Beginning Monday, October 16, the Sitzer | Burnett commission trial begins in Kansas City, Missouri. Inman will be updating this post live throughout the month-long trial. Check back early and often for news, views, schedules and more.
KANSAS CITY, Mo. — One of two lawsuits threatening to upend the way agents are compensated has gone to trial in U.S. District Court in Western Missouri.
Inman Deputy Editor Andrea V. Brambila is on the ground for what could be a three-week trial. Many of the biggest names in real estate are expected to testify.
As Sitzer | Burnett unfolds in October, check back for updates, including color from the courtroom, on-the-ground reporting, breaking news and schedules.
WEDNESDAY, NOVEMBER 1 — DAY THIRTEEN
3:01 p.m. CDT: Hello dear Inman readers!
After two and a half weeks of examining the real estate industry under the microscope of a federal trial, we are bringing this live blog to an end — for now.
Andrea V. Brambila
If you’re wondering what just happened, scroll down for updates from the Sitzer | Burnett trial and read our in-depth coverage of all the twists and turns — not to mention testimony from National Association of Realtors CEO Bob Goldberg, RE/MAX CEO Nick Bailey, Keller Williams co-founder Gary Keller and the homesellers themselves.
And if it’s fireworks you want, check out our story on a Tom Ferry podcast video featuring Berkshire Hathaway HomeServices exec Allan Dalton, which prompted the defendants to ask for a mistrial, which Judge Stephen R. Bough denied. Each side wrapped its closing arguments on Monday, including an impassioned rebuttal from the plaintiffs’ lead counsel, Michael Ketchmark.
From a seat in the gallery throughout the trial it was hard to tell what the jury was thinking – their faces remained neutral through most of the testimony. But once the ball was in their court, they made quick work of it. After less than two and a half hours of deliberations, they came to an historic verdict, awarding the plaintiffs $1.78 billion in damages that, by law, will be trebled to $5.36 billion.
But the story isn’t over. Minutes after the verdict, Ketchmark filed another bombshell lawsuit against NAR and other real estate companies, Gibson, which will be exponentially bigger in scope than Sitzer | Burnett or even its larger cousin, Moehrl. Moehrl is still expected to go to trial in the first half of 2024.
In Sitzer | Burnett, NAR and HomeServices have vowed to appeal, but 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. The judge in Sitzer | Burnett must also make his final judgment in the case, which may or may not mean he issues some kind of injunction that the industry will have to comply with immediately.
Lurking in the background of all of this are federal regulators. The U.S. Department of Justice and the Federal Trade Commission have their eyes on the real estate industry and we don’t know yet what they have in store.
What we do know is that we will be with you every step of the way, Inman readers, doing our best to keep you up-to-date on issues that could have earth-shaking consequences on your work. Because you are the people who care. You have shown us with your attention, tweets, emails, phone calls, and comments.
So until the next trial, thank you for reading. —Andrea V. Brambila
1:30 p.m. CDT: Sitzer Survey: Yesterday’s verdict came as a shocker for most Inman readers, who expected the jury to issue a verdict in favor of the real estate defendants. 60 percent of respondents said they expected the defendants to prevail, compared to 40 percent who thoughts the plaintiffs would win.
In our final Sitzer survey, we want to know: Were you satisfied with the Sitzer | Burnett verdict?
10:35 a.m. CDT: A day after jurors delivered a jaw-dropping verdict in the Sitzer | Burnett trial, Inman founder Brad Inman and a panel of real estate leaders shifted to what it all means during a virtual Connect session on Wednesday.
“They failed,” said Inman of the defendants, which includes the National Association of Realtors. “A jury found them guilty of failing, and now the members are going to pay for these shenanigans. It’s shameful.”
EXp Realty’s Kendall Bonner and Collabra Technology’s Russ Cofano walked Connect viewers through Tuesday’s court proceedings and laid out what might come from Judge Stephen R. Bough as he assesses next steps. Although the impact of the decision remains foggy, the panelists acknowledged brokerages have had years to prepare for the changes now poised to upend the industry.
“We’ve failed to do that in any meaningful way across the industry,” she sad.
Read the full story here, or watch the session on demand with your Inman Connect ticket. —Jotham Sederstrom
5:37 a.m. CDT: Another page in the calendar is gone, and with it the status quo.
But to hear it from defendants, Tuesday’s verdict signaled the end of a chapter, not the story, with plaintiffs’ attorney Michael Ketchmark all but confirming a sequel when he filed a new lawsuit immediately after the ruling, this time against a fresh roster of defendants, including Compass, eXp and Redfin.
The National Association of Realtors, which is also named in the new lawsuit, intends to continue fighting allegations its involved in a conspiracy to inflate commissions, spokesman Mantill Williams told Inman yesterday afternoon.
“This matter is not close to being final as we will appeal the jury’s verdict,” Williams said after the ruling. “In the interim, we will ask the court to reduce the damages awarded by the jury.” Read the story here. —Jotham Sederstrom
TUESDAY, OCTOBER 31 — DAY TWELVE
3:12 p.m. CDT: With jurors ruling in favor of the homeseller plaintiffs today in the Sitzer | Burnett commission trial, it’s all but guaranteed that the real estate industry will be scrambling for answers tomorrow.
But have no fear. With virtual Inman Connect kicking off tomorrow, the historic commission ruling will be front and center Wednesday when Inman founder Brad Inman moderates a panel called “The Verdict is in” featuring eXp Realty‘s Kendall Bonner, Collabra Technology CEO Russ Cofano and more.
The session will air live at 8 a.m. PST/11 a.m. EST and cover not only the latest updates from the trial this month but how real estate agents can get ahead of the shift. Watch Brad’s panel with the experts live or on-demand with your ticket for Inman Connect. Or log in here if you already have your ticket.
12:09 p.m. CDT: Minutes after jurors sided with the homeseller-plaintiffs in the Sitzer | Burnett trial Tuesday, attorney Michael Ketchmark filed a new class action lawsuit against another group of big-name real estate industry entities.
Ketchmark filed the suit on behalf of three new homesellers, who like those in Sitzer | Burnett claim to have suffered from a real estate industry conspiracy that inflated agent commissions. In this case, however, the suit names as defendants Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna, and Douglas Elliman. The suit also names the National Association of Realtors as a defendant.
Ketchmark filed the suit in the United States District Court for the Western District of Missouri. Read the full story here.— Andrea V. Brambila
12:07 p.m. CDT: PLAINTIFFS WIN: A jury in Kansas City, Missouri, sided with a group of homeseller-plaintiffs Tuesday, ruling that real estate’s biggest names participated in a conspiracy that helped keep agent commissions inflated.
The jury found that all of the defendants, which include the National Association of Realtors as well as franchisors such as Keller Williams, participated in the conspiracy. And the jury ultimately awarded $1.785 billion in damages. Read the full story here. —Andrea V. Brambila
11:41 a.m. CDT: VERDICT REACHED: The jury has reached a verdict after deliberating for 2 hours and 28 minutes. The call came into the courtroom at 11:28 a.m. Central.
About an hour and a half into deliberations, the jury asked for the damages calculation exhibit. — Andrea V. Brambila
10:12 a.m. CDT: Sitzer Survey: When we asked on the second day of the trial who you thought would win, 56.7 percent said they believed NAR and the real estate defendants would prevail. The other 43.3 percent said the homeseller plaintiffs would win.
We’ve heard two more weeks of testimony and arguments and are now waiting for a verdict from the jury in the Sitzer | Burnett trial. So we want to ask one more time: Who do you think will win?
8:55 a.m. CDT: Jurors in the Sitzer | Burnett commission trial have begun deliberating.
According to the plaintiffs’ proposed jury verdict form, jurors will have to decide whether they believe a conspiracy existed and, if they do, whether that conspiracy raised, inflated or stabilized broker commission rates paid by homesellers. If the jurors answer “yes” to that latter question, they must then say whether they believe each of the defendants knowingly and voluntarily joined the conspiracy with the purpose of furthering its goals.
The jurors must then say whether they believe the conspiracy caused the plaintiffs to pay more for real estate brokerage services than they would have without the conspiracy. If the answer is “yes,” they must then state the amount of damages proved by the class plaintiffs.
The plaintiffs are asking for reimbursement of $1.78 billion in commissions they and their fellow class members paid to buyer agents over the course of more than seven years — plus potential treble damages that could raise that total to around $4 billion. —Andrea V. Brambila
“The law matters, the evidence matters, common sense matters,” NAR’s lead counsel, Ethan Glass, told jurors. “Don’t leave your common sense at the door.”
Ahead of jury deliberations later this morning, read summaries of all the arguments made by defendants and plaintiffs here. —Jotham Sederstrom
5:23 a.m. CDT: Good morning from Taylor Swift’s home away from home, where this morning inside the Charles Evans Whittaker U.S. Courthouse an eight-member jury comprised of seven men and one woman will review and consider arguments made by plaintiffs and defendants over the past two weeks.
