Training on trial as plaintiffs challenge commission strategies
Materials painted 6% commissions as the goal, plaintiffs’ attorneys argued, while industry witnesses defended it as just a number, and negotiable.
Key points:
- RE/MAX’s Nick Bailey and David Liniger were among those who provided video testimony.
- Plaintiffs’ attorneys called out commissions discussions at the Keller Williams Family Reunion.
- The trial’s first live testimony came from home sellers who said they didn’t realize negotiating commissions was an option.
- What the jury decides in this case could result in huge changes to the buyer agent commission structure not just in Missouri but across the U.S.
KANSAS CITY, Mo. — Agent training practices were put under the microscope on the third day of the Sitzer/Burnett trial as attorneys for the plaintiffs attempted to connect the dots between training sessions and inflated commissions.
The nine-member jury watched more video depositions in the Wednesday morning session, which included testimony from RE/MAX CEO Nick Bailey and the company's founder, David Liniger. Later in the day, Ryan Gorman, former CEO at Coldwell Banker and Anywhere Advisors, said they asked the National Association of Realtors to make a unilateral offer of compensation voluntary. However, it has remained in place.
RE/MAX doubles down on the value of collaboration with associations, MLSs
During his testimony, Bailey said RE/MAX stands behind collaboration, and if agents choose to work for the brokerage, they have to join NAR. Liniger added, in reference to MLS membership, that agents should be committed to the spirit of cooperation and collaboration laid out in NAR's policies.
A significant amount of discussion focused on the nuance involved in RE/MAX's and Keller Williams' agent training related to commissions: what agents should charge, how to communicate that to sellers, and what to do if the home seller wants to offer less.
Specifically, there was testimony centered around the 6% figure being used in training documents and sessions. Some defended the use of that percentage, saying it was just a number to put into the model, and the message to agents was that commissions are always negotiable.
However, attorneys for the plaintiffs presented other training slides that suggested agents should follow the 6% commission model because it works.
Another document introduced showed that agents, when facing an objection from a seller who didn't want to pay 6%, were trained to respond with an offer of 5.99%.
The plaintiffs also used the training documents to try and support their argument that steering — where buyer agents "steer" their clients toward listings with higher commissions — is happening. They claimed the documents contribute to steering by reinforcing the idea that agents should go after the highest commission possible.
KW put on the hot seat
Other testimony involved appropriate times to talk about commission strategies, including allegations by the plaintiffs that Keller Williams violated its own policy by talking about commissions during its Family Reunion events, which not only host thousands of KW agents, but include representatives from other real estate companies.
Michael Ketchmark, lead attorney for the plaintiffs, also delved into "collusion theory" — the idea that companies may choose to cooperate for their mutual benefit, acting together to influence prices, for example, resulting in less competition.
Ketchmark questioned Michelle Figgs, a former KW industry analyst about notes she took that touched on the topic. In notes from a meeting, she wrote that KW Co-founder Gary Keller "believes strongly in collusion theory for why commissions are stable." Figgs testified that she personally "largely dismissed this hypothesis."
In a pretrial brief, attorneys representing Keller Williams argued that Figg's notes were hearsay and claimed she could not actually remember the identity of the person who made that statement.
Home sellers describe fees as a "hard pill to swallow"
Jurors got their first taste of live testimony on Wednesday afternoon, with three of the plaintiffs — Hollee Ellis, Rhonda Burnett and Jeremy Keel — taking the stand.
A common theme in the testimony is that they didn't know or realize that negotiating the commission was an option. In Ellis' case, after subtracting for the loan she still owed, the commission fees took about 40% of what was left of her profit from the sale.
"It's a hard pill to swallow that we're walking away with so little," Ellis said.
Burnett testified that the contract she was presented with had an option of choosing the commission fee, with a blank space, 7%, 8%, 9% and 10% listed as options. She filled in the blank spot with 6%. She didn't think she was getting a deal, but the way the contract was presented, it might make some home sellers think that was the case.
She also didn't think it was fair that she paid the buyer's broker to negotiate against her and her husband. She listed her home for $275,000 and it sold for $250,000, plus they had to pay for some repairs.
Keel, who testified that he was an attorney, also believed he had no ability to negotiate the commission fees.
The defense brought up past property sales the plaintiffs made to show that they did have previous experience dealing with real estate transactions and that they benefited from having agents in those transactions.