BAM Key Details:
- A little more than a week before the Sitzer/Burnett class action lawsuit goes to trial, NAR reversed course and said it’s now allowing listings with $0 for buyer compensation.
- Attorneys for the plaintiffs, who have evidence of NAR officials insisting that $0 was not permissible, are calling this a “stunning admission of guilt.”
The National Association of Realtors® (NAR) has changed its commission rule, also known as its Participation Rule. It now allows listing brokers to offer buyer brokers $0 in compensation when listing a home in any of the 500 Realtor-affiliated MLSs across the U.S.
This reversal happened about a week before the Sitzer/Burnett commission lawsuit trial began on October 16. An attorney for the plaintiffs called NAR’s reversal of the commission rule a “stunning admission of guilt,” as reported by Inman. Now that the verdict is out—the federal jury awarded plaintiffs $1.785 billion in damages for conspiracy to enforce the cooperative compensation rule—it looks like the timing of the reversal was a wrong move by NAR.
NAR’s Change in Commission Rule
NAR’s Participation Rule previously required listing brokers to offer buyer brokers a commission in order to list a property on the MLS—even if the commission was as little as one penny. With two class action lawsuits gearing up for trial (the Sitzer/Burnett trial set to take place this month and the Moehrl lawsuit trial is expected to begin in the first half of 2024), NAR has changed the details of the rule.
In a statement to Inman, NAR spokesperson Mantill Williams said,
NAR’s MLS policy requires participants to communicate an offer of compensation to other MLS participants and that offer can be any amount, including $0.
In another statement, Michael Ketchmark, lead trial counsel for the plaintiffs in the Sitzer/Burnett case, stated that for years NAR has been adamant that listing brokers offer a compensation above $0. He stated:
NAR has aggressively enforced this rule across the country. All this evidence will come out at trial. If there is now a sudden change in this long-standing policy it’s a stunning admission of guilt.
While Ketchmark and the plaintiffs will likely use this in an argument for their case, NAR stated this change emphasizes transparency of commission between brokers.
And to be clear, NAR is not requiring nor encouraging MLSs to change their data fields to permit $0. We are simply advising that doing so would continue to comply with NAR’s MLS policy.”
NAR’s policies are designed to ensure information is efficiently distributed to facilitate the transaction of real estate to the benefit of buyers and sellers.
So long as cooperating brokers are aware of the offers made by listing brokers, that purpose is achieved. NAR has long said listing brokers and their clients are the ones who determine the amount and makeup of the offer to cooperating brokers.
Practically speaking, the difference between one penny and $0 is negligible, and regardless, those offers are always negotiable.
Without these policies, brokerages would not know important information about listings and they would have to rely on piecemeal information collected in inefficient ways that could negatively affect their ability to serve their clients and ultimately the U.S. economy.
“We’re confident the jury will not be confused.”
NAR didn’t argue against Ketchmark’s statement regarding testimony from Cliff Niersbach, NAR’s former general counsel, who said under oath that, per NAR policy, a seller’s agent cannot list their client’s property on an MLS with an offer of zero for buyer compensation.
NAR also would not say whether it believed allowing zero for buyer agent compensation could induce buyer agents to steer their clients away from listings with a buyer agent commission rate of zero percent.
Instead, the association downplayed their about-face and argued that the plaintiffs had no evidence of NAR’s alleged price-fixing.
Plaintiffs’ focus on zero versus $1 is designed to take the focus away from the lack of any evidence that commissions are purportedly fixed at amounts well above $1. We are confident the jury will not be confused. And contrary to Plaintiffs’ claims, the DOJ actually closed its investigation into the model rules at issues in this trial, and a court affirmed that.
Williams’ confidence aside, it’s not completely insane to wonder if maybe confusion is part of NAR’s strategy.
From “not zero” to “any amount, including $0”
Until just recently, NAR has consistently argued in public statements and legal filings that—per NAR Policy Statement 7.23, aka the Participation Rule—listing brokers can offer buyer agents “as little as” one penny or one dollar for commission in order to list a property in a Realtor-affiliated MLS. It can be any amount, as long as it’s more than zero.
NAR’s attorneys said as much when they submitted its motion to dismiss the Sitzer/Burnett case on August 5, 2019:
“The rule says nothing about the amount of commission that must be offered. It permits listing brokers to frame their offers either as a percentage of the sale price or as a specific amount. That amount can be as little as one cent.”
Never mind that a penny (or even a dollar) actually sounds more insulting than zero. NAR has been ride-or-die on this for years. And now, just a little more than a week before going to trial, they’re allowing zero and pretending nothing has changed.
When Judge Stephen R. Bough denied NAR’s motion to dismiss on October 16, 2019, he did so clearly articulating his belief that NAR was requiring “some” compensation for buyers in every listing.
Relying on the plain language of the rule itself, NAR argues [the rule] only mandates listing brokers make some offer of compensation and that no minimum commission rate or amount is required.
Then, on September 13, 2021, a NAR spokesperson told Inman, when asked about the DOJ probe, “The participation rule requires listing brokers to make offers of compensation, which can be as little as $1, to buyer brokers.”
Also, at least one of NAR’s fellow defendants in the Sitzer/Burnett and Moehrl suits understood well enough that NAR’s Participation Rule required “some compensation” for buyer agents. On January 6, 2022, Anywhere became the only defendant on record to publicly call for NAR to make buyer agent compensation optional rather than required.
In response to that call, NAR did not say its rule already allowed zero-percent buyer agent commissions. Here’s its response:
“NAR continues to believe that the guidance regarding cooperative compensation that appears in its Handbook on Multiple Listing Policy serves the best interests of both consumers and brokers. It gives them freedom to choose how much commission to offer the buyer broker, including as little as one penny.”
So, after teetering on that imaginary line between one penny and zero—publicly as well as in legal documents—NAR now says zero is completely acceptable and in line with their policy.
On Wednesday, a spokesperson for Redfin, when asked to comment on NAR’s sudden acceptance of zero, told Inman, “That is not our understanding of how NAR has interpreted their policy in the past and appears inconsistent with prior reporting.”
A couple of days prior to that, Redfin leadership announced their decision to leave NAR for two reasons, one of which was NAR’s policy blocking sellers from listing properties that don’t pay a commission to the buyer agent.
This post has been updated to include the verdict of the Sitzer/Burnett trial.
