How did it all start?
Who are the Sitzers?
Who are the Sitzers?
Who are the Sitzers?
November 14th, 2017, sellers Joshua Sitzer and Amy Winger listed their home in Kansas City. They hired a Listing Agent from Keller Williams and put the house on the Heartland MLS (Multiple Listing Service). They offer a 5.5 % Commission, of which 3% was carved out for the Buyer’s Agent. The Sitzer home was listed at $600,000; during the course of the negotiation the house was sold for $590,000. The plaintiffs argue that they paid a full 3% commission to a buyers agent that (working in the best interest of his Buyer’s) was able to negotiate the price down. That Buyer Agent received a $300 smaller commission for his efforts, while the seller received $10,000 less for his house. Sellers questioned why they paid an agent to negotiate a lower price for their home. But Sitzer had no power to negotiate the buyer broker’s commission. He just HAD to pay the full commission. Sitzer wondered why.
He blamed NAR and a rule he referred to as the Adversary commission rule or the buyer-broker commission rule. They claim that commissions are artificially inflated based on the way that the MLS currently operates. Specially they state that various MLSs’ through California and the country allow only Realtors to list a property for sale.
An article written by Attorney Mark S. Nadel for the Berkeley Business Law Journal [Obstacles to Price Competition in the Residential Real Estate Brokerage Market], states that, according to Keller Williams University course materials, offering less than a 3 percent co-op fee “will reduce the number of willing and qualified buyer that will see your home.”. He goes on to opine “That offer is a solicitation to the buyers’ agents to violate any fiduciary duty they owe to their buyer clients. In fact, offering a fee to a party to cause them to favor the payor’s interests ahead of their client’s interests is essentially the definition of a bribe, and should be recognized as such.”. Nadel feels that it is this “steering of Realtors to sellers who made more generous offers of buyer compensation was at the heart of the Sitzer lawsuit.
I have to state here that my biggest responsibility to my buyers is to ensure that they are not overpaying for what the Market Comparables have shown me. I have never cared to steer my clients away from a home based on the Compensation offered. I spend hours on spreadsheets to show my clients my “Value Channels” and we agree when to step off the carousel. As a Listing Agent, I share what the various strategies are with regard to Buyer Agent compensation and let them make their own choices.
It has been stated that Agents should not be saying their services are free to the buyers. But it feels like the suits suggest that we are not valuable and shouldn’t be compensated?
Who are the Burnetts?
Who are the Sitzers?
Who are the Sitzers?
Rhona and Scott Burnett went to sell their home in Kansas City in 2016. As this was not the first home they were selling they knew they had to pay a commission to their agent. But this is where I feel there is a case of a few bad apples spoiling the bunch. I had to read this a couple times to make sure I was getting it right. Apparently the Burnetts were presented with a document by their agent with four commission choices; six, seven, eight and nine percent! Obviously an attempt to show that commissions are negotiable. I found this egregious and ashamed that people that represent the same industry I love would pull such a tactic. Let me say this again, THEIR representative presented them this form; the party they hired to preserve their interests. This became even more chilling. Sorry to go all True Crime on you…. But it is really disappointing that this practice has been occurring. “The rest of the form, which stipulated that the commission would be evenly split among the buyer and seller agents, was already filled out; Ms. Burnett asked if she could lower the commission paid to the buyer’s agent, but her agent told her doing so would discourage agents from showing her home. “I shop sales,” Ms. Burnett, 70, said with a laugh. She spent three decades as a stay-at-home mother while her husband, Scott Burnett, 72, worked for a waste management company and spent 20 years working as a local legislator. “I’m always looking for a break. But when I asked her if I could negotiate, she said, ‘No, you really can’t.’”
She must really value her agent because she publicly stated that she did not blame her agent; that agent was just doing her job. The real estate agent was also a school advocate for the Kansas City Public Schools and they often saw each other at District meetings. Instead Ms. Burnett blames the industry, and the Powerful National Association of Realtors, which she claims has “Set the Rules”. Here is another point of contention; as the owner of a small Brokerage, I have never received a set of guidelines from the MLS or NAR about what I can offer as compensation for my clients. My clients and I talk openly about the industry standards and the options my Sellers have. Her agent literally told her she could NOT negotiate. I think that is a significant statement. Of course you can negotiate. Ms. Burnett spoke for both herself and her husband. She told the jury how she felt that the rules of the real estate industry had seemed fixed, and she believed she was forced to pay a commission that was never truly negotiable.In an interview, Ms. Burnett went on to stress that she didn’t blame her real estate agent, whom she believes was just doing her job. Ms. Burnett spent several years as an advocate for the Kansas City public schools, meeting with educators and parents that helped her district. Her real estate agent was also a school advocate, and they often saw each other at district meetings. She blamed the industry, and the powerful National Association of Realtors, which had set the rules. In the same article from the NY Times quoted above, Ms. Burnett went on to say: “It’s not the Realtors. But the Realtors are controlled by a huge spider web,” she said. “After I joined the lawsuit, I learned so much about how the industry is run. It goes all the way to the brokerages and up to N.A.R.”. I would say that the Realtors should also be held accountable in this case.
Who are the Moerhl's?
The Moehrl lawsuit, formally known as Moehrl v. National Association of Realtors (NAR), is a significant antitrust case in the real estate sector. Filed by Christopher Moehrl in 2019, it claims that NAR, along with major brokerages like Realogy Holdings Corp., HomeServices of America, RE/MAX, and Keller Williams Realty, conspired to inflate broker commissions via a rule that mandates sellers to pay commissions for both their agent and the buyer's agent. The "Buyer Broker Commission Rule" imposed by NAR, requires brokers to offer a non-negotiable commission to buyer brokers when listing a property on a Multiple Listing Service.
The plaintiffs argue that this rule artificially raises commissions, resulting in higher costs for home sellers. They contend that this practice violates federal antitrust laws by limiting price competition among buyer brokers, as sellers are compelled to offer high commissions to ensure buyer brokers show their homes to potential buyers. Developments including, Initial Filing and Class Certification filed in March 2019, the court granted class certification to two classes of home sellers by March 2023, enabling the case to proceed as a class action.
Settlement Agreements have been reached in March 2024. NAR agreed to a $418 million settlement, payable in installments, and committed to cooperate in ongoing litigation against other defendants. With additional brokerages like Keller Williams, RE/MAXA, Anywhere Real Estate (formerly Realogy) have collectively exceeded $950 million in settlements. In October 2023, a jury found HomeServices of America, NAR, and Keller Williams liable for conspiring to inflate commissions, awarding nearly $1.8 billion in damages. This verdict did not cover all defendants, therefore, there is still an ongoing litigation against others, including Berkshire Hathaway Energy Company. If successful, this lawsuit could transform commission structures, potentially reducing costs for home sellers and altering the role of buyer brokers. The lawsuit's potential damages could reach up to $54 billion, highlighting its high stakes and broad impact.
There have since been several copycat lawsuits but these three were the biggest.
