A last-minute filing by the DOJ and a handful of objections failed to derail the settlements, which cap more than five years of litigation in Sitzer/Burnett.
Dave Gallagher
Stephanie Reid-Simons5 minutes
KANSAS CITY, Mo. — A U.S. District Court judge has approved the remaining settlements in the Sitzer/Burnett case, adding nearly $700 million to the fund and ending a key chapter in the buyer agent commissions cases.
The $418 million settlement with the National Association of Realtors (plus an additional $30.6 million from brokerages and MLSs who opted into the deal) accounts for nearly half of the total damages being paid, while HomeServices of America's $250 million deal was the largest of the brokerage company settlements to date.
After nearly two hours of discussion, including arguments from several objectors, Judge Stephen Bough signed off on the settlements, capping more than five years of litigation.
During the hearing, NAR lead attorney Ethan Glass spoke about the desire to provide certainty and help the industry move forward and conduct business. He described this case as "extinction-level litigation" and said the organization felt fortunate that it was able to pay and survive, whereas many businesses would have been financially crushed.
Chris Kelly, executive vice president at HomeServices of America, said in an email that the company is pleased with the outcome, noting that it was an important milestone during this transformative time.
"Beyond the legal and regulatory pressures, ongoing market dynamics continue to impact buyers and sellers," Kelly said. "By staying focused on solving these challenges, we aim to deliver unmatched value and opportunities for our clients and communities."
11th-hour debate over buyer agreements
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Along with the monetary awards to home sellers, the terms of the settlement included changes to industry practices, most notably the removal of offers of compensation from the MLS and the mandatory use of written buyer agent agreements, which must be signed before showing a home.
Those buyer agreements turned out to be a point of contention for the Department of Justice, which filed a Statement of Interest on Nov. 24 expressing concern about the rule and other aspects of the settlement.
Attorneys for the Sitzer/Burnett home sellers and NAR responded to the DOJ's statement prior to the hearing, with the plaintiffs acknowledging the issues raised by the agency but arguing that they should not impact approval of the settlement.
The DOJ suggested that defendants might try to use the settlement as a shield against future litigation, but plaintiffs said the settlement does not limit the DOJ's ability to enforce antitrust laws.
In addressing the DOJ's concern that new buyer agreement rules could limit competition, the plaintiffs said the agreements are "intended to increase price transparency to buyers and prevent brokers from imposing hidden or surprise costs," adding that they also reduce the risk of brokers trying to steer buyers for the purpose of getting higher commissions.
"These hard-fought practice changes thus benefit both buyers and sellers by creating market incentives to lower the amounts consumers pay to buy and sell homes," the plaintiffs wrote in the filing.
They also noted that the agreement "does not require that a broker and potential buyer client work together on an exclusive basis. And it does not require that brokers set any particular price or adopt any pricing model, as long as the broker's pricing is clearly disclosed in advance of the home search process."
NAR attorneys agreed, adding in their filing that "buyers are free to hire a broker (or not) whenever they want; buyers who want to engage a broker are free to hire whatever type of broker they want," but clarifying that once they begin working together, they must agree on compensation in writing before a home tour.
"There is nothing anticompetitive about that," NAR wrote in its filing.
Where we go from here
Today's ruling closes the chapter on Sitzer/Burnett, but the story isn't over. Brokerages, associations and MLSs who have not yet settled continue to face commissions-related litigation in copycat cases across the country, and the DOJ's statement of interest suggests that the federal agency will be keeping a close watch on the industry.
For those who have settled, years of litigation — topped off with hefty damages — could also have long-lasting financial impacts.
In a recent filing, NAR estimated it is paying more than 55% of its total assets into the fund, something President Kevin Sears referenced in a speech to members earlier this month: "So what does that look like? Well, we'll be leaner in how we operate," he said, adding that NAR will continue to focus on cutting costs.
HomeServices of America noted the cost burden in a Nov. 20 filing, saying the damages "represented the uppermost limit of their ability to pay while still remaining financially viable."
Threats from within
Beyond the costly consumer lawsuits and DOJ scrutiny, some agents and brokers are also pushing back on industry practices, with active cases in Texas, Pennsylvania and Michigan challenging mandatory association memberships. Others are lobbying to eliminate NAR's Clear Cooperation Policy, a subject of much recent debate.
As NAR attempts to fend off these attacks and criticisms, some question whether the powerful, yet beleaguered trade association can remain the dominant force in real estate.