Homeseller plaintiffs in the case are asking for reimbursement of $1.3 billion in commissions they and fellow class members paid to buyer agents over the course of more than seven years — plus potential treble damages that could raise the total to around $4 billion, according to Inman reports. —Jotham Sederstrom
MONDAY, OCTOBER 30 — DAY ELEVEN
4:54 p.m. CDT: Court adjourned Monday afternoon just before 5 p.m. The afternoon saw both sides of the case deliver closing arguments, paving the way for the jury to begin deliberations Tuesday morning at 9 a.m. CDT. —Jim Dalrymple II
11:59 a.m. CDT: Following brief testimony Monday morning from Jen Davis, Keller Williams‘ vice president of MAPS Coaching, attorneys for the defense in the Sitzer | Burnett commission trial rested their case, clearing the way for closing arguments this afternoon. —Jotham Sederstrom
10:21 a.m. CDT: Sitzer Survey: Most of you don’t think the plaintiffs have shown that there’s a conspiracy to inflate real estate commissions, according to our Friday survey. 69 percent of you said the plaintiffs haven’t cleared the bar during the trial. 22 percent said they have shown proof of such a conspiracy, and the remaining 10 percent said they don’t know.
With the trial wrapping up this week, we want to know: Who should earn a higher commission, listing agents or buyer agents?
In his testimony Friday — his first appearance in person following a taped deposition that aired Oct. 17 — an affable Keller denied the existence of a “standard commission” and said real estate agents are responsible for setting their own compensation and receive what consumers are willing to pay.
“They’re independent contractors,” Keller said multiple times under questioning from Timothy Ray, an attorney representing Keller Williams.
4:59 a.m. CDT: Back in Missouri after a bruising defeat Sunday against the Denver Broncos, the Kansas City Chiefs received a blessing over the weekend from Morgan Freeman, who nonetheless stopped short of praise for the budding romance between tight end Travis Kelce and Taylor Swift. “I don’t think about them… at all,” the Academy Award winner told CBS Mornings.
Speaking of Kansas City, Inman is back at the Charles Evans Whittaker U.S. Courthouse this week as attorneys for the defense, particularly Keller Williams, wind down their case after testimony ran longer than expected Friday. Closing arguments are still expected Monday afternoon, followed by jury deliberations and a final verdict that may take hours or even days. —Jotham Sederstrom
FRIDAY, OCTOBER 27 — DAY TEN
4:30 p.m. CDT: Court Adjourned Friday afternoon and wrapped up the second week in the Sitzer | Burnett bombshell commission trial. Though there had been a chance that the defendants in the case would rest Friday, witness testimony ran to the end of the day and will bleed into Monday as well.
Closing arguments and jury deliberations will take place next week.
Also on Friday, attorneys litigating the case filed several additional documents. One of those documents was a set of proposed jury instructions from the team representing HomeServices. Their proposed instructions would have the judge tell the jury not to consider a controversial podcast video that the plaintiffs played in court. The instructions would also have the judge tell the jury to disregard references to the Department of Justice.
The podcast video had prompted the defendants to ask for a mistrial — a request the judge denied. The episode did end with the judge advising jurors not to consider references to Inman and to NAR executive salaries, among other things, but he did not order jurors to disregard the video or DOJ references at that time.
Other recent filings in the case include an objection from HomeServices over the language describing how the jury might calculate damages, and an objection from Keller Williams over some of the language in the jury instructions. Keller Williams has also asked that the plaintiffs be barred from playing deposition videos during closing arguments — a request the judge granted.
Attorneys will discuss final jury instructions next week before the jurors are sent to decide the case. — Jim Dalrymple II
1:40 p.m. CDT: Under questioning from Keller Williams attorney Timothy Ray, co-founder Gary Keller said his company has “nothing to do” with the commissions agents charge.
“They’re independent contractors,” Keller said, adding KW agents charge what people are willing to pay.
He defended using a 3 percent commission rate in his book, saying “It was pretty innocent,” and that he wasn’t trying to suggest to agents they should always expect 3 percent commissions. “There is no standard commission,” Keller said.
He opined that nothing would happen if listing agents were no longer required to offer compensation – that they would still offer it.
Plaintiffs’ attorney Michael Ketchmark started his cross-examination by countering Keller’s claims that you can’t tell what commission rate will be next year, showing bar graphs of the commission clustering in the four subject MLSs.
He showed a November 2017 email in which Keller said, “Our agents’ commissions are under siege.” Keller replied that he was referring to companies like Zillow taking around 40 percent of the agents’ commission in return for leads. — Andrea V. Brambila
11:01 a.m. CDT: Sitzer Survey: Yesterday we asked you whether you thought it was acceptable for real estate agents to object when a client asks for a lower commission rate. We have a clear answer. 73 percent of you said this is an acceptable move by an agent, compared to 27 percent who disagreed.
On what may be the last day of testimony, we want to know: Have plaintiffs successfully established that a conspiracy to inflate commissions exists?
Gary Keller
10:30 a.m. CDT: MAN OF THE HOUR. Colorful Keller Williams co-founder Gary Keller is in court in person this morning, answering questions from Timothy Ray, the attorney representing his firm.
Keller spoke directly and easily to the jury, coming off as affable. Some members of the jury appear to brighten when he speaks.
Keller is likely to be among the last witnesses to take the stand, as the defense will likely rest its case by the end of the day. But he won’t be out of court before facing cross-examination by plaintiffs’ attorney Michael Ketchmark. — Andrea V. Brambila
9:58 a.m. CDT: Perhaps unsurprisingly, the National Association of Exclusive Buyer Agents, a trade group representing Realtors who work exclusively with homebuyers, released a statement Thursday rejecting any court ruling in Sitzer | Burnett or Moehrl that would lead to the decoupling of agent commissions.
Such a development, according to the statement, would threaten homebuyers, their agents and “potentially circumvent Fair Housing laws” by allowing Realtors to bypass local multiple listing services and proliferate pocket listings.
“A system that makes it harder for first-time and lower-income home buyers to retain loyal representation won’t save home-buying consumers money,” NAEBA President Rich Rosa said. “The lack of trusted representation will lead to costly mistakes, ultimately costing homebuyers more money.” —Jotham Sederstrom
5:06 a.m. CDT: Good morning from Kansas City, where the defendants in the Sitzer | Burnett commission trial are expected to rest their case this afternoon.
Closing arguments will likely begin Monday and last about two hours. Later, the jury will receive instructions and begin deliberations. —Jotham Sederstrom
THURSDAY, OCTOBER 26 — DAY NINE
5:11 p.m. CDT: Court Adjourned Thursday following testimony from Dr. Lawrence Wu, an economist called as an expert witness by the defendants. While on the stand, Wu said that the cooperative compensation rule is good for sellers because they want serious, qualified buyers.
“Anytime you make it easier for the buyer, the sellers benefit,” Wu said. “And because buyer agents know they’ll be compensated, they’re “motivated to find buyers” and bring them to the table.
Wu also said the fact that the buyer agents know that only one of them will be compensated — the one that brings the successful buyer — makes them compete against each other.
Dr. Lawrence Wu
“There’s only one winner. It’s a contest and the seller gets to pick the winner,” Wu said, referring to buyer brokers competing.
Wu additionally opined that the conditions for a conspiracy did not exist because the defendants did not communicate to set a price and commissions are determined “house-by-house” by individual listing agents and their seller clients. He said the fact that commissions tend to cluster in markets could be evidence of competition in a market because it just turns out that’s the going rate.
During an enthusiastic cross examination, Michael Ketchmark — an attorney representing the plaintiffs — got Wu to admit that not only had he been paid by all of the defendants, but that their attorneys helped him with his testimony.
“I showed them what I was going to do and they had an opportunity to give comments and I chose whether to accept them or not,” he said.
Ketchmark asked him if expert witnesses have a code of ethics and Wu told the jury, “The code of ethics is I have to give you my honest and independent opinion based on the analysis that I have done.” Wu said he was giving his independent opinion. When Ketchmark asked him whether he met with the defendants’ lawyers after court each day, he said, “Not every day.”
During his testimony, Wu also told the jury that plaintiffs’ expert Dr. Craig Schulman shouldn’t have looked at the real estate market in Australia because it wasn’t a comparable country and that he should have looked at markets here in the U.S. without the cooperative compensation rule — namely NWMLS in Washington and REBNY in New York. When you look at those markets, 100 percent of all listings still offer cooperative compensation, despite not having that rule.
But on cross, Ketchmark pointed out that NWMLS’s listing contract says — or it used to say until last year — that Washington law says buyers’ brokers and agents are not required to show property for which there is no written agreement to pay compensation to the buyer’s broker. He also noted that REBNY’s Real Estate Listing Service requires that commissions be shared equally between listing and buyer brokers.
