The National Association of Realtors (NAR) and the residential brokerages that were found liable in October for a $1.8 billion verdict in the Missouri-based Sitzer/Burnett trial have asked a federal judge to either reject the verdict or grant a new trial.
According to a Reuters report, NAR along with Keller Williams and units of Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) stated the evidence in the case did not support the verdict and that the judge applied the wrong legal standard when giving the jury instructions before their deliberations.
The jury decided for home sellers who claimed they were overcharged on the commissions they paid to buyers’ agents. NAR’s attorneys said the “result of the trial in this case defies precedent, logic and the evidence” while Keller Williams said the verdict sparked “baseless copycat suits.”
The plaintiffs’ attorneys argued NAR and the brokerages were “rehashing” arguments they “lost over and over again” during the trial.
The appeal is being heard by U.S. District Judge Stephen Bough in Kansas City. The defendants can separately appeal the verdict to the St. Louis-based 8th U.S. Circuit Court of Appeals if Bough rejects their appeal.
When I negotiate with a seller my commission, no one tells me what to ask for. No mls, no other broker influences my request. I explain that the commission will most likely be split with the broker that brings the buyer. If asked if I will take less, I pull out a dollar bill rom my pocket and say this represents my commission. The first thing that happens is that I share it. with the buyer’s agent and I fold it in half. Then I share it with my company and I fold it again. Then I have to pay my expenses and I fold it again. Then I have to pay my taxes and I fold it one more time and I say this is all I have let to feed my babies. That’s called negotiating. Thats what we do.
That’s not called negotiating, that’s called defending and the person defending is never in control. You charge the amount of value that you bring. Everyone pays taxes and has a cost of doing business. If you can’t explain your value rather than explain how little you get paid, that’s one reason the industry has such a bad name.
Well said Rebecca!
Excellent answer! What a joke the home sellers are from Missouri or wherever. And shame on us for losing the suit. It is astonishing. Let’s hope we can get a new trial.
It doesn’t get much simpler than that. Right on point!
Earl
that is a very good and simple way to put it. I would ask the attorneys for the prosecution..’if you receive a fee for your representation of a client, does that client have the right to tell you how to spend that fee?” That is what the jury is trying to do. My commission earned is mine to do as I wish…give it away, hire research firms..the seller is only paying one commission..how that broker chooses to spend it is his right. Once the fee is negotiated with the seller client the only way it can be changed is by mutual consent.
I would like to see the entire nar, state and local association reduced in size. They collect large dues and loby for stuff not even related to the real business. lots of waste and abuse. the MLS could be national and cost pennies to operate with the current technology. hoping this lawsuit forces some updates in how the real estate business operates.
Be careful what you wish for! The big dogs in this losing defense are also the wolves drooling over the lucrative industry that has turned the lives of many hard working agents. This is an attempt to change our industry. Strangely, lawyers ever notice they all charge about the same hourly rate take the same percentage of settlements and charge by the hour for services that are totally untraceable.. ironic
How about the Non Exclusive Broker who brings the best client deal earns the commission for their side of the transaction? This would be representing the client more effectively. Some Brokers operate in their own best interests at the expense of their client which is wrong and the system needs to change.
Great example Earl. I’m going to use that one.
NAR & associations are there to “protect the public”. Not their members. They may not have been in this situation if they just stated ethics regarding actions & duties to the public But they had to include listing brokerage to share half their commission with buyers Brokerages. Which after lawsuits began, removed the statement. They put themselves in this situation as they & associations are a monopoly in the business of residential real estate. What MLS will you use if you do not join the Local State & National associations?
That is the worst negotiation example I have ever seen when it comes to real estate.
If a broker did that to me I would take out a dollar bill and tell him this is what I get when I sell my house, then I would fold it and say this is what’s left after paying a broker to do nothing but for the privilege of listing my home on the MLS, then I’d fold it again and say this is what’s left after capital gains, and then I would escort the broker out of my house.
You completely miss the point of the lawsuit. The case was brought by buyers, not sellers.
And what you describe, the negotiation, not your horrible example, is what the buyer wants the ability to do. The sued because they want to negoatiate the commission paid to the seller and to the buyer themselves, irrespective of what is “standard” or what the selling broker wants to do.
Read what you wrote OUT LOUD.
Does it still make sense?
In your example, you’re statimg that you’re paying the listing agent 50%.
Are you even a Realtor?
the case was brought by sellers who were upset that they were paying the buyers agent commission. I think the best argument would be to compare it to a lawsuit where often one side (losing side) has to pay the winner’s legal fees. That is comparable. How many sellers pay buyer’s closing costs to seal the deal? This lawsuit was frivolous. NAR messed up by not going with a bench trial-arguing in front of a jury was bound to include someone who had a bad experience with a realtor or knew someone who did!
Fantastic Response!… Right on point! I’m guessing that you might have taken the, now ancient, self study, Tom Hopkins ” How to learn Real Estate” tape cassette courses. I used your remarks and his “How to negotiate your commission” tape to not only survive my first year in real estate, after the massive mini- computer lay offs and collapse, to finish my third year as #3 in a 120 person 5 location office. Hope you can get your brilliant, understandable remarks to the powers to be to put an end to these baseless class action lawsuits that will scare off “Newbies” from getting into a great career business.
