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KANSAS CITY, Mo. — The plaintiffs in a class-action antitrust suit challenging the real estate industry’s commission structure took the stand Wednesday and Thursday to argue that the practice of sellers paying buyer agents is “unfair.”
READ LIVE UPDATES FROM THE SITZER | BURNETT TRIAL
This is the first time the real estate industry has gotten to hear from the Missourians who are representing a class of some 500,000 homesellers who are alleging $1.78 billion in damages.
The Sitzer | Burnett Homeseller Plaintiffs
So far, four out of the five named homeseller plaintiffs in the case have testified: Rhonda Burnett, Jerod Breit, Jeremy Keel, and Hollee Ellis. The fifth plaintiff, Frances Harvey, may be called either Friday or Monday as the plaintiffs’ attorneys wrap up their case.
The defendants – the National Association of Realtors, Keller Williams, HomeServices of America and two of its subsidiaries BHH Affiliates and HSF Affiliates – will begin their defense next week. The plaintiffs allege the companies, along with franchisors Anywhere and RE/MAX who settled, engaged in a conspiracy to inflate real estate commissions.
They are specifically challenging a NAR policy known as the Participation Rule, or the cooperative compensation rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.
All of the plaintiffs who testified appeared in person in front of the nine-person jury. (One juror was subsequently dismissed Thursday afternoon.) All said that they were satisfied with the services of the seller’s agent they hired, who tended to be a family friend or acquaintance.
When questioning them, plaintiffs’ lead counsel, Michael Ketchmark of Ketchmark and McCreight, first asked them questions about their families and occupations before diving into the details of their home sales.
Hollee Ellis
Ellis, a former high school English teacher who has sold four homes and bought five in her lifetime, is the church-going daughter of a retired Realtor, wife of a forklift driver, mother to a blended family of five adult children, and grandmother to four.
She testified Wednesday afternoon that she paid a 6 percent total commission on the home sale at issue in this case, ending up with net equity of $18,295 – before paying her Coldwell Banker agent and the buyer’s Keller Williams agent. The buyer agent portion added up to 20.55 percent of her net equity, Ketchmark noted, so commissions for both agents took up 40 percent.
“It was a hard pill to swallow that we would walk away with so little,” Ellis said.
Ellis sold her home to take a new job in South Carolina. Ketchmark asked whether she considered herself a “cash-strapped buyer” at the time – a group of people NAR has said the cooperative compensation rule helps by alleviating them of the burden of paying for their own agents.
She said she did and that that 20 percent in equity that went to the buyer agent would have helped.
“I’m not against buyers’ agents,” she said – she just doesn’t believe it’s her responsibility to pay them.
“The buyer who chose them and who they’re working for should pay them.”
Before learning about this suit, she thought that sharing commissions with the buyer agent was “standard practice.” She said she “never knew” it was an option to negotiate the commission. If she had, she said, “I would have gone a different direction.”
Ellis said she didn’t join the suit for the potential payout. She’s not getting any more than any other class member, whatever that might be.
“I just didn’t think it was a fair practice,” she said, adding that she has five children who are starting their lives and buying homes and said she hoped to end this “unfair practice” for them and other consumers. “If I can help my kids out, I’m gonna do it.”
Ellis said her mom was a Realtor for nearly 30 years.
“I feel like I’m doing it for her as well,” Ellis said. “I know she worked very, very hard for some of her buyers and probably could have negotiated a different rate.”
Barack S. Echols cross-examined Ellis for Keller Williams, followed by Robert MacGill for HomeServices of America. NAR declined to cross-examine Ellis.
As the defendants’ attorneys did with the other plaintiffs, they established that Ellis had signed a contract to pay a particular commission, knew that it would be binding, and knew that that commission would be shared with the buyer’s agent.
Ellis testified that the 6 percent commission had been “already filled in for me” when she signed the contract with her agent.
She agreed with Echols that it was good for agents to work together to reach a common goal, “but the seller’s agent works for me, the buyer’s agent works for the buyer.”
MacGill referenced a home Ellis had sold in August 2021 in which she offered a 6 percent commission and noted the sale was two years after the lawsuit was filed. Ketchmark objected, saying that MacGill knew that Ellis joined the suit “well after” it was filed.
On redirect, Ketchmark confirmed with Ellis that she had not joined the suit until May 2022.
Rhonda Burnett
Rhonda Burnett
Also on Wednesday afternoon, the plaintiff for whom the case is named – Rhonda Burnett – took the stand. Burnett is a former school psychologist and public schools advocate with three adult children.
She hired a listing agent from HomeServices subsidiary Reece Nichols for her home sale. The contract with the agent asked her to “circle” which commission rate she wanted to pay and offered 7 percent, 8 percent, 9 percent, 10 percent, or a blank. The 6 percent commission was already written in the blank, Burnett said.
“It was lower than the rest,” she said, but she knew she wasn’t getting a deal. She said her agent told her “nothing was negotiable.”
She listed the home for $275,000, but it sold for $250,000 and she paid a total of $15,298 in commissions.