“It’s like a game of whack-a-mole,” Ketchmark said. — Andrea V. Brambila
Stefan Swanepoel
2:45 p.m. CDT: Attorneys for the plaintiffs seized on the National Association of Realtors’ so-called “Danger Report,” an analysis of threats to the real estate industry researched and authored by the T3Group, whose founder, Stefan Swanepoel, was called to the stand by the defendants on Thursday.
Swanepoel, who also founded real estate consulting firm T3Sixty and publishes Real Estate News, acknowledged while under oath that the 2015 report was “art, not science,” and that the report included “hypothetical future events that may or may not occur” based on interviews with dozens of people in the industry.
The plaintiffs used the report to show the industry’s fear that commissions would go down. The report said there was a 100 percent chance of downward pressure on commissions, and it highlighted the typical commissions in other countries.
The “Danger Report” pointed out other countries where commissions are lower than they typically are in the U.S., including the United Kingdom, where they’re 1-2 percent, according to the report.
Swanepoel testified in court that he didn’t choose those countries to compare to the U.S., but rather to show “an eclectic compilation of countries. — Andrea V. Brambila
David Stevens
11:41 a.m. CDT: If buyers were required to pay their buyer agents’ commissions, “it would cause extraordinary, serious damage, particularly for cash-constrained buyers and first-time homebuyers,” David Stevens, former Federal Housing Commissioner, said in court this morning.
He said he didn’t know where buyers would come up with “magic money” to pay their agents. “My conclusion is that this would disrupt a system that provides equitable representation, whether you’re rich or poor,” Stevens said.
On cross, plaintiffs’ attorney Michael Ketchmark said that the study Stevens cited most was paid for by HomeServices. The study was called “Be Careful What You Ask For: The Economic Impact of Changing the Structure of Real Estate Agent Fees.” — Andrea V. Brambila
11:15 a.m. CDT: Sitzer Survey: We asked yesterday whether NAR and the other defendants were more or less likely to win after seven days of testimony, and Inman readers are virtually split. 50.1 percent said the defendants were less likely to win, compared to 40.9 percent who said the testimony was in the defense’s favor.
After hearing testimony this week around objection scripts: Do you believe it’s acceptable for agents to object to commission counter offers below 6 percent? — Taylor Anderson
10:20 a.m. CDT: As the Sitzer | Burnett commission trial barrels toward a conclusion, perhaps as early as next week, Inman reporters are striving to separate the signal from the noise as we make sense of its impact on the industry.
As real estate professionals with skin in the game, you know how crucial accurate and precise information can be as you refine your budgets and lay out your sales strategies for the new year. That’s why were asking you to take time today for our latest Inman Intel Index, hot off the presses as of yesterday.
The insights you lend us — not only about how you believe the Sitzer and Moehrl trials will impact the industry but how you think the market will shake out over the next 12 months — provides invaluable data that we can all benefit from as we navigate a rocky economy and acclimate to a post-Sitzer world.
Take the Inman Intel Index for October and check back for a selection of results in November. —Jotham Sederstrom
The Massachusetts-based lawsuit is separate from Sitzer | Burnett and the larger case known as Moehrl, which the two franchisors also settled in September. Read about the Nosalek settlement here. — Taylor Anderson
5:30 a.m. CDT: Good morning from the home of bumper stickers, Happy Meals and non-stick frying pans. We’re back at the Charles Evans Whittaker U.S. Courthouse in Kansas City, Missouri, where more than two inches of rain has accumulated over the past two days, according to KMBC News. This morning, expect showers with a chance of thunder and a high temperature of 75 degrees later this afternoon, according to Weather.com. —Jotham Sederstrom
WEDNESDAY, OCTOBER 25 — DAY EIGHT
4:30 p.m. CDT: Court adjourned Wednesday afternoon as HomeServices continued its defense. Witnesses late Wednesday included Mike Frazier, president and CEO of HomeServices wholly-owned subsidiary ReeceNichols, and CEO of Berkshire Hathaway HomeServices Kansas City Realty and BHHS Alliance Realty. Frazier’s appearance on the witness stand, and his numerous job titles, were significant because plaintiffs have been working to establish that HomeServices and its subsidiaries are one and the same in part because they share executives.
Krista Wilson, senior vice president of brokerage at ReeceNichols, also testified. She and Frazier told jurors commission-based steering doesn’t happen today because buyers can see homes online, sometimes even before their agents do.
“I would say it’s impossible,” Wilson said, referring to steering.
Still, Frazier admitted that if a listing offered a lower commission that that would reduce buyer agents’ motivation to show a home. “That’s human nature,” he said. “There won’t be an incentive.” Plaintiffs’ attorney Michael Ketchmark then asked whether buyers assume that there’s something wrong with a home when it sits on the market. “In this market, yes,” Frazier said.
When Ketchmark cross-examined her, Wilson admitted that the lowest commission she had charged a seller while working at a limited-service brokerage was 2 percent and that she “usually” still offered 3 percent to the buyer agent. When Ketchmark asked her why she offered more than she herself was paid, she said it was because buyer agents “work hard” and buyer agents and listing agents are equally important.
At another point, Ketchmark also asked Wilson who Redfin is and she said, “They are what I would call a limited-service brokerage that just lists on the MLS.”
Wilson also said she had no opinion on whether the cooperative compensation rule should be mandatory. She said ReeceNichols had commission guidelines long before she joined the brokerage in 2002 and eliminated them about five years ago — which Ketchmark noted was around the time Sitzer | Burnett was filed and within the relevant time period of the case.
“They were not set commissions,” Wilson said. “They were guidelines. They were a place to start.”
On redirect, HomeServices attorney Jay Varon asked Wilson whether those commission guidelines had come from HomeServices. She said they had not.
Keller Williams is expected to start presenting its case Thursday, and closing arguments are expected Monday. — Andrea V. Brambila — Andrea Brambila
4:20 p.m. CDT: During cross-examination, Rosalie Warner, a senior vice president of network services for HSF Affiliates, told the court that BHHS Alliance is wholly owned by HomeServices.
“It is a company that is owned by HomeServices of America and independently operated by a franchisee,” Warner said. She said she doesn’t work for HSOA and doesn’t know their structure.
Plaintiffs’ attorney Michael Ketchmark showed her bar charts displaying how the vast majority of commission rates offered by HS companies in the four subject MLS markets are between 2.5 and 3 percent.
“Each of these companies [is] independently owned and operated,” and the franchisor doesn’t get involved in their commission rates, Warner said. Of the clustering, she added, “I can see that’s what’s happening here. I don’t know why.” — Andrea V. Brambila
Judge Stephen R. Bough
2:25 p.m. CDT: Judge Stephen R. Bough denied a request by attorneys for HomeServices of America to issue a ruling before the jury can issue a verdict. The now-denied request was separate from one made this morning in which HomeServices, NAR and Keller Williams all asked Bough to declare a mistrial.
HomeServices on Monday had filed what is known as a motion for judgment as a matter of law, saying the plaintiffs hadn’t presented “any direct or circumstantial evidence of an actual conspiratorial agreement to follow and enforce the Rule.”
Without elaborating, Bough denied the motion on Wednesday afternoon.
“The Court finds that Plaintiffs have presented sufficient evidence that a reasonable jury could find for Plaintiffs,” Bough wrote. — Taylor Anderson
1:25 p.m. CDT: During a cross-examination, Plaintiffs’ attorney Michael Ketchmark asked HomeServices of America CEO Gino Blefari about a BHHS manual which specified that agents could only agree to accept commissions of 2.7 percent or more, otherwise they should talk to their manager.
Gino Blefari | HomeServices of America
Speaking of the manual, Blefari replied, “To me what it says is the commission’s negotiable.”
Rosalie Warner, a senior vice president of network services for HSF Affiliates — who also testified Wednesday — said the manual came from an independent franchisee of HomeServices and was not provided to franchisees by the parent company.
The plaintiffs in the case had previously showed a training video in which Blefari said he would negotiate a commission, but only up, and that he pre-writes a 6 percent commission into listing agreements. He said he learned that technique from real estate coach Mike Ferry in the 1980s.
Blefari also said all training is done independently. “I’m happy to share what I did as an agent, but every company has its own training modules.”
He added, “I participate a tiny bit in the Berkshire Hathaway HomeServices training. It’s always in line with what I’ve done in the past.”
Ketchmark confirmed with Blefari he was not there to offer any evidence regarding the purpose or effect of the cooperative compensation rule. “I quite frankly didn’t know it was a rule,” Blefari said.
He admitted that the offer of compensation is a core component of the MLS. And he said the rule isn’t about a conspiracy.
