Where Real Estate Gets Its Dirt

DOJ urges industry to make a clean cut. Wants Buyers to negotiate compensation directly with their agent.

0290.-02-15-2024-AMICUS-BRIEF-filed-by-UNITED-STATES-OF-AMERICA-Statement-of-Interest-of-the-United-StatesDownload

Well we were all speculating whether or not the DOJ would give any clear direction on how they picture compensation to be handled thru the MLS. The DOJ did, and it’s a whooper. Basically they don’t think reducing offers of compensation down to zero matter at all. They want the industry to make a full break from seller setting the buyers agent commission at all. And site “steering” as a concern. So, more like a commercial model. This is something listeners of Industry Relations have heard Rob Hahn echo since the beginning, that steering was the main issue.

In a huge surprise this “Statement of Interest” references the Industry Relations podcast and Rob, myself and Ed Zorn directly,

“Rob Hahn & Greg Robertson interviewing Ed Zorn (VP & General Counsel atCalifornia Regional MLS), Burnett v. NAR: The Lawsuit That Could Upend the Housing Market, Industry Relations (Oct. 18, 2023), starting at 43:40, www.youtube.com/watch?v=pw39NB3w_0o&t=11s (“You do realize under this system (of the seller paying the buyer’s agent directly inside the contract) you do realize a closing statement at a title company or an escrow company looks 100% identical as it does today. With both commissions on the seller side. Nothing changes. The only thing that changes is the number that shows up for the buyer’s agent in that closing statement was negotiated between the buyer directly and the buyer’s agent and had nothing to do with the seller or the listing agent. That’s the one thing that’s different.”

STATEMENT OF INTEREST OF THE UNITED STATES, Department of Justice (DOJ)

I’m not sure whether to be honored or scared shitless that the DOJ listens to our podcast!

For clarity I’ve embedded the YouTube video so that you can see what the DOJ was referencing on our podcast, I started it a bit earlier so you can get some context ( I also think this is good primer to understand what the DOJ is asking for.)

Rob and I record our Industry Relations podcast today at 10AM. Should be a good.

HomeServices wants SCOTUS to decide

HomeServices wants US Supreme Court to weigh Sitzer | Burnett case

“On Friday, Feb. 2, HomeServices of America filed a petition to the U.S. Supreme Court for a “writ of certiorari,” asking the court to review an August ruling by the U.S. Court of Appeals for the Eighth Circuit affirming a lower district court ruling that HomeServices can’t enforce arbitration agreements signed by seller clients of its franchisees because the contracts the sellers signed were not directly with HomeServices.”

Andrea Bramila, Inman News

Interesting angle. Doesn’t really go to the heart of the case, but more that they, (HSofA) shouldn’t be included in the case at all.

KW settles for $70M

Keller Williams settles Sitzer, Moehrl commission suits for $70M

“If approved by the court, the settlement means Keller Williams will pay substantially less than it could have to resolve Sitzer | Burnett. On Oct. 31, in a historic verdict, a jury found that Keller Williams, RE/MAX, Anywhere, the National Association of Realtors, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners. If that award stands, it would be trebled by law to more than $5.3 billion.

The deals leave NAR, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, as the remaining defendants in the case.”

ANDREA V. BRAMBILA, INMAN NEWS

I’ve been thinking about this for the last week and a couple things stand out. I guess you could say it was shrewd of KW to see if the case was won before settling (interesting to think of NAR and BHH/HSF through that lens). Hard to say if the settlement would have been lower if they had settled earlier. But $70M feels about right. BHH/HSF are probably talking longer due to their corporate structure.

That would leave NAR standing alone. People who would know tell me that their case for appeal is pretty strong based on upon the documents being filed by NAR. That may be true, but the genie is out of the bottle. More and more of people I meet and hear I’m “in real estate” ask me about being “over-charged” for commissions. I still think settling (and sooner than later) is the right move.

Brutal

Authenticity, CoStar and the craps table.

If you haven’t caught our last episode of Industry Relations that just dropped today you hear Rob talk about the desire for industry entities such as NAR to stop the corporate word salad and speak authentically. This conversation made me think about an article and podcast that caught my attention. It was in relation to the letter (email?) Andy Florance, CEO of CoStar, sent regarding a few statements made at NAR NXT. The entire letter is available (and link to the podcast) so you can go read it here at:

COSTAR CEO SENDS MESSAGE TO WSJ & REALTOR.COM

In the letter Mr. Florance make a few statements:

He calls out Bob Evans, VP of Industry Relations at realtor.com, for making false statements “that Homes.com was working against real estate agent“.

