One of the biggest real estate news stories of 2023 was the NAR class-action lawsuit filed in Missouri federal court alleging price-fixing in the real estate industry, accusing major players of banding together to keep agent commissions artificially high.
The suit, Sitzer v. the National Association of Realtors, named the National Association of Realtors, Keller Williams Realty, Anywhere Real Estate (formerly Realogy), RE/MAX, and HomeServices of America as defendants — representing a significant swath of the brokerage market. Filed on behalf of over 500,000 home sellers in Missouri, the lawsuit contends these giants of residential real estate colluded to inflate agent commissions. Anywhere Real Estate and RE/MAX settled prior to the trail and on October 31 a jury sided against the other defendants awarding a judgment of $1.78 billion, which could end up being as high as $5 billion once the judge determines final damages.
With additional lawsuits popping up in other regions, we asked local brokers what they thought about the news and what it means on a national level.
As a bonus, we also asked what their New Year’s resolution was!
Jack Pearson, Compass
This buyer/agent commission discussion enables our industry to better define all of what a real estate expert can do for their buyers. I don’t think it should or needs to go national.
What’s your New Year’s resolution?
Judi Desiderio, Town & Country Real Estate
I would like to know more about the origin of what prompted this lawsuit. Was it bad behavior on the part of an organization and possibly a specific location where broker cooperation was not in keeping with the real estate property law or was it driven by attorneys who are resentful towards brokerage fees?
From what I have read, there seems to be a gross misinterpretation of how, and why brokers co-broke and take listings. I have been a broker for over three decades, therefore I can speak to the time when all listings were open listings. Back then, sellers gave nearly every brokerage firm in town their listing.
The open listings were taken at the same commission rate that today’s exclusive listings are taken at, but when you sold the property the broker kept 100% of the commission. There was no sharing of money or information.
Then, as we morphed into today’s modified MLS system, exclusives became the norm, and open listings were few and far between.
How and why did this happen? My recollection points to three factors. First, the Eastern End of Long Island was infiltrated by national firms that were born from MLS systems.
Secondly, the sellers preferred the single point of contact of an exclusive in giving their listing to the broker that they trusted and had the knowledge and experience to represent their best interest — rather than contacting dozens of local firms, giving everyone the open listing, having to field calls from hundreds of agents and worry if the listing information was represented correctly. Sellers choose this single point of contact with someone they know and trust and have that broker share that listing at 50/50% with other area brokers.
Thirdly, there was a huge push for transparency, cooperation, and accountability. And so the world of exclusives prevailed.
For the brokerage houses, this meant that marketing costs, promotional expenses, and information gathering of all types were now hugely different.
In co-broking these exclusives, the listing broker agrees to share the commission 50/50% with the selling broker, thus engaging with thousands of licensees and, as always, acting in the best interest of the seller.
The rules that govern our industry are clear on cooperation, ethics, and transparency. The idea of collusion is absurd. Ours is probably the most competitive business outside professional sports.
The claim of price fixing is just as absurd. As brokers compete for listings and agents we’ve seen everything from 1% list side commissions to brokers buying agents like sports figures.
As I said, I’d like to know more about the origin of this case. I hope that the national and regional real estate associations come together to show the public what it is that we do and how we represent their best interest. And if there are a few bad actors, they should be expelled permanently from this industry.
What’s your New Year’s resolution?
My New Year’s resolution has been the same for many years — to learn more, to do more, to expand and grow in my experiences and knowledge.
Christopher Covert, Modlin Group Hamptons
I think some of what the lawsuit and multiple copy-cats have shown is that as an industry we need to make sure we are clear, concise, and forthcoming in our dealings with clients. New York State has very specific guidelines in how we as brokers and agents are to present standard disclosures outlining the fiduciary agency relationships, and whether good or bad, the East End has never been a part of the NAR and MLS systems. We have always had well-defined listing agreements as it relates to commission structure and our co-broke relationships, so I am not sure we have any exposure to worry about.
That said, there will always be opportunists who might like to jump on a trend, so we shall see. I do think that the clientele in the luxury Hamptons market appreciates the value an intelligent agent brings to the table — and I don’t see that changing.
What’s your New Year’s resolution?
For 2024 I would like to focus on overall wellness. Professionally I would like to exceed targeted growth metrics with our Hamptons operations, develop more focused client relations, and continue to improve the overall client and agent experience with the group. I have very specific health and fitness goals in mind. And being as good a husband and dad as I can be.