“It really just exists so the Realtors would work together in the best interests of the buyer and the seller.” — Andrea V. Brambila
Attorneys for the HomeServices filed the motion on Wednesday morning after plaintiffs’ attorney Michael Ketchmark played a segment from a video of a Tom Ferry podcast interview with Allan Dalton, CEO of Real Living Real Estate and senior vice president of Berkshire Hathaway HomeServices. During the segment, Dalton shared a colorful example of how agents should respond to a client who requests a lower commission, which he said he’d shared “at our events.”
The video wasn’t on the plaintiffs’ list of exhibits, the attorneys said. They also listed a series of occurrences in and out of court that they said should prompt Judge Stephen R. Bough to declare a mistrial and start the proceedings over with a new jury. NAR doesn’t want the trial to start over, attorney Ethan Glass said. Read the full story here. — Taylor Anderson
12:07 p.m. CDT: Sitzer Survey: Nearly 60 percent of respondents to our Sitzer survey yesterday said they believed the number of Realtors would drop dramatically by 2026 if commissions were decoupled. Breaking those numbers down, a plurality of respondents — or 34.4 percent — envision the number of Realtors dropping to between 750,000 and 1 million. That would be a steep drop from the 1.5 million Realtors today.
Another 22.7 percent think the number of Realtors could fall to between 500,000 and 750,000 by 2026, while 17.8 percent see the numbers falling even more, to fewer than 500,000.
Alternatively, 7.1 percent of respondents said they believed the number of Realtors would grow by 2026.
We asked you on the first day of opening arguments who you thought would win this trial. At that time, 54.3 percent said NAR and other defendants would win. But given what you’ve now read about the trial, do you think the real estate defendants are more or less likely to prevail?
The program, called Redfin Max, begins on Jan. 1 in Los Angeles and San Francisco, Dalrymple writes. Once it kicks in, agents in those markets will “earn competitive splits as high as 75 percent,” according to Redfin.
“We want top agents who have a book of business of their own,” Jason Aleem, Redfin’s senior vice president of real estate operations told Inman, adding later that “in a perfect world we’ve got all rising stars and we’ve got all rock stars.” Read the full story here. —Jotham Sederstrom
That action, according to Brambila, prompted an attorney for HomeServices to suggest that any decision rendered by the jury could be reversed by an appeals court because of how unfairly damaging seeing the video allegedly was. Read all the details from Andrea’s latest dispatch here. —Jotham Sederstrom
6:05 a.m. CDT: Good morning from Kansas City, where thunderstorms are likely this morning as the Sitzer | Burnet commission trial gets underway, followed by scattered showers, wind and hail, according to Weather.com, which puts the odds of rain at “100%” on Wednesday. — Jotham Sederstrom
TUESDAY, OCTOBER 24 — DAY SEVEN
5:02 p.m. CDT: Court adjourned Tuesday after an exchange between Michael Ketchmark, attorney for the plaintiffs, and Ron Peltier, former CEO of Berkshire Hathaway HomeServices of America. The exchange happened after the defendants called Peltier to the witness stand.
During cross examination, Ketchmark played video of a podcast in which an executive from HomeServices said he’d never cut his commission — and compared doing so to being a prostitute “standing outside the Lincoln Tunnel”
Ketchmark asked Peltier if the comments reflected HomeServices values, and if the executive should have been fired.
“I’m not speaking for him. He’s not speaking for us. He’s on a podcast,” Peltier replied.
After the judge dismissed the jury at 4:49 p.m. CDT, the exchange prompted some legal fireworks. Timothy Ray — an attorney representing Keller Williams — told the judge that bringing up the podcast video, as well as an Inman article, “was completely inappropriate and highly prejudicial to us” and “Mr. Ketchmark knows better.”
And Robert MacGill, an attorney representing HomeServices, also argued that “we have very specific concerns about what Mr. Ketchmark did.”
The judge said they would discuss the issue Wednesday morning.
Afterward, Ketchmark told Inman that “we complied with all the rules and all the obligations and we’re moving forward.”
“We’re going to let the jury resolve this case,” he added. — Andrea Brambila
3:40 p.m. CDT: Plaintiffs’ attorney Michael Ketchmark narrowed in on the consequences for multiple listing services that don’t follow the National Association of Realtors’ mandatory policies during his cross-examination of NAR Director of Engagement Rodney Gansho Tuesday afternoon.
Gansho said the only consequence is the potential loss of insurance coverage. During Ketchmark’s cross he surmised most MLS executives don’t prioritize the insurance “because they could buy their own and it’s not that expensive.”
NAR Director of Engagement Rodney Gansho
Ketchmark produced a 2018 email Gansho wrote in which he told attorney Mitch Skinner of the Council of Multiple Listing Services that “continued failure” to adopt the mandatory rules could lead to charter revocation for the local association that owns and operates the MLS. It could also lead the local association to remove officers from the MLS because they have “effective control” of the MLS.
Gansho also inadvertently provided Ketchmark with some ammunition. Gansho told him that when HomeServices’ Jon Coile or anyone else serves on a NAR committee they owe a fiduciary duty to NAR. Ketchmark seized on this aspect of the alleged conspiracy, to which Gansho angrily replied, “There’s no conspiracy here.” — Andrea V. Brambila
1:10 p.m. CDT: National Association of Realtors Director of Engagement Rodney Gansho took the stand Tuesday morning.
Gansho walked through details of NAR’s governance system — its board of directors and committee structure — and explained aspects of NAR’s Code of Ethics, including Articles 1, 3, 12 and 16. He also laid out the Clear Cooperation Policy and how it differed from the cooperative compensation rule.
Gansho said the NAR MLS handbook was a “model” local Realtor associations use to adopt their own rules. He said they don’t have to adopt NAR’s rules, but if they don’t, “they would jeopardize their errors and omissions insurance policy.”
“They can purchase their own insurance if they want to,” Gansho said, adding that local multiple listing services enforce the rules in conjunction with local associations.
Gansho said offers of compensation in the MLS are negotiable, and he acknowledged that NAR’s decision to allow listing brokers to offer no compensation to the buyer’s agent “is relatively new.”
But when an unidentified MLS decided to change its policy — BrightMLS, according to Inman’s own reporting — NAR reversed its policy, said Gansho, who added that Bright’s decision was not orchestrated by NAR.
“We weren’t even aware of it,” Gansho said. “They never called us.” When Ethan Glass, an attorney representing NAR, asked whether leaving the compensation field blank would be the same as zero, Gansho said, “Leaving it blank is not an offer.”
Plaintiffs’ attorney Michael Ketchmark will cross-examine Gansho after lunch. —Andrea V. Brambila
11:01 a.m. CDT: Sitzer Survey: Nearly two-thirds of you said yesterday that buyers would be well-served if they could wrap their agent’s commission into their mortgage. The other 35.3 percent disagreed.
Today, we want to know: If the industry is significantly changed as a result of the scrutiny it’s currently facing, what do you think will happen to the number of licensed Realtors in the future? — Taylor Anderson
10:15 a.m. CDT: Plaintiffs attorney Michael Ketchmark cross-examined NAR CEO Bob Goldberg Tuesday in an exchange that was testy and, at times, funny.
Ketchmark tried again to make an analogy between chicken producers inflating prices and what NAR is doing. Goldberg said it was an “apples and oranges” comparison because agents offer services, not a product.
NAR CEO Bob Goldberg
Goldberg said he couldn’t say whether what the chicken producers did was against the law, to which Ketchmark asked, “Do you need me to explain antitrust law?”
“No,” Goldberg replied, “I need you to explain to me the chicken law.”
Ketchmark brought up several ways NAR talks about commissions. On redirect, NAR attorney Ethan Glass pointed out that Goldberg hadn’t said the organization doesn’t talk about commissions because it’s taboo, he said they don’t train their agents to set commissions or what commission rates should be. — Andrea V. Brambila
5:42 a.m. CDT: We’re back inside the Charles Evans Whittaker U.S. Courthouse this morning as the defense continues to make its case.
Plaintiffs attorney Michael Ketchmark is expected to question National Association of Realtors CEO Bob Goldberg under cross this morning and will likely seize on portions of Monday’s testimony from former NAR president Sharon Millett around the cooperative compensation rule.
Among the points Millett made on Monday under questioning from Ethan Glass, an attorney representing NAR, is that the rule, as devised by the trade organization’s Presidential Advisory Group in the early 1990s, has no bearing on whether listing brokers compensate buyer brokers. According to a summary provided by NAR, Millett contended that compensation would be offered regardless of the rule because it’s the best way to ensure the property gets seen — and in some cases the only way a buyer can afford to complete the transaction.
Of Millett, Ketchmark told Inman, “What a wonderfully nice woman.”