He (Andy F.) takes full responsibility for CoStar News naming Sitzer/Burnett plaintiff attorney Michael Ketchmark, “newsmaker of the week” and states “It will not happen again.” [Small quibble; Ketchmark was named “Person of the week”]

He also points out the fact realtor.com and the WSJ is owned by the same company and then makes a damn good point. Here’s a quote from his letter:

“Many people mistakenly believe that Realtor.com is part of NAR. In fact, it is not, it was sold years ago and is now owned by News Corp. The Wall Street Journal and Realtor.com are sister companies. They work together closely. The folks that call the shots for The Wall Street Journal and Realtor.com are one and the same.

The Wall Street Journal has been prolifically writing more than most about theSitzer/Burnett class action lawsuit and the NAR defeat. They have published article titles such as “Home Sellers Take On the Realtors Cartel”, “Almost No One Pays a 6% Real-Estate Commission-Except Americans”, “The Upending of One of America’s Most Popular Professions”, “The Way You Pay to Buy or Sell a Home is About To Change”, “Jury Finds Realtors Conspired to Keep Commissions High”, “Real-Estate Commissions Could Be the Next Fee on the Chopping Block”, “Realtors Face an Antitrust Reckoning” and more.“

Letter from Andy Florance, CEO & Founder of CoStar

Zing! Pow! Authentic enough for you yet? Love him or not Andy Florance is not in his box seats, he is on the field, and I’m here for it.

As a prolific player of craps I have an analogy for you. In the game of craps you have the concept of “right way” and “wrong way” bettors. In simple terms “right way bettors” are betting on the shooter, and “wrong way bettors” are betting “against the shooter”. When a hot craps game is going on and a “wrong way bettor” shows up at the table everyone gets pissed off. They think having a “wrong way bettor” at the table brings “bad juju”. CoStar, in my view, has been perceived by the industry as a “wrong way bettor”. This was due to the fact that CoStar’s business model does better with the elimination or neutering of buy side compensation. And guess what? It’s looking like Andy made the right bet.

“7 OUT!”

Here’s the thing as these so called “portal wars” heat up. There are many things that we can argue about regarding the business models of all the portals. Dual agency, agent responsiveness, etc. But the Sitzer/Burnett ruling and all the copy cat lawsuits are making it very clear that the game has changed. CoStar isn’t the wrong way bettor any longer.

We need to move on. CoStar, Zillow, Realtor.com are all going to have to adjust. We as an industry are going to have to adjust.

We aren’t play craps anymore. Feels to me more like poker.

Anyone else seeing these?

Just as predicted these copycat lawsuits are gonna be everywhere. 😖

What was missing from NAR messaging regarding the commission lawsuits?

Brian Boero from 1000watt wrote a great post about how “the real estate industry’s responses to the Halloween jury verdict to be almost universally weak.” As usual he makes a lot of great points. You may have heard similar arguments if you listened to Rob and I on our most recent Industry Relations podcast with Sam DeBord.

In Brian’s post he states,

“Good arguments balance evidence with proper framing — framing that is usually constructed to activate the emotions of their intended audience.

Good arguments use language, and words, that ignite feeling and imagery. “Cartel” – a word used over and over by plaintiffs’ attorneys – is a great example.”

I thought I might take a stab at this. I wrote the following as if I was writing for the National Association of REALTORS. Hope you enjoy, and thanks Brian for the inspiration.

Why is the Biden administration so focused on attacking solo female entrepreneurs?

Recently a jury comprising of 6 non-homeowners handed down an award in what is known as the Sitzer | Burnett class action suit. The award was $1.8 billion dollars in a suit suggesting REALTORS were involved in a “cartel”, facilitated by the multiple listing service (MLS), to keep real estate commissions artificially high.  We, the National Association of REALTORS, and 2 other real estate franchisors are appealing this ruling.

It was also recently discovered that the plaintiffs in the case had been is close communication with the DOJ before, during and after the trial ended.

The average REALTOR is a 59 year woman and is classified as an independent contractor.  Selling real estate is commission only sales job with no salary, and no benefits.  Why do these 59 year old women strike so much fear in the heart of the federal government?  Surely there are other pressing issues facing our country.

Buying a home isn’t the same as buying a stock.

In a recent hit piece the WSJ cited that since the advent of the internet prices have been slashed on  “stockbroker commissions”, but not real estate.  What may seem obvious, to everyone but the WSJ, buying a home is not like buying a stock, or a book, or a plane ticket.  3 factors come to mind. 

1. Buying and selling a home is typically the largest transaction anyone does in their life. 

2. Buying and selling a home is not a transaction done often, statistics show it might be once every 10 years after you become an adult. 

3. And last but not least is that buying or selling a home is an emotional experience. 

Due to these 3 core issues consumers have chosen time and time again (in fact in 2022, more consumers choose to use a REALTOR than ever before) to hire a trusted advisor.

