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Tanya Monestier has become well-known in the real estate industry for her criticism of new transaction forms created after the National Association of Realtors’ proposed settlement of multiple antitrust suits.
Now the University of Buffalo contracts law professor is taking a more active approach to the fate of the deal: as a homeseller objector to the settlement and the heaps of cash the plaintiffs’ attorneys stand to get.
On Monday, Oct. 28, Monestier, who says she sold a home in Rhode Island in 2022 and is therefore a member of the homeseller class affected, filed an objection to the settlement in U.S. District Court for the Western District of Missouri.
The filing asks the court not to give the NAR deal final approval at its scheduled fairness hearing on Nov. 26 in Kansas City and to reject the plaintiffs’ attorneys’ request for some $333 million in fees from the combined $1 billion settlements reached with NAR and other defendants.
Monestier’s filing is comprehensive at 136 pages, but boils down to one thing: Consumers are not getting anywhere near sufficient value from the settlement, either monetarily or through its required business practice changes, and it may actually leave them worse off.
“This settlement is the worst of all possible worlds,” Monestier writes.
“Under the pre-NAR settlement paradigm, the rules were clear, and confusion did not reign supreme. Sure, sellers paid inflated commissions, but the rules of the game were well-established. The settlement agreement takes a tiny baby step toward decoupling, but in a way that is just an illusion. We basically just have the pre-NAR settlement system in place with a whole lot more paperwork, headaches, lies, chaos, and frustration.”
Monestier is not just screaming into a vacuum. Her criticisms of the NAR settlement not only have the potential to affect court proceedings but also influence the Department of Justice. In her filing, Monestier details her interactions with the DOJ, including a presentation she gave to about a dozen people at the federal agency on this topic, as well as a 41-page memo she provided the DOJ. The filing notes, “Much of what appeared in the memo to the DOJ is also contained in this objection.”
In the filing, Monestier stresses that how the settlement has been applied on the ground has made it “an abject failure” because it “preserves the status quo of sellers paying both brokers, and commissions remaining steady at 5 [percent to] 6 [percent].”
“Industry participants are doing several interrelated things to perpetuate the system of seller-paid buyer broker compensation: refusing to take listings where the seller does not agree to compensate the buyer’s broker; messaging to the seller that if they don’t offer compensation, they won’t get offers, and steering buyers away from properties that don’t offer buyer broker compensation,” Monestier writes.
While some brokers and agents think it’s not a problem if buyers “self-steer” from properties where sellers aren’t offering buyer agent compensation up front, Monestier argues that the result is that sellers feel compelled to pre-emptively offer that compensation and nothing changes.
“[T]hat leads us right back to square one — with the seller covering the full cost of commissions,” Monestier writes.
“According to some buyers’ agents, sellers are covering the commissions post-NAR settlement in 99 [percent] of cases (and are telling their clients that).”
Under the NAR deal, the primary business practice changes that multiple listing services and brokers had to put in place were to remove offers of compensation from MLSs and to require buyer agents to have buyer agreements — with compensation specified — signed before touring a home with a buyer.
“The goal of the settlement was laudable,” Monestier writes. “It was based on the premise that buyer brokers were using commission rates posted on the MLS to steer buyers to properties that provided higher levels of compensation.”
But those business practice changes only made sense “on paper,” according to Monestier. Because sellers or their listing agents can still offer buy-side commissions in advance, the settlement continues to prop up the current system, she argues.
“The ‘enforcer’ of this settlement is the Defendant itself,” Monestier writes.
“Sort of like the fox guarding the henhouse. It will leave sellers still offering buyer broker commission in advance because they fear that buyers will skip their house if they don’t. It will leave buyers only seeking out properties where they know their buyer broker will be compensated by the seller.
“It will leave any potential unrepresented buyer out in the cold; if you don’t play by the rules of the industry, you get shut out. And it will leave us in a worse position than we were before.”
She maintains lawyers came up with the deal without realizing how it would actually play out.
“In the real world, the implementation of the settlement has been a disaster,” she writes.
“It has not eliminated steering. It has not resulted in lower commissions. It has not shifted the obligation to buyers to pay their own agents.
“It has led to widespread confusion and the exploitation of consumers. It has not accounted for the psychology of buyers and sellers. And it did not anticipate the lengths to which the industry would go to ensure that the commission structure that has prevailed for decades stays firmly in place.”
Monestier details seven workarounds that agents and brokers nationwide are using to breach the NAR agreement “en masse,” all of which boil down to tailoring what buyer brokers get to whatever a seller is pre-emptively offering.
These include amending a buyer representation agreement so that the broker can get more compensation from a seller once the broker knows how much a seller is offering; buyer brokers accepting “bonuses” from sellers above what was negotiated with the buyer; including a compensation range, rather than a definitive amount, in the buyer agreement; and using “touring” agreements in addition to buyer representation agreements, among other tactics.