“We never suggested her work in 1992 was part of this conspiracy,” Ketchmark said, referring to an alleged conspiracy to inflate commissions. “It’s how [the rule] is being followed and enforced now that’s the issue. And all the defendants know it and that’s why they’re so afraid.” —Jotham Sederstrom
MONDAY, OCTOBER 23 — DAY SIX
4:54 p.m. CDT: Court adjourned just before 5 p.m. CDT Monday.
Following testimony from former NAR President Sharon Millett Monday afternoon, Ethan Glass — an attorney representing the National Association of Realtors — called NAR CEO Bob Goldberg to testify.
While on the witness stand, Goldberg spoke about what NAR does as a trade organization, and said that the national, state, and local Realtor associations have common membership but not common control. He also said the state and local associations are “all independent of NAR.”
When Glass asked whether NAR trains its members what commissions to charge their clients, Goldberg said, “We don’t touch that. That’s taboo.”
Later Glass recalled how it was suggested last week that NAR’s incentive in the alleged conspiracy was to maintain its dues revenue. But Goldberg replied, “That’s preposterous because we are commission benign.” By that, he meant NAR gets its $150 in annual dues per member regardless of what that member charges or how much they make.
After the judge dismissed the jury at 4:54 p.m. CDT, the attorneys and the judge discussed scheduling issues. Michael Ketchmark, an attorney representing the plaintiffs, told Inman he’ll cross examine Goldberg Tuesday, and that the defense will call NAR Head of Engagement Rodney Gansho to the witness stand. — Andrea V. Brambila
4:15 p.m. CDT: Attorney Robert MacGill has asked Judge Stephen R. Bough to rule in favor of HomeServices of America and its subsidiaries, BHH Affiliates and HSF Affiliates, saying plaintiffs failed to find “evidence of any kind” the franchisor was involved in a conspiracy to keep commissions high.
Robert MacGill
“Lacking any direct or circumstantial evidence of an actual conspiratorial agreement to follow and enforce the Rule, Plaintiffs have instead focused their case on red herrings,” MacGill wrote in the Monday filing, otherwise known as a “motion for judgment as a matter of law,” wherein the court is asked to enter a legal ruling prior to a jury verdict on the basis that no jury would rule otherwise.
“No reasonable jury could find in Plaintiffs’ favor on their conspiracy claim against any one of the HomeServices Defendants,” said MacGill, who added that NAR and Keller Williams would file similar arguments. — Taylor Anderson.
3:45 p.m. CDT: The defense makes its case. Attorney Michael Ketchmark rested the plaintiffs’ case before lunch on Monday, and when the trial resumed Beatriz Mejia, an attorney representing the National Association of Realtors, called her first witness to the stand: former NAR President Sharon Millett.
Millett was the chair of a Presidential Advisory Group at NAR in the early 1990s when the body issued a report that recommended NAR change the cooperative compensation rule. The rule wasn’t changed until 1996, Ketchmark acknowledged later in his cross-examination of Millet. — Andrea V. Brambila
1:01 p.m. CDT: Plaintiffs in the Sitzer | Burnett trial last week focused much of their energy on the training and coaching practices of the nation’s largest franchisors.
11:55 a.m. CDT: Sitzer Survey: On Friday, we asked you what you think would happen if commissions were “decoupled,” meaning listing brokers no longer made offers of compensation to buyers’ agents, and the buyer agent’s commission instead came directly from the buyer.
56.5 percent of respondents said commissions would decline if that happened. 28.8 percent said they didn’t expect commissions to change much at all, and the remaining 14.7 percent said commissions would rise as a result.
That has us wondering, if the industry shifted and buyers were responsible for paying their agents directly, would they be better-served if they could wrap their agent commission into financing? — Taylor Anderson
9:53 a.m. CDT: Attorneys for the homeseller plaintiffs no longer intend to call RE/MAX co-founder Dave Liniger to the stand, according to an amended court filing viewed by Inman. Jay Papasan, the best-selling co-author of The Millionaire Real Estate Agent and vice president of strategic content for Keller Williams, is also no longer scheduled to testify. —Taylor Anderson
Before then, read Jim’s “Essential Guide to Week 1 of Sitzer | Burnett” here and check back later for updates as the trial gets underway. —Jotham Sederstrom
5:05 a.m. CDT: Welcome back to Kansas City, Missouri, where attorney Michael Ketchmark will seek to rest the plaintiffs’ case Monday — and perhaps even earlier than desired if the final homeseller named as a class representative, Frances Harvey, is unable to take the stand today. Ketchmark told Inman Harvey ran into complications making her way back from travels in Japan.
Beside Harvey, jurors can expect “four relatively short video depositions” before plaintiffs rest: Rosalie Warner, vice president of Network Services for HSF Affiliates; Darrell King, a former COO and compliance officer for Keller Williams; Cliff Niersbach, a former associate general counsel for the National Association of Realtors; and Kevin Goffstein, president of Berkshire Hathaway HomeServices Alliance Real Estate and Alliance Title Group.
The National Association of Realtors is expected to lead when the defense takes the floor later this afternoon, Ketchmark said. —Andrea V. Brambila
FRIDAY, OCTOBER 20 — DAY FIVE
4:55 p.m. CDT: A wrap for the week. After four days of arguments and witness testimony, the first week of Sitzer | Burnett wrapped up late Friday afternoon just before 5 p.m. CDT.
Friday’s witnesses included Roger Alford, a law professor from Notre Dame. The plaintiffs will continue making their case Monday, and among other things plan to call Australian real estate expert Todd Reynolds as a witness.
Inman’s Andrea Brambila will be back in the courtroom Monday as well, so stick with us as we head into week two. — Jim Dalrymple II
4:11 p.m. CDT: What do you say, ChatGPT? With training and objection scripts under fire as attorneys for the plaintiffs drill down on how agents negotiate commissions, Inman Deputy Service Editor Christy Murdock appealed to artificial intelligence chatbot ChatGPT for a few tips on how to thoughtfully demonstrate your worth without running up against antitrust no-nos. Although ChatGPT has drawn criticism for real estate advice that runs counter to fair housing laws, Murdock said in the case of objection scripts, its guidance holds up. See what the bot had to say. — Taylor Anderson
3:27 p.m. CDT: “This to me is one of the clearest cases of price-fixing and collusion I’ve ever seen.” Craig T. Schulman, an associate professor of economics at Texas A&M who took the stand for the plaintiffs, testified Thursday. Nevertheless, on Friday morning he clarified that the legal question of whether there was a conspiracy between the defendants was not under his purview. “That’s the job of the jury,” he said. — Andrea V. Brambila
Judge Stephen R. Bough
12:48 p.m. CDT: Judge-approved. If you’re enjoying Inman’s commission coverage, you’re not alone. This morning inside the Charles Evans Whittaker U.S. Courthouse, Judge Stephen R. Bough, who is presiding over the Sitzer | Burnett trial, showed his computer monitor to reveal he had been reading coverage of the trial on Inman’s live blog, several sources confirmed after the fact. He told the courtroom he was enjoying the coverage, the sources added. — Andrea V. Brambila
11:32 a.m. CDT: Sitzer Survey: Inman readers weren’t so split when we asked yesterday whether you’d ever received training on how to object to a seller who tries to negotiate a lower commission. Just over 69 percent said yes, you’ve received such training, compared to 22.6 percent who said you’d never been trained on the matter. (The remaining 8 percent said neither yes or no.)
Today, we want to know: What would happen if listing brokers could no longer make offers of compensation to buyside brokers? — Taylor Anderson
Ethan Glass | Partner at Cooley
10:02 a.m. CDT: Ethan Glass, an attorney for the National Association of Realtors, is currently cross-examining Craig T. Schulman, an associate professor of economics at Texas A&M who took the stand for the plaintiffs Thursday.
Glass keeps asking questions he wants yes or no answers to and Schulman keeps trying to offer fuller answers. Glass keeps telling him that he can wait until redirect from plaintiffs’ attorney Michael Ketchmark to give those answers. — Andrea V. Brambila
5:55 a.m. CDT: Good morning from the home of Janelle Monae, Paul Rudd, Walt Disney, Jean Harlow, Robert Altman, Charlie Parker and Edie McClurg.
We’re back in Kansas City as the first week of Sitzer | Burnett comes to a close today. Until then, Inman Deputy Editor Andrea Brambila will be back in the Charles Evans Whittaker U.S. Courthouse around 8:30 a.m. CDT this morning to file dispatches as the plaintiff’s attorneys work to wrap up their case today or early next week. Among those expected to testify today or perhaps Monday is Frances Harvey, the only remaining homeseller plaintiff yet to take the stand.
The remaining defendants — the National Association of Realtors, Keller Williams, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates — will begin their defense next week. —Jotham Sederstrom
THURSDAY, OCTOBER 19 — DAY FOUR
4:57 p.m. CDT: COURT ADJOURNS AGAIN: At 4:57 p.m. all the jurors but one, a new mom, left the room. She remained and spoke with the judge, then shook hands with all of the attorneys and said good luck. Inman later confirmed with Michael Ketchmark, an attorney for the plaintiffs, that she was dismissed from the jury.
