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Burnett Trial Updates

Update: October 31, 2023 - Verdict

After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom came back Tuesday and found NAR and other corporate defendants liable in the case. 

NAR had presented in court that its rules prioritize consumers, support market-driven pricing and promote business competition. This matter is not close to being final as NAR will appeal the jury’s verdict. It will likely be several years before this case is finally resolved.   

NAR stands by the fact that its guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing. NAR will continue to focus on our mission to advocate for homeownership and always put consumer interests first.  
 

Update: October 30, 2023

On Monday, the final defense witness took the stand, which was followed by instructions by the judge to the jury and closing remarks by lawyers for the plaintiffs and all co-defendants. During NAR’s closing remarks, outside counsel Ethan Glass presented to the jury how there was no evidence to support the plaintiff’s allegations against NAR.

  1. NAR demonstrated there is no evidence or expert testimony to support allegations of antitrust violations claimed by plaintiffs. It makes no sense that hundreds of thousands of people got together to coordinate on a very public rule and public rule-making process involving hundreds of thousands of public documents.  
  2. NAR affirmatively proved purpose and effect of the cooperative compensation rule, which enables brokers to know how much they will be paid before starting work. NAR’s model rule has expressly stood for the proposition that buyer brokers, like everyone else, have the right to know how much they will be paid prior to commencing work. Commission rates are market-driven and have fluctuated over time. Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction. And those costs are spelled out to buyers and sellers.
  3. NAR reaffirmed that a trade organization can lawfully create rules. NAR illustrated how trade associations are legal and serve important purposes, including for consumers. It is common practice for trade associations to meet or talk amongst the industry and adopt a rule or industry standard. And membership is voluntary.
  4. NAR showed that there is no harm to sellers. NAR doesn’t tell people what to charge or to receive a commission. NAR rules are very intentionally pro-consumer and pro-business competitive, and buyer brokers exist because consumer protection agencies thought they were important.

Jury deliberation begins Tuesday.

NAR Position

In response to the marketplace, NAR has developed guidance for local MLS broker marketplaces that supports consumers getting comprehensive, equitable, transparent and reliable home information while brokerages of any size, service or pricing model get a fair shot at competing. The result is an efficient model for brokers to serve sellers and buyers and to enable market-driven pricing and buyer representation for consumers. REALTORS® adhere to a strict Code of Ethics and bring incredible expertise to guide consumers through the financial, legal and community complexities of buying or selling a home. 

For more information: REALTOR® Magazine - Burnett Trial Preview
 

Update: October 27, 2023

On Friday, four more witnesses took the stand for the corporate defendants. The trial will continue Monday morning with one more witness expected, followed by closing statements, jury instructions and then jury deliberation, which could begin as soon as Monday afternoon. A verdict could then be delivered at any point and likely sometime next week.
 

Update: October 26, 2023

Thursday, four additional witnesses took the stand for the corporate defendants.

Video testimony of Scott Trupiano, a withdrawn plaintiff, detailed his experiences both purchasing and selling homes. Trupiano recounted how he was very satisfied with his real estate agent and worked with her as both a seller agent and buyer agent for three separate transactions. Trupiano agreed to the terms of the listing agreement each time and rated his agent a 9 out of 10 on each transaction, sharing how he valued the services she provided.

David Stevens, who previously served as Assistant Secretary of Housing and Federal Housing Commissioner for the U.S. Department of Housing and Urban Development (HUD) and oversaw FHA programs for Single and Multi-Family Housing, discussed why the current compensation model is not only helpful for both home sellers and buyers, but particularly first-time buyers:

  • Most first-time home buyers are cash constrained and requiring them to also pay for the buyer agent commission could force them to put down less for a down payment or forego professional services needed for one of the biggest purchases they’ll make in their lifetime.
  • Home sellers benefit from the offer of compensation because it ensures the seller will receive the most qualified buyers and the best offer. 
  • Buyer brokers’ expertise is needed now more than ever because it is hard to buy a home.
  • The compensation the listing broker pays to the buyer broker is always negotiable.

Dr. Lawrence Wu, President of National Economic Research Associates, also testified that:

  • There is no evidence of conspiracy because offers of compensation are decisions independently made between a home seller and a listing broker, and always negotiable.
  • The offer of compensation benefits sellers by ensuring they get more buyers to see their house and more competitive bids, and benefits buyers by ensuring they have more choices and access to professional representation. 
  • No one gets paid until a property sale closes, which fosters competition and creates a marketplace where brokers are further motivated to always serve their clients’ best interests.
  • Even if the cooperative compensation rule was not in place, evidence shows that the practice of cooperative compensation would still exist because it is good for sellers and buyers.

Keller Williams plans to present their witnesses on Friday, with closing arguments by all parties likely to begin on Monday, followed by jury deliberations.

Update: October 25, 2023

On Wednesday, four witnesses took the stand for the corporate defendants who will continue presenting their case through the week. Defense expert witnesses are anticipated to take the stand tomorrow and closing arguments could be as early as Monday. HomeServices of America, Inc. filed a motion for mistrial, which the court denied.

