Brokerage executives are speaking up for buyer’s agents following a landmark victory over the National Association of Realtors, Keller Williams and HomeServices America in a class-action antitrust lawsuit.
The Kansas City jury sided with 500,000 home sellers in Missouri who accused NAR and some of the nation’s largest brokerages of conspiring to hike commission costs. The verdict in the Sitzer/Burnett case includes $1.8 billion in damages, which could be tripled among the defendants for more than $5 billion in damages.
Many brokerage leaders haven’t jumped in on the conversation over the legal developments likely to upend the industry as many firms size up their involvement in the case, a similar class action suit set for trial early next year, or a lawsuit filed just minutes after the verdict was released.
But for those that are chiming in, concern over the future of buyer’s agents is paramount.
“The industry has come under attack, and buyer’s agents and their clients are really the ones who will feel the greatest impact,” Brown Harris Stevens CEO Bess Freedman said.
Freedman emphasized the importance of buyer’s agents in New York City, who are often responsible for putting together board packages and advising clients in one of the world’s toughest markets.
“Many of them hustle and they only get paid on deals that get done,” Freedman said. “There is this horrible misconception that technology can replace a good buyers’ agent, and I am sorry, but that is just not true.”
Appearing on CNBC’s Last Call just hours after the verdict, Freedman pushed back against the plaintiffs attorney Michael Ketchmark’s claim that NAR operates as a “cartel” and that brokerages are “corporate machines taking over real estate.”
“What is being said is completely untrue,” Freedman said. “It’s ridiculous.”
Compass’ Leonard Steinberg posted on Instagram to dispute how the plaintiffs characterized brokers and their commission negotiations.
“I do not collude with any other agent or brokerage to fix the commissions I negotiate with my clients to pay,” Steinberg said in the post. “Do I have the option not to work for someone who does not pay me what I am worth? I hope so! And I know they have that option too.”
Daniel de la Vega, president of One Sotheby’s International Realty in South Florida, reacted with a laughing emoji to Steinberg’s post.
In Los Angeles, Amalfi Estates’ Anthony Marguleas predicted that buyer’s agent commissions will nosedive if buyers are responsible for their compensation, leading many of these agents to leave the business entirely.
He also said he heard from several agents who were surprised by the outcome of the case.
“They’re in denial,” Marguleas said. “Every sleazy commission tactic that real estate firms allowed and promoted was put front and center at the trial.”
The industry’s potential shake up could improve the public’s perception of brokers, he added, and motivate only “full-time, experienced” agents to stay in the business.
Ryan Serhant, head of his eponymous New York-based brokerage, said he doesn’t think a market without buyer’s agents is likely.
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“We definitely can’t have a situation where only the seller’s agent is compensated and therefore can closely control the entire transaction,” Serhant said. “This presents a real conflict for potential buyers.”
Serhant said he’s waiting to see how other brokerage executives and local groups like the Real Estate Board of New York will respond before drawing conclusions about how the verdict will impact his business.
“If we have to change the way we do business, we will change the way we do business,” he said.