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It’s hard to believe that it’s been one year since the Sitzer-Burnett verdict, a day that will live in real estate infamy. Do you remember where you were when the decision came down? I had just returned from an early morning tennis drill. I jumped on my office meeting only to receive notifications about the verdict being rendered.
It was a stomach-drop moment, and up until that point, the reality of it all was hard to grasp. Initially, the case seemed like an extreme money grab by opportunistic attorneys looking for a loophole in which to land the payout of a lifetime. The idea of a seller not paying a co-op commission to a buyer’s agent seemed like a far-flung idea, so far removed from the practicality and reality of how the business worked.
The verdict was the beginning of an arduous and stressful year of uncertainty in an already uncertain market between higher interest rates and real estate prices, coupled with inflation that didn’t have buyers feel good about buying and would-be sellers who wanted to hang on to their low interest rate or not risk moving because prices were too high.
Was this the nail in the coffin for the industry as we knew it? Like all of us, I’ve spent the past 11 months or so on numerous trainings, webinars and legal updates, coupled with consuming a plethora of articles, podcasts and organic social media on this topic. The interpretations of the settlement have been wide-ranging, with some extremely inaccurate, some accurate and many somewhere in between.
Here are my five takeaways, as I reflect on the decision and our industry today.
1. It’s about choice
To me, the verdict was not about alleged antitrust violations regarding cooperative compensation rules that required a seller to pay a buyer’s agent to have their property listed in the MLS.
It was about exposing a broken system wherein we must tell consumers they have choices about how they choose to work with an agent to buy and sell real estate.
The one piece of the trial that stood out to me was when Rhonda Burnett’s listing agreement had options for the seller to choose the commission rate they wanted, above 6 percent which was already written in the listing agreement, and went up from there. Did the consumer truly understand what they were getting for that fee?
Did the agent demonstrate their value, or was it about seeing how high a fee they could get away with? Hence, the consumer is challenged to really understand our value and work with us as a trusted advisor.
In addition, besides consumer choice, agents (who are also consumers) have had little to no choice with regard to many aspects of running their own business.
We have been mired in the red tape of crazy rules and requirements that we never questioned. From the day we activate our licenses and begin practicing real estate, we are told certain things are mandatory, such as having to join multiple Realtor associations that include your local, state and National Association of Realtors. In addition, for the most part, you had to be a member of these associations to be able to pay for access to MLS.
Again, we complied, not really knowing anything about how these organizations were run or what was really going on behind the scenes. And for agents who wished to challenge the status quo? Finding out how to access the necessary forms and other related tools was not easy or cost-effective.
The Realtor associations never wanted you to know you had options. I’m not saying these associations don’t offer value, but every agent must do what is right for them. Again, it’s about being given a choice.
Several of these requirements are starting to be questioned. Because some brokerages and franchisors, including Anywhere, RE/MAX and Keller Williams, negotiated not to require their agents to be members of NAR, more agents are asking questions in general as to why they have to join NAR.
As a result, lawsuits have been filed, and brokerages and industry thought leaders are weighing in. A lawsuit was just filed by Maurice Muhammad of Progressive Realty against NAR, the Pennsylvania Association of Realtors and the Greater Lehigh Valley Association of Realtors for creating a monopolistic system that forces membership to these organizations.
Darryl Davis, a national speaker, trainer and Inman contributor has also weighed in on the danger of a mandatory NAR membership requirement as it relates to antitrust.
2. In NAR we (don’t) trust
The lawsuits exposed an organization rife with controversy, full of ego and bravado, and willfully ignorant of the storm of practice issues brewing that led us to where we are today.
Between the sexual harassment cases, organizational shake-ups, lack of communication and transparency with membership, having to be a member of this organization is not something I feel particularly good about, nor do I want the consumer to necessarily associate me and my personal brand with in light of the negative publicity that has been surrounding this organization.
As an agent, it’s enough to run our own business, continually build our brand and engage with the communities we serve, let alone worry about how the associations you are required to join are being managed.
