How did Redfin get roped into the commissions lawsuits?
Despite cutting ties with NAR and touting its consumer advocacy, the brokerage is named in a new lawsuit similar to the Sitzer/Burnett and Moehrl cases.
- The discount brokerage is now a defendant, along with six other brokerages and NAR, in the new Gibson case alleging a conspiracy to keep commission fees inflated.
- In a filing, the plaintiffs say that despite Redfin’s decision to cut ties with NAR, the brokerage still took part in a commissions conspiracy.
- CEO Glenn Kelman briefly addressed the new lawsuit in a blog post and said Redfin was a brokerage “on the right side of history.”
Shortly after the jury reached its verdict in Sitzer/Burnett, the legal drama widened with the introduction of what could be a new nationwide class action lawsuit challenging buyer agent commissions — and Redfin is right in the middle of it.
The company was among the defendants named in the new case, despite recent efforts to distance itself from NAR and the association's policies. In October, Redfin announced it was cutting ties with NAR; CEO Glenn Kelman declared "enough is enough" and said the trade association "isn't the future."
Kelman cited two primary reasons for the decision: NAR's rule that mandates a fee for the buyer's agent on every listing, and allegations of sexual harassment at the highest levels of the organization.
Even though Redfin is known for its lower commission fees, that was apparently not enough to keep the brokerage out of the new lawsuit, known as Gibson v. NAR et al, which was filed immediately following the Sitzer/Burnett verdict in U.S. District Court in Missouri. Redfin is lumped in with six other brokerages and NAR in a complaint that seeks to include any home seller in the U.S. who sold a home in the past four years using a listing broker affiliated with the defendants.
In court documents, the plaintiffs' attorneys for the Gibson case noted that "despite its recent change of heart, Redfin has been part of the conspiracy throughout the class period and must now account for its historic role in the conspiracy." Real Estate News has reached out to Redfin for comment.
Redfin positions itself as a brokerage 'on the right side of history'
Kelman touched on the court filing in a blog post published Oct. 31, shortly after the Sitzer/Burnett verdict was announced, calling Gibson a copycat lawsuit. Kelman aimed to set Redfin apart from other brokerages, stating that the company has "campaigned tirelessly for lower fees, commission transparency, and broader consumer access to real estate listings."
"As a company that exists to give real estate consumers a better deal, Redfin is proud of our unwavering consumer advocacy," Kelman said.
Along with many other real estate companies, Redfin's stock dropped immediately following the announcement of the verdict. Redfin shares, which started Oct. 31 at $5, quickly fell 13% but recovered slightly the following day. The company is scheduled to release its third-quarter earnings report on Nov. 2.
The bigger picture
Looking ahead, Kelman expects to see big changes across the industry, no matter what happens with the ongoing court cases.
"Traditional brokers will undoubtedly now train their agents to welcome conversations about fees, just as Redfin has been doing for years, especially when advising a seller on what fee to offer to buyers' agents," Kelman said in his blog post. "Rather than saying that a fee for the buyers' agent of 2% or 3% is customary or recommended, agents will say that a buyers' agent fee, if one is offered at all, is entirely up to the seller. This is as it should be."
He added that if the changes result in fewer buyer agents, Redfin is prepared to take market share in that new environment.
"We've built self-service technology for buyers to set up their own tours and to make offers. We'll use that technology to market the properties listed by our agents directly to consumers, taking market share from other brokerages," Kelman said, adding that they may consider opening the platform up to other listing agents who will partner with Redfin.