Key Takeaways:
– The third day of the Sitzer/Burnett class action buyer broker commission lawsuit focused on training materials used by brokerages and testimony from three named plaintiffs.
– Industry executives, including Rene Galicia and Rodney Gansho from the National Association of Realtors, appeared via video deposition.
– Gansho confirmed that NAR’s “Antitrust Compliance Guide” discourages discussing fees with competitors and using statements that imply collusion.
– Michelle Figgs, former senior industry analyst at Keller Williams, discussed a study on collusion in the real estate industry but stated that she had largely dismissed it.
– Figgs’ notes from a Keller Williams meeting referenced Gary Keller’s belief in collusion theory for stable commissions.
– Meredith Maples, senior director of KW University, discussed KW’s antitrust policy and how it aligns with slides and scripts used at KW events.
– RE/MAX CEO Nick Bailey confirmed RE/MAX’s affiliation with NAR and the cooperative compensation rule but stated it was a NAR policy, not a RE/MAX policy.
– Bailey clarified that commissions are negotiable despite training materials using a 6% commission as an example.
– Ryan Gorman, former president of Coldwell Banker, discussed Anywhere’s proposal to rescind NAR’s cooperative compensation rule, which did not make it out of committee.
– Gorman stated that Anywhere does not train agents to set commissions at a certain level.
– Hollee Ellis, the first plaintiff to testify, shared her experience of paying a 6% commission on a home sale, which accounted for 20.55% of her net equity.
– Ellis expressed her desire to end the “unfair practice” through her involvement in the lawsuit.
– Plaintiffs Rhonda Burnett and Jeremy Keel also testified in person on Wednesday.
HousingWire:
The third day of the highly consequential Sitzer/Burnett class action buyer broker commission lawsuit included a deep dive into the training materials used by various brokerages and the testimony of three of the named plaintiffs.
Several industry executives, including Rene Galicia, the former director of MLS engage at the National Association of Realtors, and Rodney Gansho, the head of engagement at NAR, again appeared via video deposition, according to reports from Inman News.
Gansho is responsible for helping NAR establish its Clear Cooperation Policy, which went into effect in 2019 and is at the crux of this lawsuit. In his testimony, Gansho confirmed that NAR’s “Antitrust Compliance Guide” states that members should not discuss fees with competitors and that agents should never use statements such as, “I’d like to lower the commission, but no one will show your house.”
Michelle Figgs, the former senior industry analyst at Keller Williams, appeared next. In Figgs’ video deposition, Michael Ketchmark, the lead attorney for the plaintiffs, asked her about a 2003 study titled, “Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry,” which she had sent to Ruben Gonzalez, Keller Williams’s chief economist, roughly six years ago.
The study attributes the “apparent uniformity of commission rates” to collusion.
“Why do commission rates appear to be so insensitive to economic forces? We do not have an answer to this puzzle. One possibility is that it reflects collusion by real estate brokers, perhaps enforced by the fact that every Realtor has to work through the local MLS, which makes price cutting easily detected,” the study states.
In her deposition, Figgs said that since sending the email to Gonzalez, she had “largely dismissed” the study.
Ketchmark also highlighted Figgs’ notes from a May 2015 Keller Williams meeting, in which she wrote that “Gary [Keller] believes strongly in collusion theory for why commissions are stable. ‘Co-opetition.’”
Figgs told Ketchmark that she was unsure if Keller himself or someone else in the meeting had made the statement.
Meredith Maples, the senior director of KW University, also appeared before the jury via pre-recorded video deposition footage. In her deposition, Ketchmark asked Maples about KW’s antitrust policy, which prohibits commission discussions, and how she reconciled that with slides from KW events that show information about 3% commissions for each side of the real estate transaction.
Maples told Ketchmark that the slides and scripts were models that agents could use as guides in their own business.
“Anything we include from a script perspective is a hypothetical situation,” Maples said. “We don’t tell people what to charge.”
Ketchmark countered this with the fact that nothing on the slides designated things as a model. He then quoted Keller Williams’ definition of a model: “A pattern of something to be made; an example for imitation; serving as or capable of serving as a pattern to be imitated.” From this, Ketchmark said Keller Williams teaches its agents that a “model will work for you if you follow it.”
Ketchmark also showed footage of RE/MAX CEO Nick Bailey’s deposition, which was recorded prior to RE/MAX filing its settlement agreement. Despite Bailey’s appearance via the pre-recorded footage, RE/MAX is no longer a defendant in the lawsuit.
In the video, Bailey confirms that RE/MAX requires its franchisees to belong to NAR and therefore follow its MLS policies and code of ethics.
“I do believe that the MLS is derived from the concept of cooperation and compensation,” Bailey said. However, he added that if the cooperative compensation rule was not mandatory, RE/MAX does not believe it would change the behavior of selling agents.
Bailey also stressed that the rule is a NAR policy and not a RE/MAX policy. In RE/MAX’s settlement agreement, the firm noted that it was no longer requiring its franchisees and their agents to belong to NAR, among other things.
Like the executives from other brokerages, Ketchmark question Bailey on RE/MAX’s agent training materials, which also use the example of a 6% commission.
“It is for example purposes only,” Bailey said. “We are very clear that commissions are negotiable.”
However, after further questioning, Bailey said statements in training materials about not cutting commissions appear in training materials to serve as an example of how to handle objections.