This entire mess can be avoided and fixed if all Realtors have their buyer clients agree and sign an employment contract AKA buyers representation agreement. No one would go to work for someone befor they were hired. Think it through and you will do the right thing and have a clear understanding with your buyer from the start. Explain how commisions can be paid with each showing of a property. many sellers agree to pay both sides to help market their house. In some cases the seller decides not to pay both sides. Thats when you let your buyer know they will pay your commission as a closing cost if the seller accepts your offer. Make it plain in your contract that the buyer is paying the sales commission at closing just like any other closing cost. This can be a negociated closing cost just like all other closing cost. Disclosure is allways a smart idea.
most buyers do not have funds available to pay their own realtor, after down payment, etc. many need to rely on seller to pay some or all of their closing costs-how do you think they will pay any commission? to me, commission is same as paying buyer’s closing costs-something the seller does to get the property sold. I think we should go back to the way it was where all agents represented the sellers-then no confusion, still be fair to buyer, of course, but no more confusing agency decisions.
Great explanation Earl. I have used this too if I have a client questioning our commission. I’ve been selling since 1975 and have rarely had much difficulty with sellers explaining our commission. Now may be different with all the negative news.
Good luck in 2024.
The listing agreement clearly sets forth the commission to be paid to the buyer’s agent. There is no surpise here for the seller. Pretty much all of my buyers don’t have the extra cash reequired to pay the buyer’s side commission separately; it has to be built in to the sale price to make the sale happen. In the unlikely event a buyer is able and willing to pay their agent separately, it’s likely that the buyer would prefer to build that amount into the sale price to make it partially financable and to conserve cash. If not, it is also likely the buyer would pay less for the property. Hence, the net result to the seller would be the same.
Why would a court rule that we are not negotiating our commissions and make it so that we can not negotiate? Does any one else see the ignorance here?
I have agents sending offers that say ” buyers commission to be waved” in effect, negotiating my listing contract with my Seller. If the Buyer wants to give the Seller the buyers portion then they should add it to their purchase price. Again, I can’t be the only one seeing the ignorance here..
Well said! Most industries pay employees a competitive wage. Why is it that realtors are not permitted to receive competitive compensation? Every house we place on the market has significant costs to the listing agent we don’t get reimbursed for. Agents have bi-annual educational costs required to maintain our licenses, we pay for health costs and insurance out of pocket, we share our commission not only with the buyer’s agent but our broker house as well, we pay for advertising, professional pictures, open house materials (not to mention our time spent sitting and exposing ourselves to possible danger at an open house), car expenses, and so much more. Why is it they are complaining about the commission now but had no issue with the seller paying their buyer broker when they were purchasing the house they are now selling? They want to hire us because we know real estate (just like doctors know medicine and attorneys know the law), and then they want to cut our pay. If commission is an issue, why not sell it as an FSBO? Is it because they don’t want to pay an attorney to negotiate the terms of the contract or to write the contract or be exposed to the ramifications of being sued for failing to comply with Federal Regulations? Do they negotiate prices with their doctors or attorneys? We can’t even negotiate with pharmaceutical companies over medication!!! Why are Realtors not afforded the same rights these other industries have?
Don’t people understand that commission is our livelihood ? You want professional service and you don’t want to pay for it?? The system of who pays for the commission has been there for decades and there must be a reason of why it’s still there.
I would argue that the buyer pays the commission. Where does the seller get the funds to pay a commission? They get it from the buyer. It would be extremely rare if a seller paid their own commission. If there is a loan involved for the buyer, they are having to pay off that commission over the life of the loan. Even in a cash offer, the funds are coming from the buyer for the commission.
The seller clearly knows that when they hire an agent to market their home, that the agent has informed them in writing that if another agent brings the buyer to the table they will share their commission with that agent. Now….if the listing agent also bring the buyer to the table, the seller will still pay the agreed upon commission.
Having been in this business for over 40 years, I have listed many properties with a contract with the sellers (Owners). When doing that I ask my seller to approve what I offer another office if they bring a ready willing and able purchaser to the property. My contract is with my seller, so the buyer’s agent has to come to me for their commission, not the seller. When I began, the check was written to the buyer’s brokerage from the listing broker’s account.
Could renewing this practice settle this question?
Sandra Mitsis, YOU ARE ON POINT! I couldn’t have said it better myself. The cost to sellers and/or buyers is for THEIR protection along with ours as agents and Brokers. Praying for a win for NAR and the respective agencies.
I am not sure why these people are making the Real Estate Agent’s commission such a big issue. How many industries are there where the hired people will work for FREE for days, weeks, and months? Real Estate Agents work for days, weeks, and even months before we finally get paid after the Closing. Many of these people who are bringing these lawsuits will be complaining for sure if their own employers decided to lower their pay or delayed paying their paycheck.