Gary Keller Takes Stand In Person As Sitzer | Burnett Trial Verdict Nears

Key Takeaways:

– Keller Williams leadership has no control over the commissions charged by its agents
– Gary Keller testified in the Sitzer | Burnett trial and denied the existence of a “standard commission”
– Agents are responsible for setting their own compensation and receive what people are willing to pay
– Keller Williams is being sued as part of a class action lawsuit representing 500,000 Missouri homesellers seeking reimbursement for commissions
– Keller defended his books and stated that commissions vary by city
– Keller Williams’ culture and philanthropic efforts were discussed during the testimony
– Keller denied any involvement in collusion or discussions about the cooperative compensation rule
– Plaintiffs pointed to notes from a former Keller Williams analyst as evidence of the alleged conspiracy
– The cross-examination focused on Keller’s charitable acts and the clustering of commission rates in the Kansas City market.


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KANSAS CITY, Mo. — Keller Williams leadership has no say in the commissions charged by its agents, company co-founder Gary Keller said after taking the stand in person at the Sitzer | Burnett trial in Kansas City on Friday.

Keller’s testimony was set to be the culmination of the defense’s argument that real estate commissions are variable, and that some of the nation’s largest real estate companies didn’t conspire to stabilize commissions in violation of a federal antitrust law.

In his testimony, Keller denied the existence of a “standard commission,” and said agents are responsible for setting their own compensation and receive what people are willing to pay.

“They’re independent contractors,” Keller said multiple times under questioning from Timothy Ray, an attorney representing Keller Williams.

The plaintiffs have previously claimed Keller is head of an alleged conspiracy between Keller Williams, the National Association of Realtors, Anywhere (formerly, Realogy), RE/MAX, and HomeServices of America and two of its subsidiaries HSF Affiliates and BHH Affiliates in the case. The class action lawsuit represents about 500,000 Missouri homesellers seeking reimbursement for nearly $1.8 billion in commissions paid to buyer brokers between 2015 and 2022.

Keller came across as affable on the stand, speaking to the eight-person jury easily and directly. At least a couple of the jurors appeared to brighten as he spoke. He was soft-spoken and the judge and court reporter reminded him several times to speak up.

Keller was on the stand most of Friday’s court time. Below are details from Keller’s testimony and his cross-examination by plaintiffs’ lead counsel Michael Ketchmark.

Keller’s testimony

Keller first testified about Keller Williams’ culture, including its philanthropic arm, KW Cares, which Keller noted had helped victims of Hurricane Katrina and Hurricane Harvey in Houston.

Ray also asked Keller about his background, including his family — his wife of 36 years was in the gallery — and his career from aspiring rock star as a teen to founding KW in 1983.

Keller was asked about a couple of his books, The Millionaire Real Estate Agent, and Shift. He defended the income calculators he used in the former that used a 3 percent commission rate to show agents how many client appointments, listings and sales they need to have to reach a million dollars in income.

He said that at the time, Keller Williams didn’t have any data on commissions, so he estimated that the total rate would add up to 5.6 or 5.7 percent and rounded up.

“It was pretty innocent,” he said, adding that he wasn’t trying to suggest to agents they should always expect a 3 percent commission or that listing agents should always offer a 3 percent commission and that he says in the book that commissions vary by city.

In regards to KW Family Reunion events, he said that they tend to attract between 12,000 and 15,000 attendees, including agents that KW brokers are trying to recruit from competitors. He gives a “Vision Speech” at the event where he shows the audience slides of economic indicators over time, such as gross domestic product, first-time homebuyers, mortgage rates, days on market, and sides per agent.

In a Vision Speech video Ray played, Keller can also be seen showing slides regarding compensation, including commission negotiations, which Keller said in the video KW was “OK with” and “like[d],” and Keller Williams’ agents’ average commissions on the seller side (2.6 percent) and on the buyer side (2.7 percent) between 2002 and 2019.

“We’re not talking commissions here, we’re just showing averages,” Keller said in the video.

Keller said the only time the commission rate on the buyer side had ever averaged 3 percent was during the Great Recession, when sellers were eager to incentivize buyer agents to sell their homes. He noted that the rate stayed at 2.8 percent or 2.9 percent even after that.

He said the slides he shows at the events are for “perspective” and to explore issues in the economy so that agents are informed.

“There’s nothing else you can take from this,” he said of the commission slides. “There’s nothing competitive about it.”

He added that the data show that commissions “vary literally every year” with market conditions.

He said the 6 percent commission is a “myth” and the idea that he was trying to tell agents in local markets what to charge by showing that national historical information is “ludicrous.” 