With the new mom dismissed, the jury now consists of seven men and one woman. However, the dismissal should not disrupt the proceedings because federal rules merely require the trial to have anywhere between six and 12 jurors.
After the newly dismissed juror left, Ketchmark spoke to lawyers representing the defendants. He told Timothy Ray of Keller Williams that he planned to bring in two experts, and would have another plaintiff available to testify Friday. And he spoke to Robert MacGill from HomeServices of America about bringing in expert witnesses. During the conversation, Ketchmark appeared to become increasingly agitated when MacGill wouldn’t say if he was planning on flying in an expert from Australia.
Eventually, Ketchmark turned to Ray and said, “The frustration level is through the roof!” He added that he can’t continue with attorneys from NAR and Keller Williams being good cop and MacGill not being an “honest broker.” At one point, he told MacGill, “Be careful when the rabbit gets the gun.”
Speaking to Inman afterward, Ketchmark said that as the plaintiffs’ attorney he has to go first and plan how he’s going to present his case, adding that he and the defendants’ attorneys agreed to keep each other apprised of the witnesses they were planning to bring.
Ketchmark said, “The NAR and Keller Williams attorneys have been forthright and honest in their dealings, but I asked the HomeServices attorney a direct question and he refused to answer,” which was “frustrating.”
“It’s not how I practice law and I don’t like it,” he said. “But trials are full of pressure and I’m willing to forgive him” if he doesn’t continue with what he’s doing.
But as the conversation progressed, Ketchmark became angry again thinking about how MacGill had treated the plaintiffs on the stand.
“These are teachers, a former police officer, an executive director for Mothers Against Drunk Driving,” Ketchmark told Inman. “He’s trying to trick them and fool them and bully them on the stand, saying things that are blatantly not true. That’s not the pursuit of justice. It’s frustrating to me. We’re going to ask the jury to hold them accountable.” — Andrea V. Brambila
3:40 p.m. CDT: NAR’s economic incentive in the alleged conspiracy to keep real estate commissions high is $225 million per year, according to testimony from Craig T. Schulman, an associate professor of economics at Texas A&M who took the stand for the plaintiffs Thursday. That’s $150 in NAR dues times 1.5 million members.
Schulman is still testifying as we head toward the end of the day. — Andrea V. Brambila
1:45 p.m. CDT: ANOTHER PLAINTIFF SPEAKS: Plaintiffs’ attorney Michael Ketchmark launched into Thursday’s witness testimony by calling to the stand homeseller plaintiff Jerod Breit, a former police officer who is now regional executive director of Mothers Against Drunk Driving.
When asked why he joined the lawsuit as a class rep, Breit said, “After my first experience selling a home, I was exposed for the first time to how it works and I didn’t think necessarily that it was fair.” So when a friend told him about the suit, he offered to join.
Jerod Breit | Plaintiff in Sitzer | Burnett. Image via LinkedIn
He said he was satisfied with his RE/MAX agent, but after joining the lawsuit, he learned something that came as a nasty surprise: In his contract with RE/MAX, he’d agreed to pay a total 5.5 percent commission to sell his home with 2.7 percent going to the buyer agent. But when looking at the sale’s settlement statement and his attorneys did the math, it turned out that he had actually been charged a 6% commission. When Ketchmark asked how learning that made him feel, Breit said, “It made me feel stupid.”
When Ketchmark asked again why Breit joined the suit, Breit said, “I still don’t see the fairness in paying for somebody you’re never going to meet and never works for you in any way. I don’t think it’s fair.”
Robert MacGill from HomeServices of America cross-examined Breit and got him to acknowledge, by going through various contracts that Breit signed, that Breit knew that as a seller he would be paying the buyer agent commission. At one point, MacGill said, “A deal’s a deal.”
NAR and KW declined to cross-examine Breit.
When given the opportunity to redirect, Ketchmark asked Breit, “Do you hate buyer agents?”
“No,” Breit said. Ketchmark then asked if Breit’s position was that he shouldn’t have to pay a buyer agent as the seller and Breit said yes. Ketchmark latched onto MacGill’s statement that “a deal’s a deal.”
He said there were two sides to that handshake: Breit and RE/MAX, and that those contracts spell out corporations’ obligations and duties as well. In their contract with Breit, RE/MAX agreed to follow all applicable laws.
Ketchmark asked Breit if he thought RE/MAX was going to follow the law and Breit said yes. He asked if Breit thought that RE/MAX was going to join together in a conspiracy “designed to pick your pocket” and Breit said no.
“Are you asking they keep up their side of the deal by complying with federal antitrust laws?” “Yes,” Breit said. — Read more about Breit here. Andrea V. Brambila
11:15 a.m. CDT: Sitzer Survey: Inman readers were largely split yesterday when we asked whether they believe buyers’ agents steer clients away from listings that offer a lower commission. A very tight majority, 50.7 percent, said steering occurs. The other 49.3 percent of respondents in our unofficial Sitzer survey said steering doesn’t happen.
After yesterday’s testimony focused on training agents to handle client discussions around commissions, we wanted to know: Have you ever been trained on how to object to a seller who wants to pay a lower commission?
10:31 a.m. CDT: The Real Estate Board of New York is changing its rules around buyer agent commissions amid broader turmoil around compensation and multiple legal challenges to the way agents are paid nationwide.
Starting Jan. 1, REBNY rules will prevent listing brokers from paying buyer agents and will instead require sellers to pay commissions directly, The Real Deal reported Thursday morning.
The change is part of a handful of updates being made to the agreement governing REBNY and the Residential Listing Service in New York City, which are independent from the National Association of Realtors. Some agents told the outlet they feared the change would give too much leverage to buyer agents, while others say the change will provide more transparency and efficiency. — Taylor Anderson
6:14 a.m. CDT: Today’s Horoscope, from Vogue — “Today, you’re being asked to trust what’s being offered to you as well as what’s being taken away from you. The Universe knows what’s best for you and will deliver it to you in divine time.”
6 a.m. CDT: Ed Zorn, the vice president and general counsel of the nation’s largest multiple listing service — as well as an attorney with trial experience — predicted Friday, before the Sitzer | Burnett trial had begun, that Keller Williams would “probably settle” in the coming days and that it would be difficult for Berkshire Hathaway affiliated groups to find an escape at this stage.
Aired on an episode of Industry Relations with Decentre Labs CEO Rob Hahn and Vendor Alley publisher Greg Robertson, the remarks were among the many prognostications offered by the California Regional Multiple Listing Service executive in an interview that was taped Friday and released yesterday. And Zorn made clear settlements can come even if parties claim they plan to fight.
“You have some likely spots where people settle,” he told his interlocutors. “After the first week, if things go horribly wrong for the defendants, that’s a settlement point. Right after the trial, before an appeal bond hearing, another excellent point. That’s the most likely spot for NAR to sit if NAR doesn’t outright win.”
Zorn said a win would be hard for NAR, but not impossible. —Taylor Anderson
“It goes back to the model,” said Meredith Maples, senior director of Keller William University, who in recorded testimony told Ketchmark that such percentage splits, including numerous examples in training materials from KW events trotted out by Ketchmark, were arbitrary. On the stand, RE/MAX CEO Nick Bailey used similar language, saying the use of “6%” commissions in the franchisor’s training materials were merely “examples.” And on and on.
“It is for example purposes only,” Bailey said, according to Inman Deputy Editor Andrea Brambila, who’s reporting from Missouri throughout the duration of the trial. “We are very clear that commissions are negotiable.” —Jotham Sederstrom
WEDNESDAY, OCTOBER 18 — DAY THREE
4:54 p.m. CDT: Court adjourned. After many hours of testimony, court wrapped up Wednesday just before 5 p.m. Though it was only the second day with witnesses on the stand, there were highlights aplenty. Perhaps the most significant was the appearance of three plaintiffs: Hollee Ellis, Rhonda Burnett and Jeremy Keel. All three testified in person — a surprising turn of events given that the plaintiffs had previously remained out of the spotlight.
Also on Wednesday, Ryan Gorman — who served as CEO of Coldwell Banker for three years before being removed from the post in December — appeared via a video deposition.
Court is set to recommence Thursday morning at 10:30 a.m. CDT — a two hour delay compared to previous days because one of the jurors, a new mom, has a conflict. — Jim Dalrymple II
3:15 p.m. CDT: First plaintiff speaks. Plaintiff Hollee Ellis, a Missouri homeowner and daughter of a long-time Realtor, took the stand Wednesday afternoon and explained why she joined the class action suit. Ellis’ appearance was especially notable because the plaintiffs have tended to keep a low profile — making Wednesday a rare chance to get commentary directly from one of the people who initiated the case.