“I paid the buyer’s broker to negotiate against me and my husband, which resulted in a lower sales price,” Burnett said.
“She did a good job for him [the buyer], but I had to pay her commission.”
MacGill cross-examined her for the HomeServices defendants. He asked her if she had considered selling for-sale-by-owner (FSBO). She said she initially had, but ultimately went with an agent.
“You have to be on MLS to sell a house,” she said.
Burnett said she considered what MacGill called a “discount broker,” Your Future Address, who charged a 1 percent commission, but still required sellers to pay a 3 percent commission to a buyer’s agent.
“We had no problem paying for an agent to sell our house,” Burnett said. But were “not happy” about having to pay the buyer’s agent.
MacGill then asked her if Your Future Address had told her that her list price should be $250,000 rather than $275,000 and she confirmed that the firm had.
On redirect, Ketchmark confirmed that Burnett had no problem paying her listing agent a 3 percent commission and that Your Future Address had said she still had to pay a 3 percent buyer agent commission because the firm uses the MLS.
Jeremy Keel
Jeremy Keel
Keel took the stand next. An attorney, Keel specializes in elder law. Ketchmark confirmed he did not work in antitrust law. The home sale at issue in this case went for $205,000 and he paid a 6 percent commission, 3 percent to his Keller Williams agent and 3 percent to the buyer’s Reece Nichols agent.
Asked why he joined the suit as a class rep, he said that after going through the selling process, he thought it was “unfair” and wanted it to change.
Echols cross-examined Keel, noting that Keel did not pay commissions when he was himself a buyer. He pointed out that in one purchase, Keel only paid a 5 percent commission and asked him if he had negotiated that.
“No, I didn’t know you could negotiate commission,” he said. That was in part because the commission figures in the contracts he signed were already filled in, he added.
Echols then showed arbitration clauses and class action and jury trial waiver clauses in a purchase contract that Keel had crossed out before signing, which Keel confirmed.
NAR and HomeServices declined to cross-examine him. On redirect, Ketchmark noted that Keel had crossed out those clauses after the suit was filed.
Afterward, Ketchmark criticized HomeServices’ use of such waivers as an attempt to keep cases like this one from juries.
“I’m glad it didn’t work in this case,” he told Inman.
“I don’t know why these corporations feel they need to hide from juries, but they’re not going to be able to hide from this one.”
Jerod Breit
Jerod Breit
On Thursday, Breit took the stand. Breit, the son of a factory worker, was a police officer for nearly a decade and is now executive director for Mothers Against Drunk Driving (MADD).
He said when he bought his first home he was “cash-strapped” but was able to get a down payment grant from a state first-time homebuyer program.
So the state of Missouri didn’t leave it up to the real estate industry to help buyers? Ketchmark asked.
One of the defendants’ attorneys spoke up. “Objection. Leading.” Judge Stephen R. Bough sustained the objection.
When asked why he joined the lawsuit as a class rep, Breit said, “After my first experience selling a home, I was exposed for the first time to how it works and I didn’t think necessarily that it was fair.” So when a friend told him about the suit, he offered to join.
He said he was satisfied with his RE/MAX agent, but after joining the lawsuit, he learned something that came as a nasty surprise: In his contract with RE/MAX, he’d agreed to pay a total 5.5 percent commission to sell his home with 2.7 percent going to the buyer agent. But when looking at the sale’s settlement statement and his attorneys did the math, it turned out that he had actually been charged a 6% commission. When Ketchmark asked how learning that made him feel, Breit said, “It made me feel stupid.”
“It was preloaded on the contract and I thought I was signing what I needed to sign,” Breit added.
When Ketchmark asked again why Breit joined the suit, Breit said, “I still don’t see the fairness in paying for somebody you’re never going to meet and never works for you in any way. I don’t think it’s fair.”
Robert MacGill from HomeServices of America cross-examined Breit and got him to acknowledge, by going through various contracts that Breit signed, that Breit knew that he would be paying a commission and that his listing broker would be paying the buyer agent.
“Sure, it’s still my money,” Breit said.
At one point, MacGill said, “A deal’s a deal.”
NAR and KW declined to cross-examine Breit.
When given the opportunity to redirect, Ketchmark asked Breit, “Do you hate buyer agents?”
“No,” Breit said. Ketchmark then asked if Breit’s position was that he shouldn’t have to pay a buyer agent as the seller and Breit said yes. Ketchmark then homed in on MacGill’s statement that “a deal’s a deal.”
He said there were two sides to that handshake: Breit and RE/MAX, and that those contracts spell out corporations’ obligations and duties as well. In their contract with Breit, RE/MAX agreed to follow all applicable laws.
Ketchmark asked Breit if he thought RE/MAX was going to follow the law and Breit said yes. He asked if Breit thought that RE/MAX was going to join together in a conspiracy “designed to pick your pocket” and Breit said no.
“Are you asking they keep up their side of the deal by complying with federal antitrust laws?” Ketchmark asked.
“Yes,” Breit said.