The 1.5% vs. 6% Lie

Plaintiffs in the Sitzer | Burnett case and others have highlighted that in other countries consumers pay closer to 1.5% for real estate commissions, where in the United States the number is closer to 6%. The truth is consumers in the US have always had choices.  Discount brokerages offer real estate services for much lower than 6%.  In fact very recently Redfin did a nationwide campaign with big red billboards all over the country touting a 1% listing fee, which is less than the 1.5% fee touted by plaintiffs.

So the 1.5% vs 6% is a lie.  Consumers can always negotiate a commission and there are many brokerages and agents offering discounted services.  Don’t believe us, just Google, “flat fee real estate services” and search the over 29 million results.

Would consumers prefer a world where they would have no idea what the house across the street sold for?

Since the birth of the World Wide Web, and the launch of portals like Zillow, real estate listing data is now readily accessible everywhere, a sharp contrast to the rest of the world.  This is mostly due to the multiple listing service (MLS).  The plaintiffs falsely say that the structure and ownership of the MLS forces higher commission rates. This is simply not the truth.  The MLS is one of this country’s greatest inventions and an essential tool of every REALTOR.  The MLS brings together sellers and buyers. It’s reliable. It helps hundreds of thousand agents make a living and brings families together. It’s the operating system of the American Dream.  

The federal government wants to shut down the MLS, which would create a environment of less transparency and bring us back to companies gatekeeping real estate data which would make it more difficult to make offers on properties for sale and finding properties on the internet.

We at the National Association of REALTORS will fight for our members, the open real estate market, and will not let the federal government destroy the American Dream.

The National Association of REALTORS

Listing Bits Episode 88: Does NAR Have Value Beyond MLS Access? – with Michael Lissack of The Virtual Realty Group

The verdict against NAR in the Sitzer lawsuit has organized real estate up in arms.

But Michael Lissack thinks the decision is the best thing to happen to the industry in 100 years.

In fact, he sees the trade association as a criminal enterprise with little value beyond MLS access.

Michael is Managing Broker for The Virtual Realty Group, a 100% commission brokerage that operates in 12 states. 

On this episode of Listing Bits, Michael joins Greg to discuss the real issue behind the lawsuits against NAR and describe what he would do to make buyer’s agent commission negotiable.

Michael explains why it’s necessary to decouple the MLS from NAR membership and how that would likely lead to bankruptcy for the trade association.

Listen in for Michael’s provocative take on why associations don’t deserve a way forward in a world where MLS access is open to anyone with a real estate license.

What’s Discussed:  

The real issue behind the lawsuits against NAR and several real estate brokerages

What Michael would do to make buyer’s agent commission negotiable

Why the DOJ takes issue with mandatory membership in NAR for MLS access

How decoupling the MLS from NAR would impact everyday REALTORS

What decoupling the MLS from NAR membership would do to the trade association (and what NAR might do to demonstrate its value and rebuild)

What it would take to decouple local, state and NAR membership

Why Michael believes a real estate license should be the only requirement for MLS access

Running MLSs as not-for-profit organizations vs. for-profit entities

Greg’s thoughts on providing a way forward for associations by compensating them for the work of building the MLS

Why bankruptcy might be apt for associations who don’t provide value beyond MLS access

Connect with Michael Lissack:

Michael.Travel

Michael on LinkedIn

Resources:

Sitzer v. NAR

Michael’s LinkedIn Post

Our Sponsors:

Trackxi

Batton down the hatches

Mother of all commission suits filed in Illinois, this time by homebuyers

“The scope of Batton 2 is exponentially larger than Gibson, Sitzer | Burnett, or another, similar case, Moehrl. Both Batton 1 (formerly, Leeder) and Batton 2 seek class certification on behalf of two proposed classes:

  • a “Nationwide Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the United States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for injunctive relief, meaning either a court-ordered prohibition or a requirement on the defendants’ behavior.
  • a “Damages Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the Indirect Purchaser States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for damages under “antitrust, unfair competition, consumer protection, and unjust enrichment laws.”
Andrea Brambila via Inman News

This is why I drink.

RPR was not on my bingo card

Remember back when the industry freaked out about RPR and how it could be NAR’s play to become a national MLS? I found this article from 2009, that captures the spirt of the day.

Skeptics of RPR Database Voice Worries

“Some skeptics at the conference have even referred to the Realtors® Property Resource database (RPR), as “Reaper” — as in the Grim Reaper — fearing its potential to harm their business.

Because it will not include offers of cooperation and compensation and will only be accessible to NAR members, the database won’t function as a national MLS, NAR says. Not all are ready to take NAR’s word for it.”

RETechnology

Emphasis mine. Sure you would have to be a member of NAR but in a day and age where many people are questioning what being an “MLS” even means … who knows what could happen?

Somewhere Marty Frame is laughing his ass off.

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