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At the end of 2022, over the objections of the National Association of Realtors and major real estate franchisors, a federal court in Missouri rescheduled a commission trial for what would be the last time, to Oct. 16, 2023.
That trial, for a case known as Sitzer | Burnett, would overshadow the real estate industry in 2023 as its start date approached. Its shocking verdict would reverberate not only through the industry but into the minds of consumers, awakening them to challenge a decades-old industry practice so ingrained many had never thought to question it before.
As the final judgment in that case looms, here’s a look back at how Sitzer | Burnett, and an ever-rising pile of copycat commission lawsuits, unfolded in 2023 — and what they may foretell about the future of the industry in 2024.
2023 started with a NAR win — but it may be short-lived
The year started off with a victory for NAR in yearslong litigation with the U.S. Department of Justice, one of two federal agencies charged with antitrust enforcement. In January, a federal court ruled in favor of NAR in a case seeking to enforce a settlement agreement between the trade group and the DOJ.
The ruling set aside the DOJ’s request for information from NAR on rules regarding buyer broker commissions and pocket listings, among others.
The commission rule at issue, known as the Cooperative Compensation Rule or the Participation Rule, requires listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service. The rule and its local iterations are the subject of, now, more than a dozen antitrust lawsuits across the country.
The court ruling drew mixed reactions from agents, brokers and other industry players, demonstrating divisions within the real estate industry over the rules. In March, the DOJ filed an appeal of the lower court’s ruling and, in June, argued that the decision be reversed so that the agency can “resume its consequential investigation of conduct that affects over $100 billion in broker fees paid by Americans annually.”
In July, NAR fired back, saying the DOJ had closed the investigation as part of the settlement agreement and should be required to “keep its word.” But in August, the DOJ insisted that “[i]t is well past time for NAR’s rules to be assessed on their merits.”
The appeals court heard oral arguments in the case on Dec. 1, and statements from the judges indicated that they were inclined to let the DOJ resume its probe. The court will likely issue a ruling on the appeal in the first half of 2024. If the court overturns the lower court decision, NAR will have to respond to the DOJ’s demand for information about its rules. The probe could ultimately lead to rule changes at NAR through additional litigation.
Separately, in November, Michael Ketchmark, the lead counsel for the Sitzer | Burnett plaintiffs, told Inman that his firm has been in talks with DOJ officials regarding putting NAR “out of the business of using the MLSs as a vehicle for higher commissions.”
Major brokerages don’t display commissions
In February, the Consumer Federation of America released a report finding that more than a year after NAR required MLSs to allow their agent and broker subscribers to display buyer-broker commissions on their websites, nearly two-thirds of brokerage sites aren’t doing so. According to the report, many major brokerages — including Compass, eXp, Howard Hanna, Sotheby’s International Realty, Berkshire Hathaway HomeServices and Crye-Leike — do not or rarely display buyer-broker commissions on their websites in three dozen major cities.
Additionally, the report found that Redfin almost always displayed buyer-broker commissions in the markets examined, Zillow did in just over half of the markets examined and Realtor.com did not in all markets examined, save one.
NAR policy does not require that its member agents or brokers display buyer-broker commissions, just that MLSs must allow them to if they wish to do so.
An argument the plaintiffs in most, if not all, of the lawsuits challenging the Cooperative Compensation Rule make is that the rule encourages agents to steer homebuyers away from properties offering less than a local area’s typical commission, thereby propping up the commissions offered by sellers to buyer brokers. That most brokerage sites don’t display those rates means that buyers may be less apt to realize that they’re being steered and may discourage discount brokers from offering lower rates, according to CFA.
In October, a new study found “strong statistical evidence that buyer agents nationwide steer their clients away from low-commission listings.” The paper argued that the smaller the commission offered to buyer agents, the less attention a listing got.
Moehrl becomes a class action
The original bombshell commission lawsuit, known as Moehrl after its lead plaintiff, was filed in March 2019. Four years later, in March of this year, the case got class certification, prompting debate about the merits and impact of the multibillion-dollar case, with many urging the industry to stop arguing and prepare for what’s coming.
The suit names as defendants the National Association of Realtors and real estate franchisors Anywhere (formerly Realogy), HomeServices of America, RE/MAX, Keller Williams and HomeServices-owned The Long & Foster Companies. The suit alleges that some NAR policies, including the Cooperative Compensation Rule, violate the Sherman Antitrust Act by inflating seller costs.
