The Ten: How commissions lawsuits defined the year, and what’s next
The Sitzer/Burnett trial put a spotlight on compensation, but it’s far from “case closed” as questions — and lawsuits — about how agents get paid multiply.
Editor's Note: In a historic year shaped by trials — of all kinds — a handful of people and themes have emerged as defining forces. Real Estate News has selected the top newsmakers of 2023 who have left a mark on the industry or shown perseverance in the face of epic challenges and opportunities. They are The Ten.
After years spent simmering in the background, challenges to agent compensation practices came to a full boil with the Sitzer/Burnett trial — and its decisive verdict — on October 31.
The outcome of the case was stunning to many in the industry. The jury awarded massive damages to Missouri home sellers — nearly $1.8 billion, which could be tripled to around $5.4 billion in accordance with antitrust laws — and the verdict is already having a snowball effect, with copycat cases cropping up across the U.S., and brokerage companies, MLSs and real estate associations scrambling to assess their policies.
How many more court cases will end with a similar result, and how many billions of dollars in damages are at stake?
For now, there are more questions than answers. How will buyer's agents get paid if compensation practices change? Is buyer agency doomed? What will happen to MLSs? And who gets to make the new rules — a judge? NAR and local associations? The Department of Justice, which has also taken an interest in the cases?
One thing is certain: Change is coming.
NAR and others are determined to appeal, with the association remaining adamant that the current system puts consumers first.
"The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible," Mantill Williams, vice president of public relations and communication strategy at NAR, said in an email. "Sellers can sell their home for more and have their home seen by more buyers, while buyers have more choices of homes and can benefit from professional representation in what for many will be the most significant and complex purchase of their lives."
But court cases keep piling on, and as one brokerage leader told Real Estate News, the outcome of the appeals doesn't really matter — "Change is here."
Copycat lawsuits are multiplying
As of mid-December, more than a dozen major commissions cases seeking class action status have been filed. And they are likely to keep coming as attorneys scour the country looking for home sellers or buyers, frustrated with compensation policies, who are willing to be class representatives for cases in their local MLS region.
What will become of all these lawsuits? There's a good chance they could be consolidated into one mega class action case, said Ed Zorn on a recent Real Estate Insiders Unfiltered podcast. Zorn, the vice president and general counsel for the California Regional MLS, also said it's possible that a settlement, covering all of the similar lawsuits, could be reached.
Rule changes are in the works
The Anywhere and RE/MAX settlements offer a preview of the potential policy changes that could be coming. The brokerage giants agreed to eliminate minimum commission requirements and NAR membership requirements, and their brokers and agents will have to clearly disclose that commissions are fully negotiable and not set by law.
The settlement, along with those proposed rule changes, has received preliminary approval and is going through the final approval process.
For MLSs, the rule changes revolve around how, or if, a listing includes an offer of compensation for a buyer's agent. A handful of leading MLSs — including Northwest MLS, Bright MLS, Unlock (formerly ACTRIS in Austin), REcolorado, NorthstarMLS and Canopy MLS — now allow $0 buyer-broker compensation offers for listings, something NAR did not officially permit until this fall.
The Real Estate Board of New York took things a step further, and starting on Jan. 1, will no longer allow listing agents to include any sort of offer of compensation on its Residential Listing Service, which operates independently of NAR. Only sellers may do so.
The DOJ dark horse
It's possible that the Department of Justice could step in with concerns about this settlement or others to come, like it did in the Nosalek case, where it questioned the agreement reached between MLS PIN and the plaintiffs. From the DOJ perspective, allowing an offer of $0 commission does not go far enough to make the market more competitive.
The rules could also change if the DOJ is able to reopen its case against NAR. The U.S. Court of Appeals heard oral arguments from both sides on Dec. 1 about a case previously settled in Nov. 2020. If the DOJ is allowed to reopen the sweeping antitrust case, the federal government could try to impose other rule changes impacting buyer agent compensation.