He said nothing about showing the commission data violated KW’s antitrust policy because it didn’t show local rates.

Keller admitted that KW does require agents to join Realtor associations and multiple listing services, but allows them to obtain an exemption from their team leader. He said KW doesn’t track exemptions.

“They don’t need our permission to do it,” he said. “So we don’t track whether they do it or not.”

According to Keller, KW put that policy in place in 1989 — before the current version of the NAR cooperative compensation rule at issue in this case — because the company wants agents to have access to the MLS.

He himself is not involved with any Realtor associations, he said.

“I’m either all work or all play,” Keller said. “It’s nothing against NAR or the local boards. They do what they do and we run our business.”

Asked how often he had discussed the cooperative compensation rule at Keller Williams before the suit was filed, Keller said, “Never. Never came up. Never discussed.”

Additionally, he said he had never discussed the rule with anyone at NAR and had never had anything to do with the rule.

Asked whether he believed in “collusion theory,” he said, “I don’t even know what that means.” Plaintiffs point to the notes of former Keller Williams industry analyst Michelle Figgs as evidence of the alleged conspiracy, specifically the statement in those notes that “Gary [Keller] believes strongly in collusion theory for why commissions are stable. ‘co-opetition.’”

Like other defense witnesses, Keller opined that nothing would happen if listing agents were no longer required to offer compensation to buyer brokers — they would still offer it.

Ketchmark’s cross

Plaintiffs’ attorney Michael Ketchmark started his cross-examination by asking Keller whether he had ever heard that you shouldn’t trumpet your charitable acts in public.

The question was a reference to Matthew 6:1-2: “Be careful not to practice your righteousness in front of others to be seen by them. If you do, you will have no reward from your Father in heaven. So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by others.” 

Ketchmark said he’d had that idea drilled into him as a child. (Ketchmark’s parents and his son, Steven, who is also an attorney, have sat in the gallery every day of the trial.) Keller responded that he had heard of that and Ketchmark asked whether he did so anyway in order to influence the jury.

Keller replied that he would never help anyone in order to take credit for it. “To my knowledge, I’ve never gone outside of this room and trumpeted that to anybody, sir,” Keller said.

(Keller Williams has published at least 15 press releases touting its philanthropic work since 2005, according to its own archive. Inman has also written several articles about KW Carescharitable efforts.)

Then Ketchmark asked whether Keller was ready to talk about the facts of the case and Keller affirmed he was.

After Keller’s testimony, Ketchmark told Inman, “Gary Keller spent the first half hour talking about charitable giving of his agents because Keller Williams loses on the facts and law of this case.”

During his cross, Ketchmark pushed back against Keller’s claim that you can’t tell what commission rates will be next year. He showed bar graphs of commission clustering in the suit’s four subject MLSs in Missouri, which the jury has seen multiple times.

Showing the graph for the Kansas City market, in which 94 percent of listings offered a 3 percent commission, Ketchmark said that unless something changes as a result of the trial, he was “100 percent” certain that the rate in that market would remain 3 percent.

He said that although Keller said he’d engaged in cooperative compensation since he joined the industry in 1979, the market had changed since then. When the internet came along, Keller was “terrified” that it was going to affect his “precious commissions,” Ketchmark said.

Keller replied, “I wasn’t terrified and I wouldn’t characterize commissions as precious.”

Following that, Ketchmark showed the jury a November 2017 email Keller wrote to KW executives where he said, “Our agents’ commissions are under siege.” 

While Keller admitted he wrote the email, on the stand he said, “Commission rates are not under siege. The amount of money agents take home is under siege.”

Keller said he was referring to companies like Zillow taking around 40 percent of agents’ commission in return for leads. 

Continuing to read from Keller’s email, Ketchmark said, “‘Today our goal is to do everything in our power to protect our real estate agents’ commissions’” and “‘Keller Williams knows there’s a war being waged to control the data of our industry and provide real estate services at the lowest cost possible.’” Keller admitted he’d written the statements.

Ketchmark then asked Keller if he’d admit he wrote the part of the email where he says Keller Williams knows there is a battle going to be waged between Keller Williams and Internet-based companies and that the battle won’t stop until “every commission dollar is wrung from the agents’ pocket.”

Attorney Ray then jumped up from his seat and said, “We’ll stipulate that that’s what it says,” to which Ketchmark replied in a warning tone, “Counsel.” 

The judge in the case, Stephen R. Bough, then overruled Ray’s objection and Ketchmark told Ray, “I’m not looking for your stipulation. I’m looking for [Keller’s] sworn testimony.” 

Ketchmark then turned to his son in the gallery and said, “Thanks for warning me about that, Steven,” noting that the younger attorney had told him Ray would try that tactic.

