Resi is reeling from massive litigation fallout

More copycat Sitzer/Burnett antitrust lawsuits, Bespoke discrimination lawsuit moves forward

Residential Real Estate Deals With Massive Litigation Fallout
Keller Williams' Gary Keller and NAR's Tracy Kasper (Illustration by The Real Deal with Getty, Keller Williams, NAR)

WeWork’s bankruptcy may have dominated the headlines this week, but there’s been a lot of other news in the residential real estate sector, with the sagas of two massive lawsuits that have shaken up the industry.

The fallout, of course, comes from the seismic $1.8 billion Sitzer/Burnett verdict, which found NAR and two brokerages liable of conspiring to keep commissions high under the industry group’s rule dictating commission splits in exchange for access to the MLS.

The decision has identified several countries with more competitive commission structures, including the United Kingdom, Israel and Australia, as a potential answer to the billion-dollar question facing U.S. brokerages and agents. 

Those international structures include few exclusive listings, the end of the MLS and online listings, and agent commissions as low as 1 percent, as brokers told The Real Deal

“Our view is the U.S. has a very unique model that actually, the representation is actually properly separated [between] the buyer’s agents and [the] seller’s agent,” real estate entrepreneur Thomas Ma said.

But that could change, should the industry be forced to adopt commission structures that more closely resemble those foreign markets. 

“I think it will be a race to the bottom,” said Ma, founder and CEO of Real Messenger, a social media app for real estate listings. “The service level will be so bad.”

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Copycat lawsuits on the NAR verdict have piled up against the biggest brokerages in the country.

The latest hit the books in Illinois last week, just days after a Kansas City jury found the National Association of Realtors, Keller Williams and HomeServices of America guilty of conspiring to drive up costs charged to homesellers. Seven homebuyers, led by Mya Batton, are suing Compass, Redfin, Douglas Elliman, eXp and three other brokerages over similar accusations — this time centering homebuyers instead of sellers.

“Defendants’ unlawful, anticompetitive conduct causes America’s home buyers to pay inflated commissions for broker services they misrepresent as free, to pay inflated prices for the homes they purchase, and to receive reduced quality broker services,” the complaint states. 

The lawsuits come just in time for earnings season for Compass, Redfin, Douglas Elliman, and OpenDoor. The potential impact of antitrust lawsuits is top of mind for all of the companies.

Meanwhile, the New York State Division of Human Rights has found probable cause regarding a discrimination complaint filed by former Bespoke executive Jarret Willis against the brokerage and its founders, Cody and Zachary Vichinsky.

Willis, who is Black, filed a complaint in February, in which he alleged that another employee addressed him by the N-word and that various employees referred to him as Jafar, the villain from “Aladdin,” in a derogatory manner. Willis also alleged that the word “kike,” an anti-Semitic slur, was frequently used at the firm’s Hamptons office and that the brokerage withheld from him hundreds of thousands of dollars in commissions.

And while not necessarily in litigation, the Freddie Mac investigation of Ralph Herzka’s Meridian Capital might end up there. The probe is examining a deal the brokerage did for the company, sources told The Real Deal. Meridian is now barred from brokering deals on behalf of Freddie Mac lenders. Herzka’s firm has placed a broker on leave and is working with Freddie on its inquiry, according to a source familiar with the investigation.

David Brickman, who previously served as CEO of Freddie Mac, has stepped down from his role as executive chairman of Meridian Capital Group. Brickman joined Ralph Herzka’s Meridian in 2021 to help launch the firm’s lending affiliate, NewPoint Real Estate. But the mortgage executive has walked away and scrubbed mentions of his involvement with Meridian on several online profiles.

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