Update: October 24, 2023

Tuesday the defense continued their case as NAR CEO Bob Goldberg completed his testimony and NAR Director of Engagement Rodney Gansho took the stand. Gansho explained how Multiple Listing Services (MLSs) and associated rules work and noted:

  • Local MLS broker marketplaces promote transparency, equity, and efficiency for the benefit of consumers and enable real estate professionals to better serve their clients.
  • Local MLS broker marketplaces determine their rules locally and decide whether to adopt provisions of NAR’s MLS Handbook, including those identified as “mandatory.”
    • Should a local MLS choose not to adopt mandatory provisions, it would need to purchase its own error and omissions insurance.
    • Local MLSs are responsible for enforcement of the rules it adopts.
    • Nothing in NAR’s MLS handbook requires sellers to do anything.
  • “Blanket unilateral offers of compensation” means the listing broker makes a one-way, initial offer (unilateral) that is the same (blanket) for any MLS participant who brings a ready, willing buyer. That offer can then be negotiated – and often is – at any point in the transaction.
  • The listing broker has fiduciary duties to the seller and the buyer broker has fiduciary duties to the buyer, and no one makes any money unless there is a successfully transaction and the property sells.
    • Sellers determine which real estate professional to work with, and whether to even work with one.
    • At the outset of the transaction, sellers determine how much they will pay for a real estate professional’s services, which is then memorialized in the listing agreement between the seller and the real estate professional.
    • The NAR Code of Ethics requires REALTORS® to disclose to sellers any amount of compensation that will be offered to a buyer broker who brings a ready, willing buyer to successfully purchase the seller’s property.
    • The NAR Code of Ethics requires buyer brokers to inform buyers of all properties that meet their criteria, regardless of the offer of compensation being made to the buyer broker; and buyer brokers have options when they are not getting the cost of their services covered by the seller broker, including that the buyer can pay directly for the buyer broker’s services or the buyer can ask the seller to cover that cost.
  • The NAR cooperative compensation rule benefits sellers by exposing their home to every brokerage and real estate agent with ready, willing buyers to successfully purchase the buyer’s home. Buyers benefit because there is one centralized marketplace to go to, and they don’t have to pay out of pocket expenses, which means more buyers can afford a home and have more money to purchase a home, and sellers have a larger pool of buyers to purchase their home.

Update: October 23, 2023

Today, plaintiffs rested their case after presenting testimony from four more witnesses. In the afternoon, the defense began its case and presented NAR CEO Bob Goldberg. Goldberg shared the many functions and benefits of a trade association, and specifically how NAR works to protect, preserve, and advance homeownership, as well as to increase professionalism in the industry, and all for the benefit of consumers. NAR also presented Sharon Millett, NAR Past President and Chairperson of the 1991-92 NAR Presidential Advisory Group on Agency (PAG).

Millett explained:

  1. The PAG found that buyers needed and wanted a loyal advocate to represent them in the transaction, as the market shifted from subagency to buyer agency. 
  2. The PAG’s charge and goal was to accommodate and encourage different forms of representation, placing a consumer’s freedom of choice as central to the PAG’s work.
  3. The PAG didn’t focus on compensation, as the practice of offering cooperative compensation already existed in the marketplace.
  4. The PAG’s work allowed the marketplace to evolve and to provide consumers greater choice, with today’s norm giving buyers the ability to work with a loyal buyer agent who puts their needs above anyone else’s.
  5. Buyer brokers expend a significant amount of time and effort on behalf of their buyer clients and advise buyers on all aspects of the transaction, including helping buyers sort through the overwhelming amount of information available to consumers on the internet.
  6. Listing brokers would still offer compensation to buyer brokers even if the NAR cooperative compensation rule did not exist because:

a. It is the best way to expose a seller’s property to the largest number of buyers. 
b. If the seller’s broker isn’t offering enough to cover a buyer broker’s fees, buyers may pass over a property because cash-strapped buyers can’t afford to cover the buyer broker’s fees on top of the significant amount of money it takes to purchase a home.
c.  Sellers get better pricing offers and allows sellers to sell their home faster, as two brokers work cooperatively to achieve a successful transaction for both the seller and the buyer’s benefit.

Update, October 21, 2023

On Friday, plaintiffs had three witnesses including one who talked about how commissions work abroad. Following are three perspectives about compensation and the consumer experience in other countries. 

Plaintiffs are expected to conclude their case on Monday when the defense is expected to begin presenting its case. 

