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The U.S. Department of Justice and the attorneys for homeseller plaintiffs in the Sitzer | Burnett antitrust case have entered into “very significant and ongoing” talks with the aim of shaking up how the real estate industry operates, lead counsel Michael Ketchmark confirmed to Inman exclusively on Monday.
Simultaneously, the lawyers’ latest lawsuit against the National Association of Realtors, named “Gibson” for its lead plaintiff, will seek damages of more than $200 billion before rising to approximately $600 billion as a result of “trebling,” said Ketchmark, a partner at Kansas-based law firm Ketchmark and McCreight.
“We’re in alignment with what the Department of Justice wants” — to make real estate part of the “free market” and to get NAR out of “rigging the system,” Ketchmark told Inman. “We think this is a real opportunity for change.”
Ketchmark’s talks with the Department of Justice have occurred before, during, and after the Sitzer | Burnett trial, in which a jury last Tuesday awarded $1.78 billion in damages to a class of about 500,000 Missouri homeowners. By law, that damages amount will be tripled, or “trebled,” to $5.36 billion.
The jury found that NAR and franchisors Anywhere, Keller Williams, RE/MAX, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, had conspired to inflate broker commission rates paid by homesellers.
The case challenged NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service. Even after the verdict, NAR stood by the practice of listing brokers making offers of compensation to buyer brokers.
Ketchmark said the conversations with DOJ officials and think tanks have centered around putting the trade organization “out of the business of using the MLSs as a vehicle for higher commissions.” He declined to name the think tanks without their explicit permission.
“This is one of the rare things in our country where, regardless of politics, people can come together,” Ketchmark said. “Everyone agrees we have to get the National Association of Realtors out of the pockets of homeowners. It’s not right and the jury exposed it for what it was.”
He said the conversations with the DOJ were “very significant and ongoing” but declined to share more about them.
Immediately after the Sitzer | Burnett verdict, Ketchmark filed a new class action lawsuit, Gibson, with similar allegations against NAR and a slew of real estate brokerages: Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate, and Douglas Elliman.
Because the scope of that case is exponentially bigger than Sitzer | Burnett — encompassing home sales nationwide over the course of the last four years — the damages in that case will exceed $200 billion, and that’s before trebling, Ketchmark told Inman.
“One of our goals in filing the Gibson case is to make sure any changes are brought nationwide,” Ketchmark said.
“We’re extremely focused on making sure any change that comes from this is real change,” he added.
Referring to rules that trade organizations tweak, allegedly in order to get the same result, Ketchmark said, “We don’t want to keep playing whack-a-mole. We want to unplug the whack-a-mole machine.”
In an emailed statement, NAR spokesperson Mantill Williams told Inman, “The cooperative compensation practice makes efficient, transparent and accessible marketplaces possible. Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation.”
Williams said it “hardly seems fair” that, without the practice, wealthy people could still afford representation.
“Every American should be able to work with an expert in the most significant and complex transaction most people will make in their lifetime,” Williams said.
“It’s concerning the class action attorneys still don’t understand how the marketplace works.”
Williams also reiterated a point NAR’s attorneys made during the trial — that NAR doesn’t track, receive or set agent commissions.
“It is the real estate agent, a majority of whom are small businesses and who make an average $55,000 a year, who gets paid,” Williams said.
“But the agent only gets paid after they guide their client through all the financial, legal and community complexities of buying or selling a home and only after the home sale or purchase closes.”
A final judgment from Judge Stephen R. Bough in the Sitzer | Burnett case is expected in the next 30 days. After the final judgment is entered, the defendants will file post-trial motions. For instance, NAR has already said the trade group plans to request a reduction in the damages awarded.
NAR and HomeServices have also said they plan to appeal the jury’s verdict. Before they do, they’ll have to post a bond of a to-be-determined amount to guarantee they can pay the plaintiffs their due if they don’t succeed in convincing a higher court to see things their way. To set that amount, the court will likely hold an appeals bond hearing.
Inman reached out to the DOJ’s Antitrust Division for comment. We will update this story if the agency provides a response.
Editor’s note: This story has been updated with comments from NAR.