Ketchmark continued to read Keller’s words, “‘We are going after every business that is going after agents’ data,’” which Keller called KW agents’ “sacred data.”

In his email, Keller also said, “Agents won’t be able to make as much money” and that Keller Williams will have lost “control” if Zillow has all the listings and can value a house, which, on the stand, Keller said Zillow still can’t do.

Because the email referred to AVMs (automated valuation models), Ketchmark asked Keller, “What’s AVMs?”

In response, Keller said, “I don’t actually remember.”

In the email, Keller said that KW would fight the tech companies. “We fight back. We get into every business that touches real estate and we take the money and the data,” he wrote. “That’s the playbook we are following to win the data back.” He said KW had won the “agent-centric” battle and now it would win the data battle.

When Ketchmark asked Keller what he was talking about in the email, Keller answered, “This email has nothing to do with what real estate agents charge. I was talking about what they net.” He said the email was to explain to his executives why Keller Williams was expanding into the mortgage business.

“I wasn’t suggesting that we’re trying to fight over commission rates,” Keller said. “I was talking about protecting what [agents] net.”

Closing arguments in the case are expected Monday, followed by jury deliberations that may take hours or days.

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Property Chomp's Take:

The future of real estate is uncertain, but that doesn't mean you can't prepare for it. With advancements in technology and changing market dynamics, it's important to stay ahead of the game and equip yourself with the necessary tools and knowledge to thrive in the industry. Two upcoming events, Virtual Inman Connect on Nov. 1-2, 2023, and Inman Connect New York on Jan. 23-25, 2024, will provide valuable insights and resources to help you navigate the ever-evolving real estate landscape.

One of the key topics discussed at the recent Sitzer | Burnett trial in Kansas City was real estate commissions. Gary Keller, co-founder of Keller Williams, took the stand and stated that the company has no control over the commissions charged by its agents. He emphasized that agents are independent contractors who set their own compensation based on what people are willing to pay. This testimony aimed to debunk the notion of a "standard commission" and refute allegations of commission stabilization by large real estate companies.

The class action lawsuit brought against Keller Williams, the National Association of Realtors, Anywhere (formerly Realogy), RE/MAX, and HomeServices of America and its subsidiaries HSF Affiliates and BHH Affiliates, represents approximately 500,000 Missouri homesellers seeking reimbursement for nearly $1.8 billion in commissions paid to buyer brokers between 2015 and 2022. Keller's testimony sought to establish that commissions vary based on market conditions and that there is no collusion to stabilize them.

During his testimony, Keller also spoke about Keller Williams' culture and philanthropic efforts, including KW Cares, which has provided assistance to victims of natural disasters such as Hurricane Katrina and Hurricane Harvey. He highlighted the company's commitment to giving back to the community and supporting those in need.

Keller defended the income calculators used in his books, "The Millionaire Real Estate Agent" and "Shift," stating that they were meant to provide agents with a general understanding of how many client appointments, listings, and sales they would need to reach a million dollars in income. He clarified that the 3 percent commission rate used in the calculators was an estimate, as Keller Williams did not have specific data on commissions at the time.

In regards to KW Family Reunion events, Keller explained that they attract thousands of attendees, including agents that KW brokers are trying to recruit from competitors. During these events, Keller delivers a "Vision Speech" that includes slides showing economic indicators and market trends. He emphasized that the purpose of these slides is to provide agents with perspective and inform them about the current state of the economy, not to dictate commission rates.

Keller firmly denied any involvement in a conspiracy to stabilize commissions and stated that he had never discussed the cooperative compensation rule with anyone at NAR or within Keller Williams. He also reiterated that KW requires agents to join Realtor associations and multiple listing services to ensure access to the MLS but clarified that agents can obtain exemptions from their team leaders and that KW does not track these exemptions.

During cross-examination, plaintiffs' attorney Michael Ketchmark questioned Keller about his publicizing of charitable acts, referencing a biblical passage about practicing righteousness in private. Keller maintained that he had never sought to take credit for his philanthropic efforts and stated that he had never publicly announced them outside of the courtroom.

The trial continues to unfold, and the outcome will have implications for the real estate industry as a whole. Regardless of the trial's outcome, it is crucial for real estate professionals to stay informed, adapt to changes, and continuously educate themselves about industry trends and best practices.

Events like Virtual Inman Connect and Inman Connect New York provide an opportunity to gain valuable insights, network with industry leaders, and acquire the tools needed to succeed in an ever-changing real estate landscape. As the future of real estate remains uncertain, it's essential to prepare and equip yourself with the knowledge and resources necessary to thrive in any market conditions.

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