Sitzer/Burnett: What to expect at trial
Starting Oct. 16, NAR and other defendants will present their case to a jury that could decide how agent commissions are paid.
Key points:
- Sitzer/Burnett is the first of two major class action lawsuits against NAR and top brokerage companies to go to trial.
- It’s expected to last about three weeks, with a verdict by mid-November.
- Plaintiffs are seeking significant cash damages and major changes to how buyer-broker commissions are paid.
The fundamental question of how buyer agents should be paid will be under scrutiny for the next several weeks in a Kansas City, Missouri, courtroom.
While the Sitzer/Burnett case is limited to Missouri homeowners, the decision will reverberate throughout the real estate industry. A similar lawsuit, known as the Moehrl case, is expected to go to trial in 2024 and involves regions served by some of the largest MLSs across the country.
With opening arguments scheduled to start Oct. 16, there's a lot at stake as the defendants face the possibility of significant monetary damages and fundamental changes to how they do business.
These are the key details to be aware of as the case plays out over the coming weeks.
Who, what and when
Who is involved? The plaintiffs are a group of Missouri home sellers, led by class representatives Rhonda Burnett, Jerod Breit, Jeremy Keel, Hollee Ellis and Frances Harvey.
The defendants are the National Association of Realtors, Keller Williams and HomeServices of America. RE/MAX and Anywhere Real Estate were originally named as defendants, but both brokerages settled for a combined total of $138.5 million in damages and will make changes to how they handle buyer agent compensation rules.
Given the magnitude of the case, there is a long list of proposed witnesses who may take the stand, including Gino Blefari (CEO of HomeServices), Bob Goldberg (CEO of NAR) and Gary Keller (co-founder of Keller Williams).
The U.S. District Court judge in this case is Stephen Bough, who has served the Western District of Missouri since December 2014.
What is the case about? The core issue is whether buyer agent commissions have remained artificially high because of rules in place requiring home sellers to offer compensation to the buyer-broker.
How long is the trial? The trial is expected to last about three weeks with jury deliberations beginning the week of Nov. 6. A verdict is expected around Nov. 10.
Why this case matters
Outcomes: The industry is paying close attention to this case because of the wide range of outcomes if the plaintiffs prevail. The monetary damages could be zero — or mind-boggling sums that could cripple some defendants' ability to do business.
Changes to policies and practices could also be significant. Some of the questions people are asking are:
Will a homebuyer be required to pay their agent's commission upfront?
Will they be allowed to roll the commission into the mortgage loan?
Will buyers forgo hiring an agent altogether to avoid paying commission?
If home sellers still pay buyer-broker commissions but have more negotiating power, what offers will they make?
Final decision: It's widely expected that whoever loses this case will appeal, so it may be several years before any policy changes, if required, take effect.
The game plan in court
Plaintiffs: The plaintiffs will argue that the defendants conspired to require home sellers to pay buyer-broker commissions, and that commission amounts have been inflated in violation of federal antitrust law.
The home sellers will attempt to prove that the commission fees were non-negotiable when listing a property on an MLS.
"Most buyer brokers will not show homes to their clients where the seller is offering a lower adversary/buyer commission or they will give priority to showing homes with higher adversary/buyer commission offers first," according to the original complaint, filed in 2019 as Sitzer vs. NAR, et al.
Defendants: NAR will argue that the current system, which has been in place for decades, has served consumers well. NAR Deputy General Counsel Lesley Muchow said that scrapping those rules would send the industry back into the "Wild West where unscrupulous people can regularly defraud clients."
In pre-trial documents, Keller Williams said it did not participate in any conspiracy and will provide evidence that it "has followed its own path in the real estate industry" and had no role in activities relating to NAR's Cooperative Compensation Rule.
HomeServices of America presented similar arguments in pre-trial documents, denying any conspiracy and stating the company was merely a part of NAR but had no active role in the compensation rule.