Yet another national real estate brokerage firm has reached a settlement agreement in two of the major class action antitrust lawsuits facing the real estate industry.
According to court documents filed on Monday, RE/MAX and the home sellers suing the firm in both the Moehrl and Sitzer/Burnett cases, which both deal with buyer brokers’ commissions, have reached a preliminary settlement agreement, settling all claims in both suits.
RE/MAX’s settlement agreements, as well as the earlier settlement agreements reached by Anywhere Real Estate, must be approved by the U.S. District Court judges in Illinois (Moehrl) and Missouri (Sitzer/Burnett), who are overseeing the two lawsuits.
Details of the settlement agreements will not be disclosed until the plaintiffs file a motion to approve the settlement agreements.
However, a filing with the Securities and Exchange Commission reveals some details of the RE/MAX settlement.
“The Settlement resolves all claims in the Lawsuits and similar claims on a nationwide basis against RE/MAX … and releases RE/MAX and the Company, their subsidiaries and affiliates, and RE/MAX sub-franchisors, franchisees and their sales associates in the United States from the Claims,” the SEC filing reads.
“By the terms of the Settlement, RE/MAX agreed to pay a total settlement amount of $55.0 million … into a qualified settlement fund. In addition, RE/MAX agreed to make certain changes to its business practices.”
According to Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapiro LLP, which represents the plaintiffs in the Moehrl suit, the Anywhere “settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged,” as well as an agreement for the firm to pay a total of $83.5 million for both lawsuits.
In addition, RealTrends Consulting co-founder Steve Murray notes that the settlement agreements might prevent firms that operate under a franchise model from requiring that franchises belong to a Realtor association at any level, that franchises abide by the Realtor Code of Ethics, and that franchise abide by Realtor-affiliated MLS guidelines.
In the SEC filing, RE/MAX stated that the settlement was not an admission of liability.
“The Settlement and any actions taken to carry out the Settlement are not an admission or concession of liability, or of the validity of any claim, defense, or point of fact or law on the part of any party,” the filing stated. “RE/MAX continues to deny the material allegations of the complaints in the Lawsuits. RE/MAX entered into the Settlement after considering the risks and costs of continuing the litigation.”
In an emailed statement, a RE/MAX spokeperson wrote: “RE/MAX, LLC has entered into a nationwide class settlement with plaintiffs in the Burnett (formerly Sitzer) and Moehrl cases. If approved by the court, the settlement paves the way for a clear path forward for the RE/MAX brand, its franchisees and its agents, removing the uncertainty of ongoing litigation related to these cases. While RE/MAX, LLC steadfastly refutes the allegations presented in the lawsuits, this forward-looking decision was made in the best interest of RE/MAX, LLC, its agents and its franchisees, after carefully considering the significant risks and costs associated with continued litigation. Co-Founders Dave and Gail Liniger built the RE/MAX brand with Broker/Owners, agents and consumers at the center of the business and, if approved, the settlement specifically includes releases of liability for RE/MAX franchisees and agents.”
After Anywhere and RE/MAX’s settlements, the only defendants left in the two lawsuits are the National Association of Realtors, HomeServices of America, and Keller Williams.
The two lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.
Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.
The Sitzer/Burnett trial is slated to head to trial on October 16, 2023. While a trial date for the Moehrl suit has yet to be set, it is expected start in early 2024.
“Settlement is always an option for any party in litigation. NAR’s commitment to defend ourselves in court remains unchanged and we are confident we will prevail in proving the lawfulness of the rules under attack. Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Mantill Williams, NAR’s vice president of communication, wrote in an email.
He continued: “The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and thus creates a larger pool of buyers for sellers. For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people. In fact, the U.S. model of independent, local broker marketplaces is widely considered the best value and most efficient model in the world, with no hidden or extra costs and with more complete, verified information compared to other countries. We look forward to arguing our case in court.”
Keller Williams and HomeServices declined to comment and lawyers for the plaintiffs did not return a request for comment.
Sellers/Owners of real estate have been paying far too much to sell their properties for far too long.
If someone walked into my house and told me the it was going to cost me $32,500 to sell my $600,000 home, I’d politely escort them to the front door.
A professional Realtor is worth their weight in GOLD. The knowledge, experience, negotiation, complex navigation and customer service skills go a long way; in these markets where so much is up in the air until the sale actually closes. As with all things, commissions are negotiable – you get what you pay for and sellers are free to sell their home on their own, with no realtor. Buyers are also free to purchase without representation. It will be interesting how all of this plays out as these fee’s cannot currently be financed and most borrowers don’t have extra money. Having a professional guide you in the biggest sale/purchase of most peoples’ lives is an important investment.