Litigation offers you an invaluable chance to establish clarity and demonstrate your value.
Editor’s Note: This article appeared in the Winter 2024 print edition of REALTOR(r). For resources and key developments regarding ongoing litigation, visit competition.realtor.
Since it was handed down in October, the verdict in the Sitzer-Burnett case has dominated discussions within the industry. While NAR has declared their intention to appeal, its members should remain aware of what this case entails and its significance for them as REALTORS(r).
Sitzer-Burnett is a class action lawsuit filed in Missouri federal court by home sellers in Missouri against NAR and several defendants, such as Anywhere, Berkshire Hathaway HomeServices Keller Williams RE/MAX among others. According to plaintiffs the real estate commission rates are too high; buyers’ representatives receive too much pay; NAR’s Code of Ethics/MLS Handbook as well as defendant practices contribute to overly inflated commission rates resulting from this case.
At the October 2023 trial, plaintiffs expressed concern with cooperative compensation; that is, when a listing broker offered compensation to cooperating brokers. “Offer of compensation” does not indicate an obligation for payment in terms of an exact dollar figure–in some instances even $0. The National Association of Realtors provided evidence to show how cooperative compensation benefits consumers in real estate markets. NAR provided evidence to demonstrate its rules were meant to restrict anticompetitive conduct and promote an open market with healthy competition; however, the jury ultimately sided with plaintiffs. NAR believes this outcome was unwarranted and was driven primarily by legal errors by the judge, such as legal instructions preventing jurors from considering the many procompetitive benefits derived from NAR policies and cooperative compensation practices. Post-trial briefing will conclude by March 2024 and any appeal briefed and argued later in 2024. Additionally, plaintiff’s attorneys from other jurisdictions have seen the verdict and filed similar complaints which NAR will address in court formally.
NAR remains convinced of the advantages of cooperative compensation: Real estate sales agents provide valuable services to home buyers and sellers, and should know exactly how they’ll be compensated. Cooperative compensation makes the process smooth and efficient while offering buyers professional representation if desired; sellers benefit by increasing buyer traffic into the market; all parties involved benefit from having one central source for accurate data regarding homes for sale.
NAR maintains that buyer representation is an indispensable service to consumers in what may be their single largest financial transaction ever. Before the 1990s, cooperating agents typically served as subagents of listing agents. After an FTC study revealed most buyers believed they were being represented, states passed laws mandating agents disclose who they represented – thus giving rise to buyer agency services as consumer advocates saw legitimate need and demand.
What the Verdict Means for You: This verdict does not alter how you run your brokerage or sales business and does not alter any choices buyers and sellers may have available to them. NAR strongly believes in cooperative compensation’s ability to create efficient, transparent marketplaces which ultimately serve consumers while furthering homeownership.
Graham Wood. Graham Wood