Regarding modifying buyer agreements upward, Monestier believes — though she acknowledges she is in the minority — that such modifications are not a workaround, but rather a breach of the NAR settlement.
“The modified ‘bump up’ agreement would run roughshod over the settlement provision that ‘the amount of compensation reflected must be objectively ascertainable and may not be open-ended (e.g., ‘buyer broker compensation shall be whatever amount the seller is offering to the buyer’),” Monestier writes.
“What a modification would allow, albeit indirectly, is the broker to collect ‘whatever amount the seller is offering to the buyer.’ This could be easily accomplished by specifying a compensation rate of 0 [percent] to secure potential buyers who will be reluctant to enter into a buyer agreement that obligates them to pay any commission.
“The implicit understanding between the buyer and agent will be that a new agreement will be entered into after the seller’s promised rate of compensation is known.”
Regarding touring agreements in which buyers are not required to compensate their agent at all or very little in order to attend property showings, Monestier asserts that such agreements could easily be used to operate business as usual.
“Every [R]ealtor could enter into a one-month touring agreement (and keep renewing it) and then sign a formal buyer representation agreement when his or her client decided to proceed with an offer,” she writes.
“Functionally, this would be the exact same thing as the status quo where [R]ealtors proceed without written agreements in place.
“All of this shows a concerted effort to allow buyer brokers to collect whatever the listing agent or seller is offering — something that is explicitly prohibited by the settlement,” she adds.
Monestier notes that her objection doesn’t discuss outright, willful breaches of the NAR deal, even though she anticipates such violations may be widespread.
“The reality is that that many [R]ealtors will refuse to have a client sign a representation agreement prior to touring a property,” she writes.
“In these cases, the [R]ealtor will likely backdate any buyer representation agreement and have his or her buyer sign the backdated agreement as part of the offer. Unless brokerages actively police their agents’ practices, no one will be any the wiser to the practice.”
Regarding the monetary amount the settlement classes can expect to receive, she points out that affected homesellers would recover perhaps $20 or $25 — “not even enough money to buy a pizza. This is supposed to compensate me for the $27,500 I paid that I shouldn’t have had to pay but for the Defendant’s alleged misconduct.”
Monestier emphasizes that the lion’s share of the settlement fund would go to the law firms representing the plaintiffs, not class members.
“Billing at their ‘normal’ rates, Plaintiffs claim that the value of their work product is approximately $92 million,” she writes.
“This includes fees for many attorneys billing at rates of $1,000 to $2,200/hour. Plaintiffs’ attorneys are seeking approximately $333,000,000 in fees plus $16 million in expenses.”
She says she found evidence that some plaintiffs’ attorneys have “misstated their billing rates — or, more charitably, charged completely different rates to different clients during the same time period” and that granting the plaintiffs’ attorneys any more than 10 percent to 15 percent of the settlement fund would be “an unwarranted windfall.”
“If this Court chooses to approve the settlement, in whole or in part, then I ask this Court to disapprove the exorbitant request for attorneys’ fees,” she writes.
“I don’t think this Court wants to be known as the one who provided a few dollars to class members and a private jet to each of the attorneys in the case.”
As a lawyer herself, Monestier lamented the impression the attorneys’ request made on the general public.
“This gives the legal profession such a bad name,” she said in a statement.
“The more I read about the attorneys’ fees and looked into their billing rates, I felt really uncomfortable with the judge just rubber-stamping the agreement. The more the attorneys take, the less the class members get. It’s about the perception that this is lawyers driving litigation for lawyers, not to benefit consumers.”
She says she felt compelled to speak up about the settlement because, at this point in the process, the plaintiffs and defendants are united in asking the court to approve the deal.
“Over one billion dollars is at stake,” Monestier writes.
“Neither party has an interest in rocking the boat. Defendants want to move forward without the constant fear of being bankrupted by future antitrust suits. And Plaintiffs have over three hundred million reasons to call this a ‘win’ and move on.”
“Unless someone speaks up, this Court is likely to be convinced that this settlement is ‘fair, reasonable, and adequate,’ she adds.
“It is not. It simply reinforces the existing system of seller-paid inflated compensation while pretending to eliminate it.”
She asked the court for the ability to participate in the Nov. 26 hearing over the phone or through Zoom. The judge in the case, Stephen R. Bough, recently required objectors to show up in person.
“This in-person requirement serves to stifle the voice of objectors,” Monestier writes. “No reasonable person would pay thousands of dollars out of pocket to come to a hearing for a settlement which, if approved, would net them a few dollars.”
Read Monestier’s filing (re-load the page if document is not visible):
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