Defense paints picture of bleak future; plaintiffs strike back hard
The defense in Sitzer/Burnett called on three experts to discuss the consequences of decoupling commissions, with one facing aggressive cross-examination.
- Industry consultants Stefan Swanepoel and David Stevens, along with economic consultant and star witness Lawrence Wu, presented testimony on Thursday.
- Wu disputed the conclusions of the plaintiffs’ expert witness and said the industry would gravitate toward a cooperative compensation system even without NAR rules.
- The plaintiffs’ attorneys pushed back in cross-examination, questioning the validity of Wu’s data and attacking his credibility.
- Gary Keller and KW President Marc King are expected to take the stand on Friday.
KANSAS CITY, Mo. — The defense in the Sitzer/Burnett trial went to work on Thursday refuting earlier testimony and trying to demonstrate the negative consequences of a change to commission practices, while plaintiffs' attorneys pushed back hard.
The jury heard testimony from three economic and industry experts in the morning: Lawrence Wu, Stefan Swanepoel and David Stevens.
Wu's testimony carried through most of the afternoon session, where he faced aggressive cross-examination by lead plaintiff attorney Michael Ketchmark, who sought to undermine Wu's credibility. Ketchmark ultimately got Wu to admit that he was coached by defense attorneys and paid for his testimony.
Wu, who is president of NERA Economic Consulting, appeared to be the defendants' star witness. An expert in the economics of antitrust laws and intellectual property, Wu began his testimony in the morning with an overview of his findings, and disputed the conclusions of the plaintiffs' expert witness, Craig Schulman, who attempted to show that commission fees are inflated based on economic data during his testimony last week.
Ketchmark questioned Wu's findings, suggesting that he was using misleading data to form conclusions that benefited the defense.
Cooperative compensation would exist in the US with or without NAR rules, witness says
Wu downplayed earlier testimony about compensation in Australia — where sellers don't pay buyer-broker commissions, and overall fees are lower — which the plaintiffs had cited to demonstrate that the U.S. model is not the only approach.
"It doesn't make sense to look at Australia, that's just not a good comparison," said Wu, adding that it would be better to compare the current U.S. system with a future system where sellers no longer paid commissions for buyer agents.
Wu also noted that even if a mandatory system of cooperative compensation didn't exist in the U.S., the industry would still choose to work that way, citing MLSs in Washington state and New York as examples of services that don't follow NAR rules but still have high rates of sellers paying the buyer agent commission.
Ketchmark pounced on that conclusion, noting that those services have clauses or workarounds that essentially convince sellers to offer similar commission rates if they want their house to be listed. Wu said he was unaware of this.
There was also a fair amount of discussion during cross-examination over whether a conspiracy was taking place. Wu held to his testimony that the plaintiffs had not provided evidence of collusion, and merely presenting data about commission rates did not prove a conspiracy.
Industry leaders discuss consequences of decoupling commissions
Swanepoel, who is the founder of Real Estate News and the consulting firm T3 Sixty, testified about the DANGER Report, which he authored and released in 2015. The report outlined the challenges facing the industry and predicted that commission levels would increasingly be put under attack.
In video testimony, Swanepoel said that doing away with the current rules "would probably turn the industry upside down."
Stevens, who operates lending-focused Mountain Lake Consulting, said homebuyers need sellers to help fund the commission fee because many buyers are strapped for cash after coming up with a down payment.
He said decoupling listing and buyer agent commissions would cause "extremely serious damage," as buyers might be forced to use credit cards to pay their buyer agent directly.
On Friday, the jury is expected to hear live testimony from Keller Williams Co-founder Gary Keller and President Marc King. If the defense wraps up their case by the end of the day, closing arguments would take place on Monday.
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