Class certification means potentially millions of homesellers in 20 MLS markets can ask to be reimbursed for $13.7 billion in commissions they paid to buyer agents between 2015 and 2020. With automatic trebling, that figure could go up to $41.1 billion.
In November, the judge in that case signaled that Moehrl won’t go to trial until “likely” fourth-quarter 2024.
Homesellers and MLS PIN reach a tentative deal — but the DOJ doesn’t like it
At the end of June, the largest multiple listing service in New England, MLS Property Information Network (MLS PIN), agreed to overhaul its policies, pay $3 million and “cooperate” against the remaining defendants named in an ongoing lawsuit known as Nosalek.
Previously known as Bauman after another homeseller, the case was filed in December 2020. Like federal commissions suits Moehrl and Sitzer | Burnett, it seeks class-action status and alleges that the sharing of commissions between listing and buyer brokers inflates seller costs and is a conspiracy in restraint of trade in violation of the Sherman Antitrust Act.
However, Nosalek differs in one important respect from the other suits: the National Association of Realtors is not named as a defendant, but MLS PIN is. MLS PIN, which has a full-time staff of 60 employees, boasts approximately 46,000 subscribers in six New England states and New York.
After some pushback from the judge in the case over the structure of the deal, she preliminarily approved the settlement in September. Shortly thereafter, however, attorneys for the DOJ’s Antitrust Division told the court that the agency had “significant concerns with the planned rule changes under the Proposed Settlement.”
On Dec. 18, an attorney for the DOJ told the court that, despite changes the plaintiffs and MLS PIN had made to the deal, the agency was still not satisfied and continued to have “concerns.” The DOJ has until Feb. 15, 2024, to file a statement of interest in the case elaborating on those concerns.
Bright breaks with NAR policy and NAR accommodates
In July, the nation’s second-largest MLS, Bright MLS, serving the mid-Atlantic region with more than 100,000 subscribers, announced on its website that starting Aug. 9 it would allow listing brokers and agents to enter any amount in a listing’s cooperative compensation fields, including zero. Previously, the fields required an offer of compensation of at least one cent.
The move constituted a break with NAR‘s interpretation of the Cooperative Compensation Rule up until that point, which had not previously allowed listing brokers to offer buyer brokers nothing in compensation.
Bright is one of 20 MLSs named as co-conspirators in the Moerhl suit, though no MLS has been named as a defendant in either of the two bombshell suits. Local Realtor associations are governed by NAR rules. Bright is owned by 43 local Realtor associations. If Realtor associations don’t follow NAR rules, they risk losing their charter. If Realtor-affiliated MLSs don’t follow NAR rules, they risk losing their NAR-provided professional liability insurance.
In September, NAR told Inman that it was now interpreting the Cooperative Compensation Rule to allow listing brokers to offer buyer brokers $0 in compensation, and, therefore, Bright was complying with the rule. An attorney for the Sitzer | Burnett plaintiffs, Michael Ketchmark of Ketchmark & McCreight, called the change a “stunning admission of guilt.”
Sitzer | Burnett goes to trial
In August, HomeServices, one of the defendants in the Sitzer | Burnett case, lost an appeal, clearing the way for the case to go to trial on Oct. 16.
Sitzer | Burnett, which names NAR, Keller Williams, Anywhere (formerly, Realogy), RE/MAX, HomeServices, and HomeServices subsidiaries BHH Affiliates and HSF Affiliates as defendants, was originally filed in April 2019 and won class-action status in April 2022. Like Moehrl, the suit alleges that some NAR rules, including the Cooperative Compensation Rule, violate the Sherman Antitrust Act by inflating seller costs.
In September, Anywhere and RE/MAX separately reached proposed settlements that would cover both the Moehrl and Sitzer | Burnett cases and see the franchisors hand over $83.5 million and $55 million respectively. Both companies agreed to change their business practices, including no longer requiring their agents and broker affiliates to become Realtors. The impact of the settlements on NAR membership remains to be seen.
The Sitzer | Burnett trial began Oct. 16 and ended Oct. 31. Those in attendance heard testimony from NAR CEO Bob Goldberg, RE/MAX CEO Nick Bailey, Keller Williams co-founder Gary Keller and the homeseller plaintiffs themselves, among others.