Maryland REALTORS® Online

It Ain’t Over ‘Till It’s Over

 

After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom, came back Tuesday and found NAR and other corporate defendants liable in the case. We wanted to share some important information with you while the news is still fresh. 

American baseball legend Yogi Berra first uttered the phrase about baseball's 1973 National League pennant race. His team was a long way behind when he said it, and they did eventually rally to win the division title. Linguistically, it's a reiteration and tells us nothing about the world when taken literally. Telling people X is X provides no real information. But it does remind us that there is still hope. There is something about the never-say-die, no-matter-the-odds-we-can-do-this spirit of "It ain't over..." that finds a place to inspire. It tells us to wait, don't make a judgement yet, because things might be turned around.

I thought of the phrase immediately after hearing about the verdict in the case of Burnett v. NAR, in which the eight-person jury in Kansas City, Mo. NAR and other corporate defendants liable in the federal antitrust class action case. The jury returned plaintiffs ~$1.8 billion in damages, which will be automatically trebled to ~$5.4 billion. Also, just minutes after the verdict, the attorney filed a new class action lawsuit against another group of real estate industry entities including Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna, and Douglas Elliman. The suit also names the NAR as a defendant.

But let’s be clear: this matter is not close to being final. NAR will appeal the liability finding because they stand by the fact that NAR rules specifying that compensation is always negotiable serve the best interests of consumers, support market-driven pricing and advance business competition. NAR remains optimistic that they will ultimately prevail.  In the interim, NAR will ask the court to reduce the damages awarded by the jury.

In court, NAR presented evidence that consumers are better off and business competition is able to thrive because of our rules and how well local MLS broker marketplaces function. In fact, the NAR cooperative compensation rule for local MLS broker marketplaces ensures efficient, transparent, and equitable marketplaces. REALTORS^® are consumer advocates, working tirelessly every day to help our clients achieve the American Dream of homeownership. NAR’s rules are very intentionally pro-consumer and pro-competitive. Local MLS broker marketplaces serve as centralized sources of detailed, accurate, and current information about available homes, affording equal access to listings regardless of the size or location of the brokerage with which we are affiliated.

As new information is provided to us, Maryland REALTORS® will make sure to keep you in the loop. 

Here are answers to questions you might have, which I present directly from NAR President Tracy Kasper.

Chris Hill

President

Maryland REALTORS®

What are next steps legally and the timing? This matter is not close to being final as we will appeal the jury's verdict, and we remain confident we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury. Due to the nature of appeals, this case likely will not be concluded for several years. 

What will be the basis for NAR's appeal? We can't speak to the specifics of that until we file our appeal, but we can say that we have a very strong legal basis for appeal.

Is there anything REALTORS^®, brokers, state/local associations or MLSs need to do differently because of this verdict? Not because of this verdict. But NAR has emphasized for many years two important things. One is the use of buyer representation agreements, which maximize transparency by putting all agreements in writing to ensure clarity and understanding, as all members are obligated to do pursuant to the NAR Code of Ethics. These agreements formalize the professional working relationship with clients and detail what services consumers are entitled to and what the buyer agent expects from their client in return. Second, it's also an imperative for members to continue to express that commissions are negotiable and set between brokers and their clients; explain how local MLS broker marketplaces promote equity, transparency, and market-driven pricing for consumers; and persistently communicate the incredible value agents who are REALTORS^® provide.

What does the future of buyer representation look like as a result of the verdict? This verdict does not require a change in our rules, but if class action attorneys had it their way, buyer representation would be very much at risk because many first-time home buyers, among others, couldn't afford to pay for representation out of pocket. It's important that members take every opportunity to express how they are experts who guide consumers through the financial, legal and community complexities of buying or selling a home.

Would NAR ever consider changing the cooperative compensation rule? This rule always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition. NAR consistently reviews and considers evolving its rules in a way that responds to changes in the industry and what best serves consumers. 

Do you expect the plaintiffs to seek an injunction that would require NAR to stop making the rule mandatory or eliminate the rule altogether?  We cannot predict what plaintiffs will do.  We would contest any such effort because this rule has always been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition. 

Does NAR have the funds to pay the proposed damages or post a bond to file an appeal? NAR is going to appeal and has the funds to post bond, which allows us to proceed with our appeals and defer potential payment of damages. While appeals will take years, and we are confident we will ultimately prevail, we also are financially prepared for any final judgment.

Is there any scenario where NAR would consider settling? NAR always has been open to a resolution that maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates our members' risk of liability for the claims alleged. We remain confident we will prevail on our appeal.