Ellis, who has sold four homes and bought five in her lifetime, said that she paid a 6 percent total commission on the home sale at issue in this case. The buyer agent portion added up to 20.55 percent of her net equity, plaintiff attorney Michael Ketchmark said, so commissions for both agents took up 40 percent.
“It was a hard pill to swallow that we would walk away with so little,” Ellis said.
Ellis said she didn’t join the suit for the potential payout. She’s not getting any more than any other class member, whatever that might be.
She said, “I just didn’t think it was a fair practice,” adding that she has five children who are starting their lives and buying homes and said she hoped to end this “unfair practice” for them and other consumers. “If I can help my kids out, I’m gonna do it.”
Ellis’ said her mom was a Realtor for nearly 30 years.
“I feel like I’m doing it for her as well,” Ellis said. “I know she worked very, very hard for some of her buyers and probably could have negotiated a different rate.”
Barack S. Echols cross-examined Ellis for Keller Williams, followed by Robert MacGill for Homeservices of America. The cross from Ray and MacGill wasn’t combative, and Ellis was composed.
NAR declined to cross-examine Ellis. — Andrea V. Brambila
Correction: Barack S. Echols cross-examined Ellis for Keller Williams. This post initially indicated Timothy Ray conducted the cross.
2:54 p.m. CDT: In a new study, researchers found “strong statistical evidence that buyer agents nationwide steer their clients away from low-commission listings.” Lower commission homes receive less attention from buyers, the paper states, and the effect increases “as the buyer agent’s commission drops farther below the going rate in a given market.”
The paper also argues that listings offering lower commissions take more time to sell. Read more here. — Jim Dalrymple II
12:58 p.m. CDT: During mid-morning testimony, plaintiffs’ attorney Michael Ketchmark played recorded testimony from RE/MAX CEO Nick Bailey in which Bailey confirmed that RE/MAX requires its franchisees to belong to NAR and therefore follow its MLS policies and code of ethics.
Bailey said, “I do believe that the MLS is derived from the concept of cooperation and compensation” but that if the cooperative compensation rule were no longer mandatory, RE/MAX does not believe it would change listing brokers’ behavior.
Nick Bailey | RE/MAX CEO
“Whether or not the rule exists or not, I don’t believe it changes anything,” Bailey said.
Regarding the Clear Cooperation Policy, Bailey said, “This is NAR’s policy. It is not a RE/MAX policy.” He said RE/MAX had not decided whether it supports the policy and that RE/MAX does not have a position on whether the policy should be mandatory.
As with other witnesses who testified this morning, Ketchmark also grilled Bailey on RE/MAX’s training materials and their use of a 6 percent commission.
Yesterday, Ketchmark played an agent training video from Gino Blefari where he said he’d negotiate commissions only if they went up, and that he pre-writes a 6 percent commission into listing agreements.
Before Bailey, Ketchmark called recorded testimony from Meredith Maples, senior director of Keller William University.
Ketchmark asked her about KW’s antitrust policy, which prohibits commission discussions, and then showed various slides prepared for KW Family Reunion events that show 3 percent commissions for each side of a deal and refer to a “standard 6% commission.”
This included slides showing how many more homes an agent would have to sell to earn a million dollars if they charged a 2.5 percent commission versus a 3 percent commission.
Maples insisted that the slides, which included scripts on how to handle objections, were “models” that agents could personalize to their own businesses. “Anything we include from a script perspective is a hypothetical situation,” Maples said.
“We don’t tell people what to charge,” she added.
Ketchmark said he planned to start calling the named plaintiffs to the stand after the lunch break. — Andrea V. Brambila
11:20 a.m. CDT: Sitzer Survey: The results of yesterday’s Sitzer survey show that readers are relatively split on what they think the jury verdict will be. Fifty-three percent believe that the plaintiffs will prevail, compared with 47 percent who believe NAR and the defendants will win.
Today, we want to know: Do you think buyers’ agents steer clients away from properties that offer lower or no commissions? — Taylor Anderson
10:29 a.m. CDT: Plaintiffs’ attorneys have relied on video testimony for depositions this morning. Michael Ketchmark called on Rene Galicia, the former director of MLS Engagement at the National Association of Realtors, and Michelle Figgs, a former senior industry analyst at Keller Williams.
Ketchmark also called on NAR Head of Engagement Rodney Gansho, who focused on establishing that the trade organization’s cooperative compensation policy is mandatory for Realtor-affiliated MLSs. Ketchmark cited the franchisor defendants involved in the Sitzer | Burnett case, noting that any of them could have proposed a change to the policy. During the testimony, Ketchmark also read aloud comments from NAR members who had objected to a different rule, the Clear Cooperation Policy, before it was approved in 2019. Among the comments:
- that brokers don’t need more mandatory regulations
- that you can’t force sellers to put their home on the MLS
- that agents’ duty is to sellers and not NAR
- that the policy would violate the Sherman Antitrust Act
- that it would create a monopoly
- NAR says it’s best for the public, “but the truth is it’s what’s best for NAR.”
With exceptions for attorneys and other essential parties, the use of cellphones and other electronics aren’t allowed in the courtroom. However, 20-minute breaks are frequent. Inman will provide updates all day. — Andrea V. Brambila
8:25 a.m. CDT: ALL RISE: Court is now in session, and the jury is expected to hear testimony from Linda O’Connor, former broker with LUX Realty North Shore in Beverly, Massachusetts. O’Connor penned a letter to NAR’s Professional Standards Committee in 2012 warning the group that the Participation Rule was “the ultimate form of restraint of trade” and should be eliminated. — Taylor Anderson
Among the 58 questions she poses, Ameer digs into how the price of home warranties, insurance and buydowns could be impacted by a verdict in favor of the plaintiffs. But she also asks dozens of practical questions regarding the future of real estate transactions, including questions around what a contractual agreement between a homebuyer and her agent might look like. Check it out here before court goes into session in a couple hours. —Jotham Sederstrom
5:34 a.m. CDT: Consumers, it seems, are rooting against the status quo. After Bloomberg reported Monday on the controversy over commission sharing, the story was flooded with comments slamming NAR and the industry at large.
“It’s time to break up this collusion by NAR,” one person wrote, while another opined that “6 percent real estate commission is the biggest scam going.”
By Tuesday afternoon, the story had racked up more than 500 comments, most of which were highly critical of the way agents earn a living. —Jim Dalrymple II
4:56 a.m. CDT: A frost settled early Tuesday morning in Kansas City with temperatures dropping to a low of 36 degrees yesterday, the coldest morning since April 24, according to Wes Perry over at KSHB 41 Kansas City.
But as plaintiffs and defendants head into Day 3 of the Sitzer | Burnett trial, they can expect a thaw that, by afternoon, should turn into a 70-degree day with a chance of rain, according to KMBC 9 News —Jotham Sederstrom
TUESDAY, OCTOBER 17 — DAY TWO
Keller’s testimony heated up shortly after Ketchmark showed him a video from a KW Family Reunion in which a slide showed the average commissions agents earned between 2002 and 2019. Despite the slide, Keller insisted, “We didn’t talk about commissions” and that the presentation was “not a conversation about what you charge” but “a model to describe the flow of money.”
Similarly, when Ketchmark pointed to a page in Keller’s book, The Millionaire Real Estate Agent, where he mentions that each side in a transaction gets an average 3 percent commission, Keller said, “It’s only an example so I can show how money goes. This is simply a model for the flow of money.”
“Nowhere in that book do I talk about commissions except to explain the flow of money. And I say average,” Keller added. —Jotham Sederstrom
3:18 p.m. CDT: After a lunch break, attorneys for Keller Williams and HomeServices of America gave their opening statements. Attorney Robert MacGill spoke for HomeServices, BHH Affiliates and HSF Affiliates, followed by Timothy Ray for Keller Williams.
The jury includes seven men and two women, with apparent ages ranging from 20s through 60s. All appear to be attentive, with some taking notes during remarks.
An attorney who is attending but not involved with the case told Inman Deputy Editor Andrea Brambila one of the women on the jury has a 5.5-week-old baby at home and needs a break to breastfeed every 1.5 hours.
The pool of prospective jurors initially included about 70 people but was whittled down to a total of seven men and two women. Ten of the prospective jurors who didn’t make it to the trial were dismissed because they sold a home during the relevant time period for the class. — Andrea V. Brambila
1:07 p.m. CDT: NAR opening remarks: Attorney Ethan Glass, speaking for NAR, used his opening remarks to push back against the idea that the real estate industry is engaged in a conspiracy.
Among other things, Glass noted that the rule at issue in the case has been around for 25 years, and it’s been public and on NAR’s website.
“What kind of conspiracy is out in public?” he asked. “There isn’t one.”
