, marking its continued entanglement in legal challenges related to commission structures.
The Allegations
The plaintiffs in this new case echo the grievances aired in the Sitzer | Burnett lawsuit, claiming they have been adversely affected by a “real estate industry conspiracy” that artificially inflates agent commissions. The suit alleges that this practice has a cascading effect, ultimately driving up costs for homesellers.
Legal Venue
The lawsuit has been filed in the United States District Court for the Western District of Missouri, the same jurisdiction that recently saw the Sitzer | Burnett plaintiffs awarded $1.785 billion in damages.
What This Means for the Industry
The filing of this new lawsuit so swiftly on the heels of the Sitzer | Burnett verdict could signal a wave of legal challenges aimed at traditional real estate commission models. Industry stakeholders will undoubtedly be watching closely as this new case unfolds, given its potential to further disrupt established practices and financial structures within the real estate market.
In a groundbreaking development, the jury in the Sitzer v National Association of REALTORS®, et al, lawsuit has returned a verdict in favor of the plaintiffs. According to reports by Inman News, the jury found against all defendants and awarded a staggering $1.785 billion in damages. This decision could have far-reaching implications for the real estate industry, potentially reshaping commission structures and business practices.
The lawsuit, which has been closely followed since its filing in 2019, questioned the legality of certain real estate commission practices. The verdict is likely to send shockwaves through the industry, prompting legal reviews and potentially setting the stage for further litigation.
It remains to be seen how this verdict will impact the real estate market in the long term, but it is clear that the decision marks a significant moment in the ongoing debate over real estate commissions and transparency.
Stay tuned for more updates and in-depth analysis on what this verdict means for the future of the real estate industry.
I’ve been discussing and writing about the Sitzer v National Association of REALTORS®, et al, lawsuit since it was originally filed in 2019. My previous articles on this case, as well as the Moerhl suit—a similar lawsuit filed in Illinois—can be found at the links below, which are in chronological order with the most recent first:
Today marks the end of the second week the trial has been underway, and it’s time to take stock of what has transpired so far.
Key Developments
Motions and Counter-Motions
Motion to Enforce Court Order: BHH Affiliates, LLC, HSF Affiliates, LLC, and HomeServices of America, Inc., filed a motion to enforce a court order. This motion was subsequently denied by District Judge Stephen R. Bough.
Deposition Designations: The court overruled most of the defendants’ objections regarding the deposition of Kevin Goffstein, allowing most of the deposition to be part of the trial record.
State Statutes and Regulations: A significant ruling came when the court prohibited the defendants from using state statutes and regulations as exhibits.
Legal Maneuvers
Pro Hac Vice Admission: Ian T. Hampton was allowed to appear pro hac vice to represent HomeServices of America, Inc.
Motions in Limine: Multiple motions in limine were filed by both parties, aiming to limit the evidence that can be presented during the trial.
Motions for Judgment as a Matter of Law: Both the National Association of Realtors and Keller Williams Realty, Inc., filed motions for judgment as a matter of law, which were denied by the court.
Trial Proceedings
Jury Trial: The jury trial has been ongoing, with proceedings taking place almost daily. The court has been in session for extended hours, indicating the complexity and importance of the case.
Witness Withdrawals: Plaintiffs withdrew David Liniger and Jay Papasan as witnesses to be called by videotaped deposition.
Jury Instructions: Various motions and objections were raised concerning the jury instructions, including a specific motion by Keller Williams Realty, Inc., for a Jury Instruction on Missouri State Law.
The first two weeks of the trial have been action-packed, with both sides employing various legal strategies. The court has been diligent in its rulings, aiming to ensure a fair trial. As we move into the next phase, it’s clear that the outcome of this case could have far-reaching implications for the real estate industry. Stay tuned for more updates as the trial progresses.
As if there wasn’t enough negative attention on the real estate industry, last week a study was released, “Et Tu, Agent? Commission-Based Steering in Residential Real Estate.” The study suggests that buyer agents may steer their clients away from properties offering low commissions. It argues that this is a key reason why agent commissions have remained high in the digital age, even as commissions in other industries have declined. According to the report, listings with the lowest commissions take 33% longer to sell and face a 75% greater risk of not selling at all.
So, is this true?
That’s a difficult question to answer. First, as the chart below indicates, the average commission rate offered to a buyer’s agent in the St. Louis market has remained relatively stable. For over 20 years, the annual average rate has been 2.7%, with the only exception occurring in March 2010 when it rose to 2.925%. Given that most listings offer the same commission rate, it’s challenging to determine if agents are steering away from low commissions. However, this consistency might support another allegation: that the industry has established a “normal” commission rate. It’s hard to deny some level of pressure on listing agents to offer a specific commission rate when thousands of listings end up offering the same rate. Moreover, offering a “below-normal” commission rate as a listing agent can attract criticism from peers.
Let me begin by saying that I’m not a sensationalist, nor am I an advocate for everything I write about. Additionally, I am not an attorney, so this not a legal opinion. I am simply a real estate broker that has been very active in the profession and industry for over 40 years now. I strive to stay on top of industry and market changes so that the agents in our firm, MORE, REALTORS®, and their clients can avoid surprises and be prepared. Another reason I do this is to share what I have learned with consumers. I believe that by sharing good, relevant and accurate information to consumers, they will be equipped to make better decisions when it comes to buying or selling real estate, including how to choose an agent to best represent them.
