Class action Lawsuits Part 5

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Now that Trials are starting, it's important for the industry to be able to explain why our structure and standards of practice work best for all parties. We've talked about the details of the 3 leading Class Action Commission Lawsuits unfolding against the real estate industry in Parts 1-4 in our newsletter series:

Sitzer/Burnett
Moehrl v. NAR
Nosalek vs. MLS PIN, et al

Oct. 16, 2023. Trial began on the Sitzer/Burnett case

The Sitzer/Burnett Class Action Commission case, involves Kansas and Missouri home sellers,with $16.2 Billion of damages at stake. There are 5 defendants in the case, 2 have already settled for millions of dollars.

The lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act.

There are 7 charges that I've seen accusing the industry in this Commission Class Action lawsuit claiming the 100 year system is unfair and they include:

1.) The suits claim the industry participates in anti competitive practices by forcing sellers into a system where they pay a Commission that is split between buyer and seller agents.

This is a false claim. In fact the Seller pays the listing company a negotiated commission that is decided between the seller and the listing company to get the property sold. In these days of choice and competition, I have seen these fees range from 1% to 10%, depending on the complexity of the task the listing company is agreeing to, and the type of property that is being sold.

When the seller contracts with the listing company, typically, the listing company can spend a significant amount of time and money to achieve the sellers's objective. Even though most listing companies put the time and money up front, they are not guaranteed any return at all, if the sellers' objectives are not met. That means in some cases there is a lot of risk with no guarantee of reward.

The listing company pays a number of marketing expenses including advertising, Internet exposure, printing materials, technology tools, and to acheive the sellers goal in the shortest amount of time, they sacrifice a significant amount of any possible fee they may receive from the seller to other sources, where the buyer may be found including other real estate professionals. Think of this as outsourcing additional marketing to companies that spend money and time to find buyers. The listing company pays the fee to other professionals and they decide how much cost the listing company will pay, not the seller and they do it to find the most buyers quickly.

In our next newsletter we will address:

2.) Sellers are forced to pay buyer broker fees without the ability to negotiate. Aren't the buyer brokers adversaries?

The Wall Street Journal article alleges this constitutes a potentially illegal tying arrangement under the Sherman AntiTrust Act that keeps buying agents paid though they offer almost no useful services.

Obviously this is a position taken from someone who has never had to do it, and we will drill down to the truth in the next Newsletter.

It is going to get worse!

Live CE classes are better than Correspondence, particularly for this issue, although we have added the discussion and suggested strategies to reduce your risk to our DCE courses. It was exciting to see the networking, partnerships and strategic partnerships, team building recruiting and resource sharing that happened at our last live classes. You can't get those benefits sitting at home taking a correspondence class in isolation but we will be providing additional information on these issues in all of our relevant courses and Maui.

You should seriously consider signing up for our next live classes, Nov 11-12, 2023 or Nov 13-14, 2023 where we will give you tools to reduce your risk for the class action lawsuits that are likely heading our way. We will have workshops and role plays to refine your commission discussion to reduce your risk. You can't get that same level of protection and training in a correspondence class. But hurry to register, these classes have limited slots available and will sell out.

Best regards,

Jerry Royse, ITI

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