Bernice Ross

The proposed settlement in the Nosalek case against MLS PIN put the real estate industry on notice that the clear cooperation rule needs to go. However, the most explosive damage to the National Association of Realtors and the overall industry would result if it and defendants HomeServices of America and Keller Williams lose the appeal they’ve pledged to file in the so-called “bombshell” Sitzer lawsuit or its yet-to-go-to-trial cousin, Moehrl v. National Association of Realtors et al.

In September, I interviewed CEO and co-founder of Next Home, James Dwiggins, whose company did over $12 billion in sales in 2022. To be prepared for the worst-case scenario, Dwiggins put together a comprehensive risk assessment examining potential outcomes from the current litigation as well as what their impact might be.

A Quick Overview of the ‘Bombshells’

Both suits “bombshell” suits allege that NAR conspired with Anywhere, Home Services of America, Keller Williams, and RE/MAX to inflate commissions through the guidelines in NAR’s MLS Policy Statement 7.23 and the Code of Ethics that govern commission sharing on the MLS.

The most important point to note about this litigation is that these are anti-trust lawsuits. Consequently, treble damages can be applied. These can be billions of dollars more than the $1.79 billion the jury in Sitzergave to the plaintiffs. The end game is that buyers will pay their own commissions.

Based upon his conversations with attorneys and industry leaders before last week’s verdict, Dwiggins outlined the following list of other potential outcomes.

Cooperation in the MLS could become optional nationally. In fact, it could even be banned by the judge in the Sitzer case.

“What if the judge says that while the appeals are going on, there’s an injunction in place where cooperation is no longer allowed in the multiple listing services?” Dwiggins said.

This would be a huge blow to the industry, but most notably to first-time buyers who cannot afford to pay the commission and may decide to transact without representation.

NAR might also lobby Congress for legislative policy changes so buyers’ agent compensation can be financed in the buyer’s home loan.

It’s also quite possible that NAR’s Clear Cooperation Policy, created to deal with off-market listings but which has attracted the attention of federal antitrust prosecutors, is rescinded and off-market listings become normal, Dwiggins said.

Either way, he said, there’s a 100 percent guarantee that pressure on buy-side commissions will occur.

Other possible outcomes:

• Brokerages and Realtor associations will consolidate in the face of lower commissions, reducing costs and rely more on virtual operations.
• A 25 percent to 50 percent reduction in buyers’ agents.
• Flat fee and hourly service models gain traction.
• Buyer agents will be either paid by the buyer or paid by the seller through the purchase agreement.

How Can the Industry Prepare?

The most important step that the industry can take across the board is to make buyer-broker agreements mandatory in every transaction.

“It’s important for fiduciary [duty] to the buyer, it creates less looky-loos coming through a property for the seller [because] they know that there’s actually a genuine client working with an agent. There’s no downside from a consumer perspective,” Dwiggins said. “It also levels the playing field, so it’s not just one agent asking for a buyer broker agreement – it’s a requirement.”

Brokerages will need to cut down on overhead and expenses over the next 12 to 24 months, he said, while developing educational, marketing and training materials for agents that clearly explain the specific value of their buyer agent services and audit their existing materials to comply with what’s likely a new world.

They should also consider coming up with different compensation model options for their agents, Dwiggins said. They will need to adapt just as their agents will. Buy-side commission pressure will also occur.

“The end result in three or four years will be [that] it’ll be a better organized business,” he said. “It is going to end that way, one way or the other, and I think we will be a better industry, long-term, for it.”

Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.