Judge denies effort to squash claims in agent commission case

A federal judge last week denied motions by real estate players to grant judgment in their favor in the ongoing, closely watched trial over real estate agent commissions.

The trial involving HomeServices of America, Keller Williams and the National Association of Realtors completed its 10th day Thursday in a Kansas City courtroom. Home sellers are seeking as much as $4 billion in damages from the firms over broker commissions they paid, which plaintiffs suggest violate antitrust law.

NAR rules require seller brokers to offer compensation to a prospective buyer's agent to get a home listed on a multiple listing service. Although NAR clarified its compensation rules ahead of trial, plaintiffs are challenging numerous mechanisms in the rules. An attorney for plaintiffs has called the Sitzer/Burnett lawsuit a "refund case" for the class of hundreds of thousands of plaintiffs who sold a home under the old rules in Missouri.

U.S. District Judge Stephen Bough quickly rejected the three companies' individual motions for judgment, which they filed midweek. Among other arguments, such as a supposed lack of standing by plaintiffs, counsel for NAR argued plaintiffs failed to present evidence of harm attributable to the organization's commission rules. 

"Since Plaintiffs do not have any evidence of what they paid with the rule and what they allegedly would have paid without the rule, they cannot show harm," wrote attorneys for NAR in a Wednesday filing, citing witnesses' testimony. "Instead, Plaintiffs simply assume that the amount paid by listing brokers to cooperating brokers is damages. This is impermissible"

Bough, in brief orders denying each motion, wrote the court "finds the plaintiffs have presented sufficient evidence that a reasonable jury could [rule] for plaintiffs."

The trial opened Oct. 16, and a verdict in the case is expected between Nov. 6 to 10. The companies are also facing a similar class action trial in Minnesota next year. Anywhere Real Estate and RE/MAX, also defendants in each case, already agreed to eight-figure settlements and some commission rule changes, and are not participating in either trial.

While there are billions of dollars in damages at stake in the trial, the Department of Justice could deliver a more serious blow to the compensation rules, as it's reportedly mulling a lawsuit against NAR after ditching a settlement with it in 2021.

Among witnesses Thursday in Sitzer/Burnett was David Stevens, the former Federal Housing Administration and Mortgage Bankers Association leader and CEO of Mountain Lake Consulting. Stevens, during his approximately hourlong testimony, said he was concerned for cash-constrained and first-time homebuyers if they were to be required to pay their buyer agents' commissions, according to courtroom reporting by Inman. 

Stevens' testimony echoed the concerns of other mortgage experts who predict low-to-moderate income buyers would be most impacted by altered compensation rules. 

Rule changes cutting into buyer agent commissions could also prompt them to pursue dual-employment opportunities, said Matt VanFossen, CEO of Absolute Home Mortgage and vice president of the Community Home Lenders of America. The industry veteran suggested that split compensation, in which a real estate agent with a mortgage loan originator license works with a lending team in a bifurcated process, would be more probable.

"It could be a likely scenario that loan officers should be aware of," VanFossen said. 

Dual compensation still poses many legal risks, such as running afoul of Real Estate Settlement Procedures Act section 8. The CHLA in May called on the Consumer Financial Protection Bureau to address consumer protections regarding dual compensation.