Not everyone has the bandwidth, ability or interest to get involved at a higher level, but that does not excuse the shortcomings of an organization that we blindly paid dues to, with no accountability for what has happened over all these years.
3. We need to raise the bar and empower the consumer
The verdict highlighted what we already knew. The public’s perception of our industry has been low. The amount of training and education in our industry has largely been about getting by sans the required coursework to pass the test, get one’s real estate license, and fulfill mandatory continuing education and license renewal requirements.
The level of training and education varies by state and local associations, brokerages and, of course, the initiative of the agent. There are many agents who make this a priority, and there are some who couldn’t care less and don’t see the value in these things unless required.
This is a profession where you learn as you go, often having to “practice” on consumers. Some of this is trial by fire and can backfire and blow up on you as an agent and cause the consumer to lose confidence in not only you but also the profession.
We must do better as an industry by offering ongoing mentorship and developing skill sets that will elevate our image with the public. This means a continual commitment to ongoing education, training and development. Experienced agents need to exercise a willingness to give their time, knowledge and expertise to those agents willing to learn.
The verdict revealed consumers have been terribly misguided about the real estate process in general. While some local and state associations may have a library of consumer-facing materials to share with prospective buyers and sellers to help them better understand our industry, many do not.
Hence why, just now, nearly a year after the verdict, NAR is putting out various consumer resources pertaining to these topics. After the settlement, the trade organization began releasing numerous pieces on the facts section of their website that have guides pertaining to what the settlement means for buyers and sellers, what a buyer agreement is, negotiating a written buyer agreement, what is a listing agreement, 10 questions to ask a buyer’s agent and 10 questions to ask a seller’s agent, among many other pieces.
NAR, along with state and local associations, should have been putting out consumer guides and basic explainers on the various facets of real estate. This material should serve as a baseline of information to provide to consumers, coupled with whatever additional materials a brokerage and/or agent would like to include, along with sharing their expert insight and expertise.
4. We need tools and flexibility to do business
Beyond buyer representation agreements and sellers no longer having to offer compensation, our industry needs more flexibility and tools for doing business. We have been handcuffed for too long to policies and procedures that have not always met the needs of consumers or us. And despite the tremendous effort that goes into a real estate transaction, it has been difficult to quantify all the effort we have put in for the buyers and sellers that we serve.
The industry has always been slow to evolve technology-wise, and brokerages and agents are looking for the next shiny object that’s going to solve all of their problems. So much of the technology in real estate is clunky and frustrating and requires multiple applications rather than running all through one seamless system.
As a result of the verdict, it was announced that Rayse, a workflow app, was being rolled out to 200 brokerages, but when you consider the availability of this app as of yet, it’s not widespread. It’s interesting that up until now, there hasn’t been anything like this for agents, and I would have thought more apps like this would have existed by this point. We have spent decades talking about how the consumer does not see the value in what we do, yet little action has been taken to provide the technology to do so up until now.
5. We’ve made it more complicated than it needs to be
The practice changes that resulted from the verdict required a revamp of a plethora of forms associated with our business, including various choices for buyer agency agreements. Many brokerages opted to move away from association forms that were cumbersome, clunky and too long in favor of shorter, simpler and easier-to-understand forms.
If agents can’t comfortably explain them, then consumers shouldn’t be asked to sign them. Longer is not necessarily better when it comes to these kinds of agreements, and we need to do better at making the complex easier to understand for all involved in a real estate transaction.
While the lawsuit seemed like the worst thing that could have happened to our industry at the time, it has exposed much-needed reform. As we navigate through the post-Sitzer-Burnett real estate era, there’s a lot more work to do.
We must hold our association leadership accountable for the decisions and policies being made. We must elevate our industry through relevant training and education. Existing coursework should be continually revised and updated to adjust to the challenges each market presents.
Having a choice in how we run our businesses and work with consumers is paramount, from what organizations we choose to belong to or not belong to, to how we can work within an MLS system to foster a more transparent and flexible experience for the consumers we serve.
