National Association of REALTORS® (NAR) General Counsel and Chief Member Experience Officer Katie Johnson shared an update on the Sitzer/Burnett v. NAR class action lawsuit and provides a Q&A for REALTOR® members on the case and NAR’s position.

Hello,

I want to provide an update on the class action lawsuit in Missouri where plaintiffs are raising questions about how broker compensation is paid. As a reminder, in April, the judge granted class certification in the case, but this in no way reflects on the actual or perceived merits of their claims. The ruling was procedural in what is yet to be a lengthy process and now allows others who have allegedly been affected to join the litigation as plaintiffs. As is common and expected, class action attorneys now begin to notify members of the class of their right to opt out, even before the validity of the case has been decided.

Notices are typically distributed through a range of communications, including emails and paid advertisements, and for this case are expected to begin September 28th. The message of the notices is: The Sitzer/Burnett v. NAR lawsuit may have an impact on the rights of anyone who recently sold a home in or near Missouri using a real estate agent and paid compensation to the buyer’s agent. The targets of these notices will be anyone who sold a home after April 29, 2014, via the MLSs in Columbia, MO; Springfield, MO; St. Louis, MO and Kansas City, MO (or after April 29, 2015, in Kansas City, KS and in Illinois near St. Louis).

We continue to anticipate and prepare for moments like this. We also continue efforts to support members and associations in their messaging to consumers and communities via updates to the competition.realtor website and various stories that run in media.

That said, it’s also important to remember that consumers often disregard these class action notices since there is no action for them to take unless they opt out of the class, which is rare. Therefore, we want to calibrate our response so as to avoid unnecessarily making this a further distraction form serving our clients and consumers. See a Q&A below/attached to provide more background.

If you receive questions from consumers about broker services and commissions, we’ve created a simple consumer website specific to these class action cases: www.realestatecommissionfacts.com. You can also tell them:

—   The question in the case of Sitzer/Burnett v. NAR is why brokers representing home sellers often pay the compensation of brokers representing   home buyers. This practice underpins local broker marketplaces where brokers compile centralized listings of all properties for sale and invite other brokers in finding a buyer.

—   The reason this practice has worked so well for so long is because it provides the greatest economic benefits for both buyers and sellers, creates greater access and equity for first-time, low/middle-income and all buyers and enables minority and small business brokers to compete with larger brokers. This market has enabled 6.3 million more people to realize the American dream of homeownership from 2010 to 2020, and helped homeowners build $8.2 trillion of housing wealth over the same period.

Thank you for your professionalism and dedication. We’ll keep you posted on further developments.

Best regards,

Katie Johnson

Q&A:

• What’s the background on the Sitzer/Burnett case?
  Three years ago, NAR and four corporate defendants were sued in class action lawsuits filed in Illinois and then Missouri alleging that home sellers are damaged when their listing broker offers to compensate the buyers’ representative. The lawsuits falsely allege that various NAR guidelines and our members’ adherence to those guidelines have led to artificially fixed and inflated compensation being paid to real estate professionals.

• What’s NAR’s position?
  The pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers. Sellers making offers of compensation to buyer brokers gives first-time, low/middle-income and all homebuyers a better shot at affording a home and professional representation. As you know, the free market organically establishes commission costs within local real estate markets based on service, consumer preference and what the market can bear.

• Where does the case stand now?
  In April, a federal judge in Missouri granted class certification in the case, but this in no way reflects on the actual or perceived merits of their claims. The ruling was procedural in what is yet to be a lengthy process and now allows others who have allegedly been affected to join the litigation as plaintiffs. As is common and expected, class action attorneys now begin to notify members of the class of their right to opt out of the class via direct mail, advertising and press stories, even before the validity of the case has been decided.

• Who is in the class?
  Generally speaking, consumers who used a real estate broker or agent to sell a home between April 29, 2014, or later in Missouri (April 29, 2015 or later in Illinois or Kansas). Sellers must have listed their home for sale on one of the following MLS’s: Heartland MLS, MARIS MLS, Columbia Board of Realtors MLS, or Southern Missouri Regional MLS. Most of which are in Columbia, MO; Kansas City, MO; Springfield, MO; or St. Louis, MO, and used an agent from Keller Williams, RE/MAX, Realogy (under its brands Coldwell Banker, Century 21, Sotheby’s, or Better Homes and Gardens) or HomeServices of America (under its brands ReeceNichols or Berkshire Hathaway).

• What should I do if I get questions from clients about whether to opt out of the class?
  First, it’s important to understand that all eligible class members (see above) are automatically included unless they ask to be excluded. If they opt out, they will be excluded from any benefits the class may receive, but still maintain their right to sue the defendants separately about the same legal claims in this lawsuit. If you are asked to advise about opting out, you should tell the person inquiring to consult an attorney.

• Should members/NAR be concerned about this class action lawsuit?
  We expect the class action to gain some attention and its possible current and/or former clients may reach out for more information. It is important to recognize these promotional actions by the plaintiffs are expected, and we are more than ready to defend ourselves from these baseless claims and expect to win. You can also direct consumers with questions about the Sitzer/Burnett case to www.realestatecommissionfacts.com.

• What is NAR doing to combat the class action attorneys’ communications about brokerage services and commissions?
  We continue to maintain engagement with the media and key stakeholders, including stories about REALTORS® as experts, updates to www.realestatecommissionfacts.com and competition.realtor and keeping our point of view in the forefront through various stories that run in media.

• What can members do?
  We highly encourage the continued use of Buyer Representation Agreements in order to formalize a working relationship with clients and detail what services consumers are entitled to and what the buyer agent expects from their client in return. We also encourage members to remind clients that there are no fixed commissions and that they are negotiable at any point in the transaction.