By Mike Bodeen · 18 March 2024
The big business news of the day, week, month or year is the National Association of Realtor’s (NAR) lawsuit settlement regarding our world of getting paid, aka commissions. Read here!
I’ve been following the original lawsuit of Sitzer-Burnett vs NAR and various real estate companies since last summer, when NAR and other major brokerages lost a case which awarded the plaintiff’s well over a Billion dollars (1.8B to be exact). A number of these companies have already settled and now our big Kahuna, NAR, has settled, subject to court approval, paying out $418,000,000.
The case: Sitzer-Burnett is a class-action lawsuit that was filed in Missouri federal court by a group of home sellers in the state against NAR and other defendants, including Anywhere, Berkshire Hathaway HomeServices, Keller Williams and RE/MAX. The plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates.
The heart of the contention revolved around the NAR rule termed the “cooperative compensation rule.” The rule mandates listing brokers to offer compensation to buyer brokers to list on a Realtor affiliated Multiple Listing Service (MLS).
Note: Not every real estate agent is a Realtor. A Realtor (capital R) belongs and pays dues to NAR. Chief of differences is that Realtors subscribe to and are bound by a Code of Ethics, that a non-Realtor is not.
In the months ahead we’ll be sorting this all out as to what this really means in “the trenches” of everyday real estate. Ultimately, the market is going to shape the future of our industry to determine, what, if any changes will actually occur. But changes will occur. And at this hour, I wonder what major changes should occur versus what changes will actually occur.
The transition begins now. No doubt for many real estate agents (including Realtors) a “Commissionectomy” (a word used by our legal staff to describe an agent’s loss of income, usually due to their own fault) will occur.
To be sure, there are a number of serious consequences in this ruling that we’ll be discussing in upcoming Snapshots.
I think GK Chesterton says it well in a quotation from his book “The Thing,” published in 1929:
“In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”
Mass agent deportations from the industry? It’s possible, then again, our current down market has already begun that reduction.
This settlement can begin to bring great legitimacy to the industry that might even raise our reputation above ambulance chasing attorneys.
Veteran Realtors with excellent reputations need not be concerned. They will always flourish. The financial stakes are too high for most buyers and sellers to navigate the process apart from professional representation. The best among us will be able to demonstrate value to our clients which will bring high financial and peace of mind results for them.
Mike Bodeen