Commissions on Trial and a courtroom scene
Illustration by Lanette Behiry/Real Estate News; Shutterstock

A world of difference in commissions outside US, jurors told 

On Day 5 of the Sitzer/Burnett trial, plaintiffs focused on steering, high fees in the U.S., and how buyer agent pay is handled differently in other countries.

October 20, 2023
3 minutes

Key points:

  • Agents “steering” homebuyers away from lower-commission listings remained a key topic in testimony.
  • Experts called by the plaintiffs drove home the point that commission fees are much lower in other countries.
  • Aligning with international norms would halve the total commissions collected by Realtors, jurors told.

KANSAS CITY, Mo. — The pace quickened Friday afternoon in the Sitzer/Burnett trial as plaintiffs brought in witnesses who testified about flaws they see in the U.S. real estate commission system and how it works in other parts of the world.

The trial, which wrapped up its first week in U.S. District Court, pits home sellers in Missouri against the National Association of Realtors, Keller Williams and HomeServices of America. The sellers allege that NAR and others participated in anticompetitive practices by forcing them into a system where they pay a commission that is split between buyer and seller agents.

Law professor says steering, excessive fees are core problems with current system

Roger Alford, a professor of law at the University of Notre Dame, told the jury he viewed steering — the idea that real estate agents would steer buyers to homes that paid a higher commission — as a fundamental problem in real estate. 

The defense pressed him on whether he could prove steering was taking place in Missouri, asking him to list addresses of specific homes involved in steering. In response, Alford said every home in Missouri that includes a listed offer of compensation in the MLS is "suffering the effects of steering."

Alford co-authored a paper in 2021 titled "Anticompetition in buying and selling homes." In it, he talks about the massive transfer in wealth from consumers to real estate professionals in the U.S., which has higher fees than other developed countries. He estimated that Realtors collected around $100 billion in commissions in 2019; if commission rates were in line with international norms, that number would be cut in half, he wrote. 

During his testimony, Alford also cited REX Homes, a low-commission brokerage that went out of business after trying to operate outside of the Multiple Listing Service and NAR, as a model that had represented a threat to the system.

Aussie real estate pro calls out U.S. commission rates, compensation practices

Plaintiffs also brought in Todd Reynolds, who worked in the real estate industry in the Gold Coast region of Australia, to testify about how commissions work in that country. At one point, Reynolds was a manager overseeing 30-40 real estate agents.

The jury appeared to be entertained by Reynolds' anecdotes about Australia and his travels. When he got down to testifying about real estate, he drove home the point that commission percentages are much lower in Australia: A 5% commission on a home sale was considered abnormally high, with many listings paying in the 1.5%-3% range. 

Reynolds also said he never came across a situation where a seller paid for the buyer agent. If a homebuyer wanted an agent, they paid for the agent's services themselves.

At the current pace, it appears the plaintiffs will wrap up their case early next week, and the defense will then present its side. That could mean a shorter overall trial with jury deliberations starting in early November.

Want to know more? Follow all of our Sitzer/Burnett trial coverage here.

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