Realtor groups conspired to inflate commissions, jury finds

Plaintiffs argued that sellers shouldn't have to pay the buyer's agent commission.

. Adobe Stock

By Jim Morrison -- Boston.com Correspondent

October 31, 2023

A jury in Kansas City, Mo., on Tuesday found the National Association of Realtors, Keller Williams, and HomeServices of America guilty of conspiring to conflate commissions, according to news reports.

The defendants were ordered to pay $1.78 billion in damages, HousingWire reported. The Real Deal said the judge needs to issue a final ruling before the verdict is finalized.

But its potential impact on how home sales are conducted in Massachusetts is unclear.

In the class-action suit Sitzer/Burnett v. National Association of Realtors, plaintiffs alleged they were unfairly made to compensate the buyer’s agent when they sold their homes.

RE/Max, which was also named in the suit, settled for $55 million, according to NAR. Anywhere Real Estate, which owns Century 21, Coldwell Banker, Sotheby’s International, and other large brokerages, reportedly settled for $83.5 million.

At issue was NAR’s “participation rule,” which the organization had interpreted to mean that listing agents had to offer compensation to buyer’s agents, The Real Deal reported on Oct. 9. Now the organization is contending that brokers can offer buyer’s agents zero compensation, the news site said.

Plaintiffs argue that the rule violates the Sherman Antitrust Act.

The Massachusetts Association of Realtors, the state chapter of NAR, did not respond to a request for an interview, but Anthony Lamacchia, broker/owner of Lamacchia Realty and a proud member of the organization, released a video Tuesday blasting the verdict. He has been a vocal critic of the suit from the outset, legal action he sees as a money grab over meaningless semantics.

In a live video feed on YouTube and Facebook, Lamacchia praised the NAR, Keller Williams and Berkshire Hathaway Home Services [an affiliate of HomeServices of America] for not settling. He said he strongly disagreed with the verdict, assured his audience the NAR would appeal, and advised viewers not to panic.

“These things happen, folks,” he said. “This is what I want you to hear more than anything else. As of today, as of tomorrow, next week, next month, two months from now, it is business as usual. Nothing changes. Nothing horrible has happened.”

He said he expects prospective homes ellers will be asking more questions about buyer’s agents will be compensated, so agents should make sure they explain it to them clearly, so there are no misunderstandings. He also expects more lawsuits may follow.

“It probably also means that Michael Ketchmark, this money-grabbing lawyer, is going to go out and sue many other companies,” Lamacchia said. “I already saw someone on Twitter put a list of the next level of companies that he’s going to sue. Well, if he keeps it up, he might get down to suing our company as well.”

“Somewhere along the line this is going to get worked out,” he said. “We as an industry will prevail.”

Lamacchia said Monday that the suit threatens a return to “the old days of buyers having no one on their side unless they can afford to pay for it.”

“These plaintiffs and their counsel couldn’t care less about home buyers and what this could do to them and their ability to obtain representation when buying a home,” Lamacchia said.

In Massachusetts, listing agents typically charge the seller a negotiable percentage of the home sale price at closing. The owner gets the proceeds of the sale minus the commission, which is dispersed to the brokerage. The brokerage then takes its cut and gives the listing and buyer’s agents their agreed-upon split.

Plaintiffs’ attorneys argue that if home buyers want representation, they should pay for it out of their own pocket.

Jack Gately, owner of Online Real Estate Academy and Jack Gately Real Estate, is not a NAR member and has covered the trial on his YouTube channel. He said mortgage lenders don’t allow buyers to roll broker commissions into their mortgages, but if they did, that would be an acceptable solution to him.

Mortgage regulations currently allow some closing costs to be rolled into a mortgage, raising buyer’s monthly payments only a few dollars a month.

In a September 2023 report, the Consumer Federation of America said “the easiest and most effective” resolution “is to modify federal mortgage regulations to allow buyers to finance buyer agent commissions.”

Correction: Due to an editing error, a previous version of this story gave an incorrect date for Anthony Lamacchia’s video. It was posted on Tuesday. Boston.com regrets the error.