The Future of Real Estate Agent Commissions and how it effects Buyers and Sellers

A federal lawsuit filed in Missouri challenging the amount sellers pay in Real Estate Commissions could have a dramatic effect on the Real Estate market. Sitzer v. National Association of Realtors, 4:19-cv-00332, (W.D. Mo.) is a Class Action Real Estate case that resulted in landmark decision and sizeable jury verdict. On October 31, 2023, a federal jury issued a verdict that ordered the Defendants to pay $1.78 billion in damages.

The underlying dispute that resulted in this Class Action lawsuit began in November 2017 when Joshua Sitzer and Any Winger listed their Kansas City home with a Real Estate Agent from Keller Williams. They offered a 5.5% commission of which 3% was ultimately paid to the Real Estate Agent for the Buyer. The home was listed on MLS for $600,000.00 and the Buyer’s Agent negotiated the price down to $590,000.00. By negotiating the price down by $10,000.00 the Buyer’s Agent received a commission of $17,700.00 as opposed to $18,000.00 had it sold at the listing price. Mr. Sitzer took issue with the fact that he had to pay a Buyer’s Agent 3% commission, resulting in a $300.00 loss for the Buyer’s Agent, when he took a $10,000.00 loss on the sale price and had no power to negotiate the commission with the Buyer’s Agent.

In the lawsuit, Sitzer along with other home sellers accused the National Association of Realtors (“NAR”), Anywhere Real Estate (Anywhere Real Estate, the parent of Coldwell Banker, Century 21 and other large real estate brands), Keller Williams, Home Services of America, and RE/MAX with violating anti-trust laws. Specifically, along with Anti-Trust violations, the Plaintiffs alleged that NAR’s Code of Ethics and MLS Handbook, along with the policies and practices of the co-defendants, resulted in inflated commission rates. Further, the allegations accuse NAR and co-defendants of conspiring to artificially inflate buyer’s agent commissions.

Ultimately, NAR, Keller Williams, and Home Services of America decided to take the case to trial. RE/MAX and Anywhere Real Estate settled before trial paying $55 million and $83.5million in damages, respectively. Along with being found guilty of conspiracy to artificially inflate real estate broker commissions, the verdict ordered NAR, Keller Williams, and Home Services of America to pay $1.78 billion in damages to the Plaintiffs. Notably, violations of Missouri’s Anti-Trust law allows the Court to award treble damages which could put the total amount of damages owed to the Plaintiff’s around $5 billion.

Facing such a severe verdict and financial penalty, NAR settled the case after trial by agreeing to pay $418 million over four years to resolve all claims. The proposed settlement agreement must be approved by the Court.

This verdict could have a large impact on the Real Estate market. It has also spurned several other similar lawsuits that are pending with the courts. This decision should result in sellers paying less in real estate commissions. It could also eliminate the need for a buyer’s agent all together as sellers no longer have to pay buyer’s agent commissions. Additionally, sellers will not be able to negotiate the seller’s agent commission.

It remains to be seen what affect this verdict will have on New York City Real Estate Agents who are not members of NAR but rather The Real Estate Board of New York (“REBNY”). A lawsuit is pending against REBNY in the United States District Court, Southern District of New York.

To read more about NAR’s take on the case visit:

https://www.nar.realtor/magazine/real-estate-news/law-and-ethics/breaking-down-sitzer-burnett.

There will undoubtedly be more litigation surrounding this issue and issues navigating the new Real Estate Agent commission landscape. If you have questions regarding this development please contact J. P. Robinson Law for a free consultation. To get started please call J. P. Robinson Law at (914) 265-3179 or email at Justin@jprobinsonlawllc.com.