A significant legal battle involving the real estate industry kicked off in Kansas City on Monday as the trial for one of two high-profile broker commission lawsuits commenced. The trial began with the empaneling of the jury, with opening arguments expected to follow shortly.
At the core of this class-action lawsuit, known as the “Sitzer/Burnett” case, lies a contentious National Association of Realtors (NAR) policy known as the “participation rule.” This rule mandates that listing brokers must provide compensation to buyer’s agents. As a result, home sellers find themselves responsible for covering commissions for agents they didn’t hire.
The plaintiffs, including Rhonda Burnett, Jarod Breit, Jeremy Keel, and others from Missouri, allege that NAR colluded with some of the nation’s largest brokerages to artificially inflate agent pay, potentially violating the Sherman Antitrust Act. Filed in 2019, the lawsuit argues that the “participation rule” creates a conflict of interest for buyer’s agents, as they may be less inclined to negotiate lower prices for their clients due to the potential reduction in their commission pool.
Furthermore, the rule prevents buyers from determining commission amounts based on agent performance, as proponents argue. It is believed that this policy further motivates buyer’s agents to negotiate with their own financial interests at the forefront.
On the opposing side, the National Association of Realtors, the largest trade group in the U.S. boasting 1.5 million members, asserts that their long-standing policies ultimately benefit consumers. Part of the rationale lies in making buyer’s agents more affordable for those seeking assistance in navigating the real estate market. NAR also maintains that its participation policy does not compel listing brokers to offer substantial compensation to buyer’s agents, but merely requires them to disclose the compensation offer.
Additionally, Keller Williams and HomeServices of America, named as defendants alongside NAR, vehemently deny participating in any conspiracy with the National Association of Realtors and claim they were not involved in the creation or implementation of the “participation policy.”
Source: The Real Deal