Judge approves $700 million in deals with NAR, HomeServices 

KANSAS CITY, Mo. — A U.S. District Court judge has approved the remaining settlements in the Sitzer/Burnett case, adding nearly $700 million to the fund and ending a key chapter in the buyer agent commissions cases.

The $418 million settlement with the National Association of Realtors (plus an additional $30.6 million from brokerages and MLSs who opted into the deal) accounts for nearly half of the total damages being paid, while HomeServices of America's $250 million deal was the largest of the brokerage company settlements to date.

After nearly two hours of discussion, including arguments from several objectors, Judge Stephen Bough signed off on the settlements, capping more than five years of litigation.

During the hearing, NAR lead attorney Ethan Glass spoke about the desire to provide certainty and help the industry move forward and conduct business. He described the case as "extinction-level litigation" and said the organization felt fortunate that it was able to pay and survive, whereas many businesses would have been financially crushed. NAR President Kevin Sears said in a statement that the approval marked "an important moment for NAR members, home buyers and sellers, and the real estate industry."

Michael Ketchmark, lead attorney for the plaintiffs, said he was "delighted" with the outcome, calling it a "long, hard-fought battle," and reflected on the verdict that led to the settlements. "Just over a year ago, I sat there and looked at the jurors, and the jurors are the ones who ultimately deserve the credit in this," Ketchmark said following the approval.

Chris Kelly, executive vice president at HomeServices of America, said in an email that the company is pleased with the outcome, noting that it was an important milestone during a time when "ongoing market dynamics continue to impact buyers and sellers."

"By staying focused on solving these challenges, we aim to deliver unmatched value and opportunities for our clients and communities," Kelly added.

The DOJ wants to keep the door open

In an 11-hour move, the Department of Justice filed a Statement of Interest in the case just two days before the hearing — something Bough appeared to refer to when he asked "how long has the DOJ been sniffing around" real estate.

In its statement, the DOJ expressed concern about certain aspects of the settlement, highlighting two issues in particular: buyer agreement requirements and the possibility that defendants might try to use the settlement as a shield against future litigation.

In court, that second issue led to much sparring, with DOJ attorney Chris Bower asking the judge not to let the settlement serve as a shield. "How will we be able to determine if a practice is illegal if we can't investigate?" Bower asked.

He also said that if the DOJ were to take further action, it should be able to choose the venue — but Bough responded by asking why his court wasn't the most appropriate place.

Glass agreed, saying the DOJ should not sue in "some far-flung district" if it decides to pursue further litigation. And if the agency goes after the industry "for following the settlement, that's an issue," Glass added.

Prior to the hearing, plaintiffs in the case responded to the DOJ's "shielding" concern, saying the settlement does not limit the DOJ's ability to enforce antitrust laws.

Taking issue with buyer agreements

Along with the monetary awards to home sellers, the terms of the settlement included changes to industry practices, most notably the removal of offers of compensation from the MLS and the mandatory use of written buyer agent agreements, which must be signed before showing a home.

While the DOJ suggested that new buyer agreement rules could limit competition, the plaintiffs argued in a written response that the agreements are "intended to increase price transparency to buyers and prevent brokers from imposing hidden or surprise costs," adding that they also reduce the risk of brokers trying to steer buyers for the purpose of getting higher commissions.

"These hard-fought practice changes thus benefit both buyers and sellers by creating market incentives to lower the amounts consumers pay to buy and sell homes," the plaintiffs wrote in the filing.

They also noted that the agreement "does not require that a broker and potential buyer client work together on an exclusive basis. And it does not require that brokers set any particular price or adopt any pricing model, as long as the broker's pricing is clearly disclosed in advance of the home search process."

NAR attorneys agreed, adding in their filing that "buyers are free to hire a broker (or not) whenever they want; buyers who want to engage a broker are free to hire whatever type of broker they want," but clarifying that once they begin working together, they must agree on compensation in writing before a home tour.

"There is nothing anticompetitive about that," NAR wrote in its filing.

Where we go from here

Today's ruling closes the chapter on Sitzer/Burnett, but the story isn't over. Brokerages, associations and MLSs who have not yet settled continue to face commissions-related litigation in copycat cases across the country, and the DOJ's statement of interest suggests that the federal agency will be keeping a close watch on the industry.

As for Ketchmark, the next step is returning to the Gibson case, which he filed immediately after the jury returned its verdict in Sitzer/Burnett. While many of the defendants have settled, several remain.

"We're moving forward against Berkshire Hathaway Energy, and we're excited to continue to litigate that case. And if we can't get it resolved, we'll be back in this very courthouse and going to trial and holding them accountable if necessary. That's what we'll do," Ketchmark said.

A painful price to pay

For those who have settled, years of litigation — topped off with hefty damages — could have long-lasting financial impacts. 

In a recent filing, NAR estimated it is paying more than 55% of its total assets into the fund, something Sears referenced in a speech to members earlier this month: "So what does that look like? Well, we'll be leaner in how we operate," he said, adding that NAR will continue to focus on cutting costs.

HomeServices of America noted the cost burden in a Nov. 20 filing, saying the damages "represented the uppermost limit of their ability to pay while still remaining financially viable."

Threats from within

Beyond the costly consumer lawsuits and DOJ scrutiny, some agents and brokers are also pushing back on industry practices, with active cases in Texas, Pennsylvania and Michigan challenging mandatory association memberships. Others are lobbying to eliminate NAR's Clear Cooperation Policy, a subject of much recent debate. 

As NAR attempts to fend off these attacks and criticisms, some question whether the powerful, yet beleaguered trade association can remain the dominant force in real estate.