Editor's Note: This article appeared in the Winter 2024 print edition of REALTOR® Magazine. For the resources and key developments on pending litigation, turn to competition.realtor.
Since it was handed down in October, the verdict in the Sitzer-Burnett case has been top of mind for the industry. The National Association of REALTORS® has made it clear it intends to appeal the verdict. In the meantime, REALTORS®, members of NAR, should be aware of what the case is about and what it means for them.
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.
At the October 2023 trial, the plaintiffs took particular issue with cooperative compensation, i.e., when a listing broker makes an offer of compensation to the cooperating broker. “Offer of compensation” does not mean that a specific amount must be paid—the offer can be any amount, including in many cases, $0. NAR introduced evidence to show how the real estate market-place works and how cooperative compensation benefits consumers. NAR also showed that its rules prohibit anticompetitive behavior and encourage the free market and competition. However, the jury found for the plaintiffs. NAR believes this outcome was unsupported and was largely driven by legally erroneous rulings by the judge, including legal instructions that prohibited the jury from considering the vast procompetitive benefits that result from NAR’s policies and cooperative compensation practice. Post-trial briefing will be complete in March 2024. NAR expects any appeal to be briefed and argued later in 2024. Meanwhile, plaintiffs’ attorneys in other jurisdictions have seen the verdict and have filed similar complaints. NAR will respond to those formally in court.
NAR continues to believe cooperative compensation is good for consumers: Real estate sales agents provide a bona fide service to home buyers and sellers and should expect to know what they’ll be paid. Cooperative compensation makes the process smooth and efficient while ensuring that buyers benefit from professional representation if they so choose. Cooperation benefits sellers by bringing more buyers to the market. And buyers, sellers and brokers benefit from the central source of accurate data on homes for sale.
NAR maintains that buyer representation is a critical service for consumers in what is often the most significant financial transaction of their lifetime. Before the 1990s, cooperating agents typically acted as subagents of the listing agent. After the Federal Trade Commission released a study showing that most buyers thought they were being represented, states passed laws that required agents to disclose whom they represented. Buyer agency grew out of a legitimate need and demand by consumer advocates.
What the verdict means for you: The verdict doesn’t require you to change how you run your brokerage or sales business, and the verdict and other pending actions don’t change the many choices buyers and sellers have. NAR stands by the benefits of cooperative compensation. It makes efficient, transparent and accessible marketplaces possible, which serves consumers and advances homeownership.