BAM Key Details:

  • On Day 9 of the Sitzer/Burnett trial, defendants called additional witnesses to the stand, including David Stevens, former Federal Housing Commissioner, T3Group founder Stefan Swanepoel, and Dr. Lawrence Wu, an economist and expert witness. 
  • Michael Ketchmark, lead attorney for the plaintiffs, cross-examined the witnesses and called their sources into question, including the “Danger Report” authored by the T3Group and a study paid for by HomeServices of America. 

On Day 9 of Sitzer/Burnett, the defendants first called David Stevens, former Federal Housing Commissioner, to the stand. 

Stevens argued that a change to the commission structure “would cause extraordinary, serious damage, particularly for cash-constrained buyers and first-time homebuyers.” He added that he didn’t know how these buyers would come up with the money to pay their agents if seller agents could not offer buyer agent compensation. 

My conclusion is that this would disrupt a system that provides equitable representation, whether you’re rich or poor.

David Stevens

former Federal Housing Commissioner

During the cross, plaintiffs’ attorney Michael Ketchmark revealed the title of the study cited most by Stevens: “Be Careful What You Ask For: The Economic Impact of Changing the Structure of Real Estate Agent Fees.” The study was funded by HomeServices of America. 

Stefan Swanepoel and the Danger Report

The defendants called Stefan Swanepoel to the stand, who acknowledged, while under oath, that the so-called “Danger Report” — researched and authored in 2015 by the T3Group Swanepoel founded—was “art, not science” and contained “hypothetical future events” that may or may happen. 

The “Danger Report” is an analysis of threats facing the real estate industry and is based on interviews with dozens of knowledgeable professionals in the real estate industry. 

The report used current data and reasoning to estimate that canceling the cooperative compensation rule would result in a 100% chance of downward pressure on commissions. It also highlighted the typical commission for real estate agents in other countries—including the United Kingdom, where agents typically earn 1–2%. 

Swanepoel testified that he chose the countries in the report to show “an eclectic compilation” and not to compare them to the United States.

An economist defends the cooperative compensation rule

The defense also called an economist, Dr. Lawrence Wu, to the stand as an expert witness. 

Dr. Wu said the cooperative compensation rule is good for home sellers because it motivates buyer agents to bring serious, qualified buyers. 

Anytime you make it easier for the buyer, the sellers benefit. And because buyer agents know they’ll be compensated, they’re “motivated to find buyers” and bring them to the table.

Dr. Lawrence Wu

Economist and expert witness in Sitzer/Burnett

Wu also explained that, since buyer agents know only one of them will be compensated, they’re motivated to compete, which works to the seller’s benefit.  

There’s only one winner. It’s a contest and the seller gets to pick the winner.

Dr. Lawrence Wu

Economist and expert witness in Sitzer/Burnett

Other highlights of Dr. Wu’s time on the stand: 

  • Dr. Wu argued the conditions for a conspiracy among the defendants did not exist because they did not communicate to set a universal standard commission rate, and commissions are decided “house-by-house” by individual seller agents and their clients. 
  • He suggested the clustering of commissions—areas where commission rates tend to stay close to 3%—could indicate competition in a market and did not necessarily indicate a conspiracy to fix commissions at that number. That could just be the going rate. 
  • During cross-examination, Dr. Wu admitted he’d been paid by all the defendants for his testimony—and that defense attorneys had helped him with his testimony. He showed them what he was going to do, they “had an opportunity to give comments,” and he chose whether to accept them or not. 
  • Asked by Ketchmark whether expert witnesses have a code of ethics, Dr. Wu responded: 

The code of ethics is I have to give you my honest and independent opinion based on the analysis that I have done.

Dr. Lawrence Wu

Economist and expert witness in Sitzer/Burnett

  • Dr. Wu confirmed he was giving his independent opinion. Ketchmark asked if he met with the defendants’ attorneys on a daily basis after court had adjourned, and Dr. Wu answered, “Not every day.” 
  • Wu also shared his opinion that the plaintiffs’ expert witness Dr. Craig Schulman should not have used the real estate market in Australia as his example of a market without the cooperative compensation rule because Australia is not a comparable country with regards to the real estate industry. He suggested referencing other markets here in the U.S. without the policy—specifically NWMLS in Washington and REBNY in New York. In both of these markets, even without the cooperative compensation rule, 100% of all real estate listings still offer buyer agent compensation. 
  • As a counterpoint during cross, Michael Ketchmark pointed out Washington law says buyer agents are not required to show properties that lack a written agreement to pay buyer agent compensation. He added that REBNY’s Real Estate Listing Service requires an equal commission split between listing and buyer agents. 

So, while both NWMLS and REBNY don’t explicitly require listing agents to offer buyer agents a share of commissions, other rules and norms in place effectively make buyer agent compensation more likely than not. 

It’s like a game of whack-a-mole.

Michael Ketchmark

Lead attorney for the plaintiffs

Stay tuned for more as the trial continues.