So, what is going to turn the real estate industry upside down?
Yes, I made a rather bold statement in my headline, but I believe it to be an accurate depiction of what is coming to the world of residential real estate, including right here in St Louis. The source of this disruption is not a single entity, but rather many. While there is a common theme to the multiple threats, they are coming from different sources. Over the past few months, I have written about all the issues I’m referring to, so below is a summary of them and links to the original articles:
Moerhl v NAR Lawsuit. 3/22/2019 – This suit was filed against The National Association of REALTORS® (NAR), Realogy Holdings Corp, HomeServices of America, Inc, Re/Max Holdings, Inc and Keller Williams Realty, Inc. The suit alleges that the defendants were “conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.” At the heart of this claim is the NAR rule that requires sellers to offer compensation to the buyer’s agent in order to be eligible for listing in the MLS.
Department of Justice (DOJ) Complaint against NAR. 12/01/2020. The DOJ filed a complaint against NAR, as well as a settlement agreement, focused on two primary issues; 1. Allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; 2.Enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers;
In an article published yesterday, I referenced the Sitzer vs National Association of REALTORS law suit and said I would have a more in-depth discussion about that suit and here it is. The lawsuit was filed by Joshua Sitzer, Amy Winger, Scott and Rhonda Burnett and Ryan Hendrickson on June 21, 2019 against the National Association of REALTORS® and the parent companies of major real estate companies and franchises including Coldwell Banker, ReMax, Keller Williams and Berkshire Hathaway Homeservices.
The Sitzer lawsuit was filed in the United States District Court for the Western District of Missouri sought to be certified as a class action lawsuit on behalf of “all persons and entities who listed properties on one of four Multiple Listing Services…and paid a broker commission from at least April 29, 2015 until the Present…“. The four MLS’s listed in the suit that this applies to are:
Heartland MLS (Kansas City, MO)
MARIS MLS (St Louis, MO)
Southern Missouri Regional MLS (Springfield, MO)
CBOR MLS (Columbia, MO)
Last Friday, April 22, 2022, Stephen R. Bough, a Federal Judge for in the Western District of Missouri, issued an order granting the class action status for the lawsuit the Plaintiffs sought.
The past several days have not been good for the National Association of REALTORS® (NAR) from a legal perspective at least.
First, last Friday, April 22, 2022, Stephen R. Bough, a Federal Judge for in the Western District of Missouri, certified a lawsuit against NAR as a class action suit.The suit, known as the “Sitzer” suit as the original plaintiffs were Joshua Sitzer and Amy Winger, alleges that the defendant, the National Association of REALTORS® “created and implemented anticompetitive rules which require home sellers to pay commission to the broker representing the home buyer“. The plaintiffs in the suit also allege that the other defendants, which include Realogy Holdings Corp, Homeservices of America, Inc., Re/MAX LLC and Keller Williams Realty, Inc., “enforce those rules through anticompetitive practices.” I believe this action by the court was expected and likely did not come as a surprise to anyone but it was not good news for NAR or the other defendants. In the coming days I’ll be doing an in-depth article on this one.
Then, yesterday, the United States Court of Appeals for the 9th Circuit delivered another and this time, a likely unexpected, blow to the National Association of REALTORS® in the form of a reversal of a suit against NAR that had been dismissed previously by a lower court. The suit, PLS.com v. the National Association of REALTORS®, is another suit alleging anti-trust violations by NAR and the other defendants which are all MLS’s. The suit was brought originally by PLS.com as a result of NAR enacting its “Clear Cooperation Policy” which for all intents and purposes, dictates to agents and brokers how and when they can market their listings. I’ve written several articles specifically on this policy in the past which can be found using the following links:
The National Association of REALTORS® (NAR) has come under attack over the past few months as a defendant in two class-action lawsuits, Christopher Moehrl v The National Association of REALTORS® and Joshua A. Sitzer and Amy Winger v The National Association of REALTORS® filed in March and April of 2019 respectively, and, most recently, a complaint brought by the Department of Justice, United States v National Association of REALTORS® filed this month. The latter came with a pre-arranged proposed settlement with NAR. I should also mention the two class-action lawsuits have as additional defendants Realogy Holdings Corp (the own and operate several franchises, some of the local ones include Coldwell Banker-Gundaker, Better Homes & Gardens, ERA, Sotheby’s, and Century-21), HomeServices of America, Inc. (owner of Berkshire Hathway Home Services), Re/Max and Keller Williams.
While there are additional issues raised in the lawsuits and DOJ complaint, central to them are buyer’s agents’ commissions. Issues raised include:
From the DOJ complaint:
Allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
Enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers;
From the lawsuits:
Sellers of residential property have been forced to pay inflated costs to sell their homes through forced payments of commissions to buyer brokers;
Home sellers have been forced to set buyer broker commissions to induce buyer brokers to show the sellers’ homes to prospective buyers;
Price competition has been restrained among brokers seeking to be retained by home buyers, and by brokers seeking to represent home sellers; and
Defendant Franchisors and their franchisees have inflated their profits by a significant margin by the increased total commissions and increased buyer broker commissions.
So, what is going to turn the real estate industry upside down?