Ryan Gorman, the former president of Coldwell Banker, also appeared via video deposition. Anywhere Real Estate, the parent company of Coldwell Banker, has also filed a settlement agreement and is no longer a defendant in the suit.
In his deposition, Gorman noted that Anywhere had submitted a proposal to NAR in the spring of 2022 stating that “the mandatory nature of [NAR’s cooperative compensation] rule is unnecessary and should be rescinded.” Gorman said that his understanding was that the proposal did not make it out of committee.
Gorman was also questioned about the training materials used at Anywhere Brands. In response to a seller asking if an agent would cut their commission, the training material suggest agents say: “I cannot cut my commission because I would never offer you less than my best.”
In his testimony, Gorman told Ketchmark that Anywhere does not train its agents to set commissions at a certain level. Gorman also noted that he believed he’d seen documents with examples of 5 percent and 7 percent “as well as the vast majority being blank.”
Wednesday’s proceedings also included the testimony of Hollee Ellis, the first plaintiff to take the stand. Ellis is a Missouri homeowner and the daughter of a 30-year real estate industry veteran. During her life, Ellis has sold four homes and bought five, one of which was sold during the time period applicable to the suit. On the home sale at issue, Ellis said she paid 6% commission on the home sale.
According to Ketchmark, the buyer’s agent portion of the commission on Ellis home sale accounted for 20.55% of her net equity, meaning the commissions for both agents ate up roughly 40% of the equity she had accumulated on the property.
“It was a hard pill to swallow that we would walk away with so little,” Ellis said.
Ellis told the jury she wanted to join the suit in hopes of ending this “unfair practice.”
Ellis was cross-examined by Barack Echols for Keller Williams and Robert MacGill for HomeServices of America. NAR declined the opportunity to cross-examine Ellis.
Plaintiffs Rhonda Burnett and Jeremy Keel also testified in person on Wednesday.
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Property Chomp’s Take:
The third day of the Sitzer/Burnett class action buyer broker commission lawsuit brought forth significant revelations and testimonies. The focus of the day was on the training materials used by various brokerages and the statements made by industry executives. Rene Galicia, the former director of MLS engage at the National Association of Realtors (NAR), and Rodney Gansho, the head of engagement at NAR, appeared via video deposition. Both executives played key roles in establishing NAR’s Clear Cooperation Policy, which is central to the lawsuit.
Gansho’s testimony confirmed that NAR’s “Antitrust Compliance Guide” explicitly instructs members not to discuss fees with competitors and to avoid making statements such as, “I’d like to lower the commission, but no one will show your house.” This testimony shed light on NAR’s efforts to regulate the real estate industry and prevent anti-competitive practices.
Michelle Figgs, the former senior industry analyst at Keller Williams, also appeared for her video deposition. She was questioned about a 2003 study she had sent to Ruben Gonzalez, Keller Williams’s chief economist, which suggested collusion among real estate brokers as a reason for the apparent uniformity of commission rates. Figgs stated that she had “largely dismissed” the study since then. However, Michael Ketchmark, the lead attorney for the plaintiffs, presented Figgs’ notes from a 2015 Keller Williams meeting, in which she wrote that “Gary [Keller] believes strongly in collusion theory for why commissions are stable.” Figgs couldn’t recall if it was Keller himself or someone else who made the statement.
Meredith Maples, the senior director of KW University, also provided her deposition testimony. Ketchmark questioned Maples about Keller Williams’ antitrust policy, which prohibits commission discussions, and how it aligns with slides from KW events that mention 3% commissions for each side of a real estate transaction. Maples explained that the slides and scripts were simply models and hypothetical situations, not directives on what agents should charge.
Ketchmark challenged this explanation by quoting Keller Williams’ definition of a model, which suggested that agents should imitate it. He argued that Keller Williams teaches its agents that a “model will work for you if you follow it.” This exchange highlighted the potential contradiction between Keller Williams’ training materials and its antitrust policy.
The deposition of RE/MAX CEO Nick Bailey was also shown, although RE/MAX is no longer a defendant in the lawsuit. Bailey confirmed that RE/MAX requires its franchisees to belong to NAR and follow its MLS policies and code of ethics. He emphasized that the cooperative compensation rule is a NAR policy, not a RE/MAX policy. Bailey stated that if the cooperative compensation rule was not mandatory, it would not change the behavior of selling agents.
Ryan Gorman, the former president of Coldwell Banker, appeared via video deposition as well. Anywhere Real Estate, the parent company of Coldwell Banker, is no longer a defendant in the lawsuit. Gorman mentioned that Anywhere had proposed to NAR that the mandatory nature of the cooperative compensation rule should be rescinded. However, he believed the proposal did not make it out of committee.
The testimonies of Hollee Ellis, the first plaintiff to take the stand, Rhonda Burnett, and Jeremy Keel were also significant. Ellis shared her experience of paying a 6% commission on the sale of her home, with the buyer’s agent portion accounting for 20.55% of her net equity. This led to nearly 40% of her accumulated equity being consumed by commissions. Ellis expressed her desire to end this “unfair practice” through her involvement in the lawsuit.
Overall, the third day of the lawsuit provided valuable insights into the training materials used by brokerages and the perspectives of industry executives. The testimonies highlighted the complex dynamics surrounding buyer broker commission practices and the potential impact on homeowners.