Update: October 20, 2023

On Thursday, another seller member of the class and an economics professor testified as plaintiffs' witnesses. Some of the discussion centered on the compensation model in local MLS broker marketplaces. For context: 

  • Agent compensation is set between brokers and their clients and always has been negotiable at any point in the transaction. Those costs are spelled out to buyers and sellers, and NAR doesn’t tell people what to charge. The NAR Code of Ethics also requires members to advise clients about cooperation and amounts of compensation to be offered.
  • Despite what may be months or even years of work, agents only get paid when a home is sold, and according to Real Trends, commission rates have fluctuated over time and are well below where they were in the ‘90s. 
  • The seller decides what fee they are willing to pay for their broker’s services and how much that listing broker should offer a broker who brings a buyer to close the transaction. 
  • Because of this practice, sellers have access to the largest possible pool of buyers, and buyers get access to the greatest number of homes for sale in one place all in transparent and efficient virtual marketplaces. 
  • Buyers also have the greatest chance to receive professional representation to guide them through the financial, legal and community complexities of buying a home in what is for many the single most complex and significant purchase they will make in their lifetime.  
  • The future of that buyer representation is at risk in this case. 

Update: October 19, 2023

  • On Wednesday, three members of the class took the stand to testify as to their experience as home sellers, along with other Plaintiff’s witnesses. In addition, the plaintiffs’ attorneys presented recorded video deposition testimony from three NAR witnesses who discussed NAR MLS guidance, including The Clear Cooperation Policy.
    • The Clear Cooperation Policy (CCP) ensures brokers and agents serve the best interest of consumers and promote equal opportunity for all. The CCP advances equal access and opportunity in housing by ensuring listings are widely available and accessible to all consumers and requires MLS participants to submit their listings within one business day of marketing the property to the public. Without the protections from the CCP, consumers would be disadvantaged because agents could refuse to give agents or customers access to those listings.
    • The CCP is especially important in competitive markets where properties sell extremely fast, and to help inoculate against circumstances in which properties are publicly marketed to limited groups of people.
    • CCP was enacted in response to concerns about confusion in the marketplace about the availability of properties – often to the disadvantage of both home buyers and sellers. Brokers and local MLS broker marketplaces across the country asked NAR to consider a policy reinforcing the pro-consumer, pro-competitive benefits of listing a property in local MLS broker marketplaces.

Update: October 18, 2023

  • On Wednesday, three members of the class took the stand to testify as to their experience as home sellers, along with other Plaintiff’s witnesses. In addition, the plaintiffs’ attorneys presented recorded video deposition testimony from three NAR witnesses who discussed NAR MLS guidance, including The Clear Cooperation Policy.
    • The Clear Cooperation Policy (CCP) ensures brokers and agents serve the best interest of consumers and promote equal opportunity for all. The CCP advances equal access and opportunity in housing by ensuring listings are widely available and accessible to all consumers and requires MLS participants to submit their listings within one business day of marketing the property to the public. Without the protections from the CCP, consumers would be disadvantaged because agents could refuse to give agents or customers access to those listings.
    • The CCP is especially important in competitive markets where properties sell extremely fast, and to help inoculate against circumstances in which properties are publicly marketed to limited groups of people.
    • CCP was enacted in response to concerns about confusion in the marketplace about the availability of properties – often to the disadvantage of both home buyers and sellers. Brokers and local MLS broker marketplaces across the country asked NAR to consider a policy reinforcing the pro-consumer, pro-competitive benefits of listing a property in local MLS broker marketplaces.

Update: October 17, 2023

  • Tuesday plaintiffs, co-defendants and NAR outside counsel, Ethan Glass, presented opening remarks in the case of Burnett et al v. National Association of REALTORS® et al. Glass noted that:  
    • NAR rules are made as part of a very public rule-making process and are persistently and publicly shared and available.    
    • The compensation rule ensures the buyer broker knows what they will be paid before they commence work and that buyers can afford representation.   
    • Plaintiffs envision a world where there is no buyers’ agent and buyers would have to go it alone in what is the single most complex and significant purchase most people will make in their lifetime.  
    • If buyers had to pay out of pocket for representation, that would reduce the number of buyers and the money buyers have to purchase homes from sellers.   
    • NAR does not seek, track, receive or set commissions for buyers’ or sellers’ agents. Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction, as set forth in NAR’s publicly available guidance for members. And those costs are spelled out to buyers and sellers.  
    • Every plaintiff in this case knew the commission they were paying to their agent and agreed to it in writing. 
    • Article 1 of the NAR Code of Ethics requires a REALTOR® to “protect and promote the interests of the client.” NAR also has rules that prohibit antitrust behavior.  

Update: October 15, 2023

Jury selection is scheduled for Monday, Oct. 16, and opening statements are scheduled for Tuesday, Oct. 17.

NAR Position: 
In response to the marketplace, NAR has developed guidance for local MLS broker marketplaces that supports consumers getting comprehensive, equitable, transparent and reliable home information while brokerages of any size, service or pricing model get a fair shot at competing. The result is an efficient model for brokers to serve sellers and buyers and to enable market-driven pricing and buyer representation for consumers. REALTORS® adhere to a strict Code of Ethics and bring incredible expertise to guide consumers through the financial, legal and community complexities of buying or selling a home.

For more information: Preview: Burnett Trial Starts Monday–REALTOR® Magazine

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