A year after Sitzer/Burnett, are the biggest impacts yet to come? 

It was a decision that sent shockwaves through the real estate industry. A year later, leaders are still trying to determine its impact — and chart a new way forward.

The Sitzer/Burnett case had been slowly simmering for four years, but on October 31, 2023, the jury took less than three hours to reach its verdict. As soon as it was announced, the wheels were set in motion for a host of changes. 

Copycats, payouts and shakeups

In the immediate aftermath of the verdict, the first of dozens of copycat lawsuits was filed, and in the following months, a wave of settlement agreements eventually put the pool of damages at more than $1 billion. 

During that time, the National Association of Realtors navigated unexpected shifts in leadership, and after vowing to appeal, ultimately decided to settle, paying $418 million and agreeing to significant practice changes.

The verdict also caught the attention of those outside the industry. The mainstream media latched onto the topic of real estate commissions — though not all media outlets got it right, claimed NAR — perhaps encouraging more consumers to negotiate agent pay. 

And more than 600,000 claims have already been filed by home sellers looking to collect their piece of the settlement fund.

Did consumers win?

But did the verdict meet the goal of the plaintiffs who brought the case? Do home sellers believe they can now decide what, if any, commissions they need to offer buyer agents? 

From a compensation perspective, not much has changed so far, but it will likely take more time for any clear trends to emerge. Since NAR's policy changes took effect on Aug. 17, companies like Compass and Redfin have reported little movement in average commissions, though Redfin has noted a small but steady downward trend over the past year.

That could accelerate: Zillow, in its 2024 report on home sellers, found that slightly more than half of sellers are negotiating commission fees, a sign that consumers are now more aware that compensation is negotiable. In contrast, a 2023 study from NAR reported that only 19% of sellers negotiated.

A 'generational shift' for agents

Michael Ketchmark, the lead attorney for the home sellers in the Sitzer/Burnett case, said that many real estate professionals are still in the process of adapting. He noted that it's hard to pivot away from rules and practices that have been in place for decades — and change could take time.

"It may even be a generational shift," Ketchmark told Real Estate News in a phone interview, suggesting that the cycle of change might involve newer agents coming in who aren't attached to the old ways of doing business.

Reflecting on the past year, Ketchmark believes the work done in the courts has pushed the industry into a more free and open market, and agents who know how to show their value are seeing opportunities.

"What I'm finding now from conversations with agents — both buyers' and sellers' agents — is they're making the shift and figuring out how to do it," Ketchmark said. 

"They can show that they can offer things to buyers, and buyers aren't afraid to pay for that when value is being brought," he added.

Refusal to compensate buyer agents 'likely to become more popular'

While the NAR settlement did not require listing and buyer agent compensation to be completely decoupled, it did set the stage for a more consumer-friendly system, said Steve Brobeck, senior fellow of the Consumer Federation of America and an outspoken critic of cooperative compensation.

"Buyers, now required to sign contracts, are talking more frequently to their agents about compensation, and some are negotiating commission rates down. Some sellers, no longer required to compensate buyer agents, are refusing to do so," Brobeck said. 

"In the next year or two, both of these consumer responses are likely to become more popular. In these situations, it is important that buyer agents ensure that sellers who refuse to compensate them, remove this compensation from the sales price. In the past, buyer compensation was usually baked into sales prices."

Brobeck expects to see more conflicts between agents who are trying to honor the new rules, and those who refuse to do so. The organization has already received complaints from listing agents who claim that buyer agents have steered clients away from their listings due to low or no offers of compensation.

"If the U.S. Department of Justice intervenes, more agents are likely to accept the new rules, especially the ability of buyers to negotiate agent compensation," Brobeck said.

NAR's year of transition

While the leadership changes at NAR in the past year — which include the abrupt exit of its president (who stepped into the role early herself), the unexpected departure of its chief legal officer and the early retirement of its CEO — were significant, what remains to be seen is whether the organization's dominance in the industry has been permanently diminished.

In the wake of scandals and a settlement that brought mixed reactions, many have questioned the value of the organization, and an upstart association was even formed to replace it. Still, NAR membership has remained around the 1.5 million level.  

The National Association of Realtors worked out the terms of a settlement that impacted its entire member base, yet it has largely left the implementation up to others. NAR has provided guidance and resources for both real estate professionals and consumers, but the work of creating or revising buyer agent agreements and changing MLS systems has fallen to Realtors, brokerages, local and state associations and multiple listing services.

A 'massive undertaking' for the MLS

The court cases and media attention may have been focused on agent commissions, but MLSs, tasked with overhauling their systems, arguably felt the greatest immediate impact of the verdict and ensuing settlement. 

Along with the technical work involved in updating their platforms, MLSs had to come up with a clear message to their members, explaining the changes and what new rules they would enforce (recall that some non-association-owned MLSs, like Northwest MLS, chose not to join the settlement). And they had to make sure they were not only compliant, but avoided gray areas to minimize risks to their organizations.

Plus, there were the psychological changes, said Art Carter, CEO of the California Regional Multiple Listing Service.

"The removal of commissions from the MLS has undoubtedly been the biggest game-changer. But when the game changes, so must our mindset. While the terms 'adapt' and 'thrive' have been widely used in our industry over the past year, they truly capture what's needed to remain successful in a shifting landscape," Carter said.

Without offers of compensation, the value of the MLS has been diminished — so adaptation is crucial. In some regions, market forces have already come into play: A private firm acquired Colorado's largest MLS, REcolorado, in a controversial sale this summer, leading many to wonder if other private entities will take over MLS organizations in the coming years.

Agents are coming on board

Despite the challenges, Brian Donnellan, CEO of Bright MLS, has been impressed with how MLSs have handled the changes so far.

"To teach over one million agents around the country how to have new and different conversations with their clients was a massive undertaking for all involved," Donnellan said. 

Those interviewed for this article said that for the most part, agents are following the rules when it comes to listing homes on the MLS. Carter said they haven't issued a single citation since CRMLS switched over to the new rules on Aug. 13.

"I was pleasantly surprised by how many people adapted to the changes ahead," said Carter, who traveled across the country giving talks about the new policies before they were implemented. "While some were unhappy to hear their way of doing business was shifting, just as many — or more — were eager to discuss how to navigate this new landscape."

Expect more litigation, but 'settle into a new normal'

Now that the technical changes are complete, Donnellan is concerned about the unintended consequences from the verdict.

"We continue to communicate to agents, consumers and the press about the need to maintain the transparency of the MLS system for the benefit of consumers and the housing market overall," Donnellan said. In recent weeks, conversations about the NAR settlement have been somewhat eclipsed by heated debates over the association's Clear Cooperation Policy, which mandates that all publicly marketed listings be submitted to the MLS within one business day — something that proponents consider essential to a transparent marketplace. 

"I hope the industry is most focused on consumers and keeps their interest at the top of mind as the issues and solutions continue to be considered," Donnellan said.

So a year out from the verdict, what's next? Donnelan expects more litigation, but he also thinks real estate is ready to move on.

"Certainly the Department of Justice continues to dig around and is likely to pop up again to try to influence how the new rules are implemented," Donnellan said. "But I do believe the industry at large will find and settle into a new normal."