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Breaking Ground: Major Legal Battle Shakes Up Real Estate Industry - What Lies Ahead?

After a four-year journey through the federal judicial system and two weeks of intense courtroom drama, the landmark Burnett class-action case has dealt a significant blow to the organized real estate industry. An eight-member jury, deliberating for under three hours, found key figures in real estate guilty of conspiring to inflate commissions in violation of federal law. They awarded an astonishing $1.78 billion to the plaintiffs, focusing primarily on buyer agent commissions, particularly the mandatory compensation offers from seller agents to buyer agents. This groundbreaking decision is already reverberating throughout the industry, with the plaintiffs' legal team wasting no time filing an identical nationwide lawsuit just moments after the verdict was rendered. This fresh lawsuit encompasses an even wider array of large real estate companies.

Defendants in the Burnett case included the National Association of REALTORS® (NAR), HomeServices of America, and Keller Williams. However, RE/MAX and Anywhere chose to settle in the weeks leading up to the trial, collectively paying around $130 million and agreeing to revise their policies.

Mike Ketchmark, the lead attorney representing the plaintiffs, disclosed to RISMedia that the new nationwide lawsuit now names "NAR and the remaining large corporate real estate companies." The allegations parallel the same "misconduct" successfully demonstrated to the Kansas City jury. Ketchmark stated, "The jury delivered a verdict... and told these corporations to cease their practices that harm home sellers. Our objective is to take this nationwide and provide similar relief across the country."

Darryl Frost, spokesperson for Keller Williams, expressed the company's respect for the jurors' decision based on the evidence before them but also voiced disagreement with the verdict. Frost stated, "We are disheartened that the court did not allow the jury to consider vital evidence that cooperative compensation is permissible under Missouri law prior to their decision. This is not the end. Keller Williams adhered to the law regarding cooperative compensation and stands by the evidence presented regarding the century-old practice of sellers' agents offering commissions to other agents involved in marketing and selling homes. We will explore all options as we evaluate the verdict and trial record, including potential avenues for appeal."

During the trial, the judge prevented defendants from referencing state laws, although NAR briefly mentioned these statutes in closing arguments.

Mantill Williams, a spokesperson for NAR, was even more explicit about the intention to appeal. He asserted, "This matter is far from being resolved, as we plan to appeal the jury's decision. In the interim, we will seek a reduction in the damages awarded by the jury. We stand by the fact that NAR's guidance for local MLS broker marketplaces ensures consumers access comprehensive, fair, transparent, and reliable home information, allowing brokerages of all sizes, service levels, and pricing models to compete fairly. We will continue to prioritize our mission to advocate for homeownership and consumer interests."

It remains uncertain what changes, if any, will result from the rules and practices successfully challenged in this case. Another larger class-action trial, centered on many of the same policies and defendants, is tentatively scheduled for early next year.

Real estate experts and insiders have varying opinions on how this verdict will impact the real estate industry, but most agree that major changes are likely, given the precedent set by this case.

John Featherston, Founder, President, and CEO of RISMedia, who attended the initial trial days, acknowledged that the plaintiffs' case appeared "extremely weak at its core." He continued, "Nevertheless, the skilled attorneys for the plaintiffs managed to convince the jury of everyday individuals. Unless this decision is overturned on appeal, it is likely that the residential real estate industry's compensation commission sharing model will undergo significant changes."

During the trial, NAR CEO Bob Goldberg was asked whether the organization would alter its policies if the jury ruled in favor of the plaintiffs. He declined to provide a direct answer, indicating that a "legal review" would be necessary.

The immediate impact on average agents remains uncertain. Part of the plaintiffs' request was Part of the plaintiffs' request was for a "permanent injunction" against the defendants, prohibiting them from compelling sellers to pay the buyer-broker. Some regions have already begun taking steps to revise or eliminate the system of "cooperative compensation," and other companies have distanced themselves from NAR.

Additionally, the Department of Justice has indicated that merely permitting offers of $0 in the MLS, a step already taken by several major MLSs, may not suffice as it pursues its investigation of alleged antitrust violations in the real estate industry.

This story is still developing, so stay tuned for industry reactions post-verdict and ongoing updates.


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