I have not written an actual meat and potatoes blog post in a while, but with all these changes and rumors floating around regarding the settlement of the National Association of Realtors anti-trust lawsuit, I thought I’d weigh in with my own two cents.
Now obviously my opinion means very little. However, I am a bit annoyed and surprised at the news media coverage of this landmark suit.
For those of you who don’t know about it, NAR was sued via a class action lawsuit alleging that brokers are price fixing commissions, and that the common practice of a seller offering a co-broke commission split to a buyer’s agent is somehow unfair and unethical.
As we all know, we live in a society of litigation. There are many powerful, very rich attorneys who are constantly on the lookout for the possibility of new lawsuits and ways to make millions suing corporations large and small. Ultimately the only people who make any real money on these class action suits are the lawyers. (With so many plaintiffs, the payout per person is only a few hundred dollars at most.)
So along comes such rich and powerful attorneys like Michael Ketchmark, Doug Miller, Jerod Breit, and Jeremy Keel. They decided that the current way real estate brokers do business is a good target for their next big payday, because seller’s agents currently offer part of their commission to buyer’s agents. (Also known as co-broking)
I have tried to understand how this is an anti-trust case, and really for the life of me I cannot. I guess part of the argument is why would a seller pay a buyer’s agent to work against them? And I suppose that makes sense, however since the money ultimately comes from the buyer, then isn’t the buyer already paying that fee? At any rate, after many years of litigation. (Until they ultimately drained NAR’s defense fund) they convinced a jury that the practice is unfair, and NAR was forced to settle.
A lot of this is above my paygrade. I do believe if there is genuine confusion over who pays what commission, then the current way of doing business needs to change. However I also believe that buyers (especially first time buyers) who need guidance, yet don’t have a lot of extra money, will really be hurt by this. Buyers need representation. If commissions can no longer be rolled into the price of the home, how can the buyer pay? They are already up against a ton of closing costs. Will buyers be forced to pay out of pocket fees or attempt to buy a house unrepresented? We will see how it shakes out.
What really annoys me though is the attorneys who have brought this case. They are currently doing a media tour, espousing how they are knights in shining armor doing battle for the poor uniformed homeowners and buyers. How they alone will save everyone millions from greedy real estate brokers.
These law firms have brought this lawsuit for one reason. To make money. And to make more money than 99% of all real estate agents will make in their entire career.
The settlement was 458 million dollars. We do not know what Ketchmark and his cohorts are actually putting in their pockets, (because unlike the NAR rules which says agents must disclose their commission rates on the MLS) these attorneys are allowed to hide their percentage. However people smarter than me have done some digging. From what they uncovered, “standard” contingency fees range from 33-40% Lets give them the benefit of the doubt and say they are charging 30%. That puts the fees collected by these bemouth law firms at 137 million dollars.
Also aren’t “standard fees” what these attorneys are suing against in the first place? How can they justify an identical practice?
The average real estate agent in the US made $44,000 in 2023, (which means that same average agent would have to work for three thousand years to equal Ketchmark’s single payday for this lawsuit) yet somehow we are the greedy, overpriced industry? The hypocrisy is so glaring. I have linked a video where Ketchmark has the nerve to refer to a real estate commission as a “rip off”!
This video (click the link) annoys me for a number of reasons. Its interesting how Josh Flagg, (who is the stereotype for a gaudy rich broker) was picked by CNBC to be the voice for millions of hardworking agents. He comes across so poorly, its cringeworthy. But this is all a carefully planned media tour to paint these greedy attorneys as the saviors. Much like they did in the numerous tobacco and drug cases. The only people who made money off those lawsuits were lawyers. And they made astronomical amounts. This is the industry that needs to be regulated and scrutinized. But that will never happen. These people are too powerful and their pockets are too deep.
So over the next few months (and years) as the real estate industry scrambles around to try to adhere to the new rules and regulations. Ketchmark and his band of bullies will be off in search of their next million-dollar payday.