Glass said the purpose of what the court is calling the “Cooperative Compensation Rule” is to remind people “of the unremarkable proposition that no one wants to work for free.” He also said, “What NAR is doing is trying to help people and trying to promote homeownership.”
He analogized the seller paying the buyer agent to when a dog is lost and the owner wants to summon a bunch of strangers to help find the dog. That owner puts out fliers offering a reward — but only if the dog is found and only to the person who brings back the dog.
His point was that the system benefits homesellers because it incentivizes buyer agents to close deals.
Glass also emphasized that NAR is a voluntary association of 1.6 million people and the average Realtor is a 60-year-old woman with her own business. Corporations are not members. “These are people who live and work in our communities.”
He also said, “Not every real estate agent is a Realtor” and that to be a Realtor is to follow a code of ethics.
And he added that NAR doesn’t own real estate agencies and “NAR doesn’t set commissions of any type.” — Andrea V. Brambila
12:58 p.m. CDT: Plaintiffs’ opening remarks: The plaintiffs leaned heavily on video depositions of Gary Keller and Gino Blefari outlining how they train agents and how they talk about commissions.
Gino Blefari | HomeServices of America
Plaintiffs’ attorneys played an agent training video where Blefari said he’d negotiate commissions but only if they go up, and that he pre-writes a 6 percent commission into listing agreements.
“I was showing them [agents] what I did so they can learn from that,” Blefari said in his video deposition.
When asked whether he thought it was appropriate to do that, he said, “I certainly don’t believe that fixing commissions is appropriate. I do believe training is essential.” When Ketchmark asked whether what he was doing was “quintessential price-fixing,” Blefari said, “No, it’s just negotiating.” — Andrea V. Brambila
12:51 p.m. CDT: Opening arguments lasted just over three hours on Tuesday after Judge Stephen R. Bough gave the jury their instructions.
Attorney Michael Ketchmark spoke on behalf of the plaintiffs. Ethan Glass spoke on behalf of NAR.
NAR Chief Legal Counsel Katie Johnson and spokesman Mantill Williams were both in the packed courtroom, as were attorneys for the Moehrl case. An estimated 75 people were in the gallery, with about 25 more between lawyers from the parties, the judge, courtroom staff and nine-person jury. — Andrea Brambila
11:36 a.m. CDT: Sitzer survey: Inman readers believe there’s a lot at stake right now. During our opening day Sitzer survey, we asked what impact you thought the trial could have on the industry. Fifty-one percent of you said the case would “greatly change the real estate industry.” Compare that to the 3 percent who said the eventual verdict would have no impact on the industry, and 46 percent saying it would have some impact.
While we wait for an update from opening arguments, we’re coming at you with another Sitzer survey. Let’s hear your predictions. — Taylor Anderson
11:20 a.m. CDT: Checking in with the leaders: Redfin CEO Glenn Kelman doesn’t expect the Sitzer | Burnett verdict, or the ruling in the larger Moehrl case, to ban cooperative compensation between listing brokers and buyer brokers. But he’s not ruling it out.
“Our guess is that the lawsuits in Missouri and Illinois will not go that far [banning cooperative compensation], but it’s possible,” Kelman told Bloomberg yesterday. “We think that DOJ action is necessary to reach that level, and that would be a seismic change — basically, half the real estate agents in this country would be unemployed.” — Taylor Anderson
Charles Evans Whittaker U.S. Courthouse on Tuesday, Oct. 17, 2023. Andrea V. Brambila
8:07 a.m. CDT: It’s a brisk fall morning in Kansas City, but things will be heating up figuratively and literally soon with an afternoon high of 69 degrees. Local headlines are focused on NFL star and Kansas City Chiefs tight end Travis Kelce and his new boo Taylor Swift. Inman reporter Andrea V. Brambila is in Courtroom 7B. We’re expecting a packed courtroom for opening arguments this morning and will have updates throughout the day. —Taylor Anderson
5:07 a.m. CDT: Opening arguments are expected to begin today, but in the meantime, the hashtag #sitzerburnett has emerged as the hashtag of choice for conversation around the trial. Vendor Alley publisher Greg Robertson was among the first to use it Monday as jury selection began. —Jotham Sederstrom
MONDAY, OCTOBER 16 — DAY ONE
7:43 p.m. CDT: The nine-person jury was selected this afternoon. The courtroom is likely to be packed for opening statements at 8:30 a.m. tomorrow.
Plaintiffs’ attorney Michael Ketchmark told Inman: “I continue to have agents and brokers from all across the nation reach out to me directly to express their frustration with the mandatory nature of [the buyer broker commission] rule. Today we live in a country of divided politics, but this is one issue we can all agree on. We were happy to see that the Wall Street Journal today called for the dismantling of this real estate cartel, which is strangling our housing market.” —Andrea Brambila
3:56 p.m. CDT: Analysts with the investment banking firm Keefe, Bruyette & Woods say it’s “very likely” that cooperative compensation will be banned in the near future as a result of Sitzer | Burnett. If that happens, the firm told investors it expects the total commission pool to drop by at least 30 percent, and as many as 80 percent of Realtors will leave the industry. Read more details in this new Inman story. — Taylor Anderson
1:25 p.m. CDT: Chatter about the potential consequences of the lawsuit intensified Monday, including in a post on the popular Lab Coat Agents Facebook group. The post was a response to the Wall Street Journal’s take — many hated the Journal piece — and included numerous predictions about what the future of the industry could look like. Here are just a few of the comments:
“I think 2 things will happen, overall real estate commission will be lowered eventually (3-4% is my guess) and buyer commission will be brought to the forefront of the conversation with buyers. Buyer agreements will become standard and will negotiate/discuss the agent compensation that will be added to any offers written.”
“If this goes into effect it [will] negatively affect the buyers exponentially! The average buyer cannot even come up with their own closing costs and down payment.”
“I feel like we could end up like a European system where there are no buyers agents.” — Jim Dalrymple II
11:23 a.m. CDT: Take our daily Sitzer survey. We want to know how much Inman readers expect the industry to change as a result of an eventual verdict. To start things off, let us know how dramatically you think the outcome will impact real estate in the U.S.
6:05 a.m. CDT: The Wall Street Journal dropped a meaty editorial on the antitrust case last night, essentially dismissing the National Association of Realtors as a “cartel,” language previously used by REX to describe the 1.58 million-member real estate trade organization. In particular, it takes aim at the supposed malleability of commission rates while touching on the conflicts of interest inherent in sellers paying buyer agent commissions.
“We’re no fans of most antitrust suits, but the evidence is strong that Realtors’ practices are classic antitrust violations that harm consumers,” the editorial ends decisively. “The Realtors may own the U.S. Congress, but perhaps independent courts won’t be so intimidated.”
5:30 a.m. CDT: Good morning from the Paris of the Plains, Kansas City, Missouri. Inman is on the ground as the trial of a class-action antitrust lawsuit filed 4.5 years ago kicks off at the Charles Evans Whittaker U.S. Courthouse. The primary order of business today is jury selection. — Andrea Brambila, Deputy Editor
5 a.m. CDT: We’re up early getting ready for the first day of what we’re told will be a three-week trial. Inman Deputy Editor Andrea Brambila is flying in to Kansas City, Missouri from California as jury selection begins. She’ll be reporting on location for the duration of the trial.
While we wait for plaintiffs and defendants to arrive at the Charles Evans Whittaker U.S. Courthouse, Inman reporter Taylor Anderson has compiled a few examples of Inman’s commission coverage in case anyone needs a crash course on the details. But the best place to start is with Brambila’s preview of the Sitzer | Burnett trial, which published this morning and can be read here. — Jotham Sederstrom, Editor-in-Chief
EDITOR’S SELECTIONS
An evolving list of essential reading as Sitzer | Burnett gets underway
Agent training, objection scripts on trial as Sitzer | Burnett ends Day 3: At a trial that could change how real estate agents nationwide are paid, RE/MAX CEO Nick Bailey, former Coldwell Banker CEO M. Ryan Gorman, and Keller Williams University executive Meredith Maples defended how they train agents in regards to commissions. Read more
Gary Keller, Bob Goldberg among first to testify in Sitzer | Burnett. A trial with the potential to shake up the real estate industry got officially underway Tuesday with opening statements from each side and testimony from heavy hitters Keller Williams co-founder Gary Keller, HomeServices of America CEO Gino Blefari and National Association of Realtors CEO Bob Goldberg. Read more
Read the playbooks of NAR, Keller Williams ahead of Sitzer | Burnett Ahead of the Sitzer | Burnett antitrust trial in Kansas City, the plaintiffs and non-settling franchisor defendants — the National Association of Realtors, Keller Williams and HomeServices and its subsidiaries BHH Affiliates and HSF Affiliates — submitted trial briefs to the court telling their side of the story. Read more
