The Floodgates of Broker Commission Lawsuits Have Opened

By Franco Faraudo

For as much as has been written about the $1.8 billion broker commission settlement, we are still a long way off from seeing that settlement getting paid off. NAR has already said that they will fight the case in appeals court. Keller Williams, one of the companies being charged in the suit, has even gone as far as to appoint a former solicitor general with hundreds of Supreme Court cases under his belt as their legal counsel. With the kind of legal and political power that NAR et al yield, it is hard to think that this verdict will actually stand or the settlement will be upheld.

But one of the biggest fears for NAR, and the entire residential brokerage industry for that matter, is not this hefty payout; it is the threat of copycat lawsuits. Now we are starting to see those lawsuits start piling up. A class action suit has been filed in Manhattan against its MLS provider, the Real Estate Board of New York (REBNY), along with a host of private brokerages. This lawsuit seems to have some ammunition thanks to the lower commissions that are paid in neighboring boroughs like Brooklyn, where commissions are negotiated separately and average around one percent. REBNY has already made changes to address these charges; starting in January, they will require sellers, not their brokers, to pay commissions directly to buyers’ brokers.

Another group of sellers have come together to file a prospective class-action complaint against NAR. Brokerages Keller Williams and HomeServices of America, both of which are headquartered in Texas, have also been listed in the complaint. One of the accusations against these brokerages is that these brokerages didn’t just abide by NAR’s commission rule; they voted for the rule at meetings. “Defendants also play a part in implementing the conspiracy by reviewing NAR’s Rules and consenting to them at annual meetings, and NAR perpetuates the conspiracy by periodically reissuing its Rules, which include the Mandatory Offer of Compensation Rule. Additionally, Defendants are involved in the conspiracy by serving on boards and committees that oversee compliance with NAR Rules,” the document claims.

It has been just over two weeks since the NAR case verdict, and already we have seen multiple similar cases being brought. With all of the money that is at stake, it is hard to think that this is not just the beginning. Here we see, in my mind, a much more dangerous outcome of the Sitzer/Burnett case than the $1.8 billion dollar award. If enough of these copycat suits are filed, it could put enough of a strain on NAR that it could change how they operate or force them to break apart entirely. The brokerages also have a lot to lose in these cases. The threat of more legal fees and the continued bad press could convince some of them to settle, much like RE/MAX did at the beginning of October. The outcome of the Sitzer/Burnett case is still likely years away, but the impact is already being felt as similar suits get filed across the country.

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