Sitzer/Burnett Verdict -What’s Next

The Sitzer/Burnett verdict by a Missouri jury found NAR, Keller Williams, and Berkshire Hathaway liable for price-fixing commissions in violation of federal antitrust laws, and awarded $1.78B in damages against them collectively (this could be tripled per applicable laws to $5.34B in damages). The main argument was that the Clear Cooperation Policy (CCP), requiring agents to enter their listings in the MLS within 24 hours of being available for public showings, and a concurrent requirement to offer a cooperating commission, had the effect of artificially inflating commissions in the Missouri area. The plaintiffs in the case essentially want buyers to pay for their own agent and for the seller to pay the listing agent

First, it’s important to note, that this case applies only to Missouri. There are several other lawsuits which had already been filed or which have been filed since the Sitzer/Burnett verdict, including ones in Illinois and in New York where the MLS required that the compensation offered to listing agents and buyer agents had to be equal. 

Locally, a change in commission policy has already happened in the multiple listing service used by realtors in the DC metro area no doubt partly in anticipation of the lawsuit’s verdict. 

On August 9, 2023, Bright updated our Listing Entry system to allow users to enter any amount in a listing’s cooperative compensation fields. Prior to this update, the cooperative compensation fields required entry of at least one cent. The fields now allow any amount, from zero and up. This small change was made to underscore the complete flexibility of Bright subscribers to engage in transparent negotiations with their clients.

This means that even before the Sitzer/Burnett verdict, sellers were not obligated to offer compensation to buyer agents.   This reflected our local real estate commissions’ decision to break with the mandatory clear cooperation policy on compensation.  We still are expected to put listings into the MLS once they are available for showing unless there are reasons to  the contrary.

The National Association of Realtors, Keller Williams and HomeServices of America all have vowed to appeal the jury’s verdict, so it’s uncertain exactly when changes will go into effect and what they will be.  Nationally, real estate companies are talking about how buyer agency agreements are going to become more common – and will be more important.  Realtors are going to have to be able to demonstrate their value to potential clients.  Sellers will have the option of refusing to pay a buyer agent.  Interestingly, Ii think that these things are already happening in the DC area.

1. Buyer agency began in the DC area in the early 1990s.  We were one of the first parts of the country to adopt buyer agency.  Now, we have several forms which are required as part of the contract process in DC, MD and VA to address buyer agency.  The three jurisdictions treat buyer agency slightly differently.  Maryland is the only one of the three that does not allow a Realtor to represent both sides in a transaction.  (As an aside, while I sometimes write the contract for an unrepresented buyer, I never claim to represent that buyer when I have a listing agreement with the seller.)
2. Some states still do not have formal processes for buyer agency, which is shocking to me since we have been doing buyer agency for over 30 years.  These states are now racing to educate their Realtors and put buyer agency agreements into place for their use.
3. Conversations about buyer agency agreements are going to become much more real because the ones in use in the DC area include a commitment by the buyer to some level of financial compensation for the Realtor.  Clearly the buyer needs to understand that he or she is making that commitment.  If the buyer has a buyer agency agreement with a Realtor for X amount of commission and then purchases a property wtih a commission that is less than X, the Realtor may reasonably expect the buyer to make up the difference.  That is difficult for many buyers who are trying to put down the maximum down payment possible in order to keep their mortgage rate as low as practical.  Many buyers just don’t have any extra money to pay a buyer agent on top of the down payment and closing costs.
4. At the moment, buyers are not expected to pay the buyer agent in most situations in the DC area.  The vast majority of homes listed in the Bright MLS have some offer of compensation, even though our MLS already allows for the seller to offer no payment at all to buyer agents.  In parts of the country where sellers have been able to offer no buyer agent compensation for several years, the vast majority of sellers are still offering compensation at essentially the same levels as before.
5. If the offer of compensation starts to change to zero, buyers will have to figure out how to pay a buyer agent or decide to go it alone without representation.  There are concerns by many real estate professionals that the least savvy members of the home buying public will be the ones who must save money and skip the representation.
6. Sellers have the right in the DC metro area to offer zero compensation to a buyer agent.  However, I think that few sellers are going to be brave enough to be that first one to offer zero compensation.  Most sellers will fear having buyer agents try to talk their clients out of viewing or offering on that property.

Clearly, the process of buying and selling homes is going to evolve over the next few years.  After all, change is constant.  Hopefully, the evolution will be purposeful and will result in more choices by educated buyers and sellers.

This post is my opinion alone in response to what I am reading about the verdict, other people’s responses and my view of the real estate industry after 34 years and counting.  If you have any questions about how the Sitzer/Burnett verdict and the changes to our MLS policy affect you, I would love to talk more with you.  I can be reached at 240-401-5577 or by email at lise@lisehowe.com.  I look forward to hearing from you.