Burnett Trial Updates: Week of October 23rd

NAR began week two of its trial in Kansas City, Mo., to present facts, laws about pro-consumer, pro-competition rules.

Here is a recap of what happened in court this week:

Monday, October 23, 2023

On Monday, plaintiffs rested their case after presenting testimony from four more witnesses. In the afternoon, the defense began its case and presented NAR CEO Bob Goldberg. Goldberg shared the many functions and benefits of a trade association, and specifically how NAR works to protect, preserve, and advance homeownership, as well as to increase professionalism in the industry, and all for the benefit of consumers. NAR also presented Sharon Millett, NAR Past President and Chairperson of the 1991-92 NAR Presidential Advisory Group on Agency (PAG).

Millett explained:

1. The PAG found that buyers needed and wanted a loyal advocate to represent them in the transaction, as the market shifted from subagency to buyer agency. 
2. The PAG’s charge and goal was to accommodate and encourage different forms of representation, placing a consumer’s freedom of choice as central to the PAG’s work.
3. The PAG didn’t focus on compensation, as the practice of offering cooperative compensation already existed in the marketplace.
4. The PAG’s work allowed the marketplace to evolve and to provide consumers greater choice, with today’s norm giving buyers the ability to work with a loyal buyer agent who puts their needs above anyone else’s.
5. Buyer brokers expend a significant amount of time and effort on behalf of their buyer clients and advise buyers on all aspects of the transaction, including helping buyers sort through the overwhelming amount of information available to consumers on the internet.
6. Listing brokers would still offer compensation to buyer brokers even if the NAR cooperative compensation rule did not exist because:
7. It is the best way to expose a seller’s property to the most buyers. 
   b.If the seller’s broker isn’t offering enough to cover a buyer broker’s fees, buyers may pass over a property because cash-strapped buyers can’t afford to cover the buyer broker’s fees on top of the significant amount of money it takes to purchase a home.
   c.  Sellers get better pricing offers and allows sellers to sell their home faster, as two brokers work cooperatively to achieve a successful transaction for both the seller and the buyer’s benefit.

Tuesday, October 24^th

The defense continued their case Tuesday as NAR CEO Bob Goldberg completed his testimony and NAR Director of Engagement Rodney Gansho took the stand. Gansho explained how Multiple Listing Services (MLSs) and associated rules work and noted:

• Local MLS broker marketplaces promote transparency, equity, and efficiency for the benefit of consumers and enable real estate professionals to better serve their clients.
• Local MLS broker marketplaces determine their rules locally and decide whether to adopt provisions of NAR’s MLS Handbook, including those identified as “mandatory.”
  • Should a local MLS choose not to adopt mandatory provisions, it would need to purchase its own error and omissions insurance.
  • Local MLSs are responsible for enforcement of the rules it adopts.
  • Nothing in NAR’s MLS handbook requires sellers to do anything.
• “Blanket unilateral offers of compensation” means the listing broker makes a one-way, initial offer (unilateral) that is the same (blanket) for any MLS participant who brings a ready, willing buyer. That offer can then be negotiated – and often is – at any point in the transaction.
• The listing broker has fiduciary duties to the seller and the buyer broker has fiduciary duties to the buyer, and no one makes any money unless there is a successful transaction and the property sells.
  • Sellers determine which real estate professional to work with, and whether to even work with one.
  • At the outset of the transaction, sellers determine how much they will pay for a real estate professional’s services, which is then memorialized in the listing agreement between the seller and the real estate professional.
  • The NAR Code of Ethics requires REALTORS® to disclose to sellers any amount of compensation that will be offered to a buyer broker who brings a ready, willing buyer to successfully purchase the seller’s property.
  • The NAR Code of Ethics requires buyer brokers to inform buyers of all properties that meet their criteria, regardless of the offer of compensation being made to the buyer broker. Buyer brokers have options when they are not getting the cost of their services covered by the seller broker, including that the buyer can pay directly for the buyer broker’s services or the buyer can ask the seller to cover that cost.
• The NAR cooperative compensation rule benefits sellers by exposing their home to every brokerage and real estate agent with ready, willing buyers to successfully purchase the buyer’s home. Buyers benefit because there is one centralized marketplace to go to, and they don’t have to pay out of pocket expenses, which means more buyers can afford a home and have more money to purchase a home, and sellers have a larger pool of buyers to purchase their home.

Wednesday, October 25^th

On Wednesday, four witnesses took the stand for the corporate defendants who will continue presenting their case throughout the week. Defense expert witnesses are anticipated to take the stand tomorrow and closing arguments could be as early as Monday. HomeServices of America, Inc. filed a motion for mistrial, which the court denied.

Thursday, October 26

Thursday, four additional witnesses took the stand for the corporate defendants.

Video testimony of Scott Trupiano, a withdrawn plaintiff, detailed his experiences both purchasing and selling homes. Trupiano recounted how he was very satisfied with his real estate agent and worked with her as both a seller agent and buyer agent for three separate transactions. Trupiano agreed to the terms of the listing agreement each time and rated his agent a 9 out of 10 on each transaction, sharing how he valued the services she provided.

David Stevens, who previously served as Assistant Secretary of Housing and Federal Housing Commissioner for the U.S. Department of Housing and Urban Development (HUD) and oversaw FHA programs for Single and Multi-Family Housing, discussed why the current compensation model is not only helpful for both home sellers and buyers, but particularly first-time buyers:

• Most first-time home buyers are cash-constrained and requiring them to also pay for the buyer agent commission could force them to put down less for a down payment or forego professional services needed for one of the biggest purchases they’ll make in their lifetime.
• Home sellers benefit from the offer of compensation because it ensures the seller will receive the most qualified buyers and the best offer. 
• Buyer brokers’ expertise is needed now more than ever because it is hard to buy a home.
• The compensation the listing broker pays to the buyer broker is always negotiable.

Dr. Lawrence Wu, President of National Economic Research Associates, also testified that:

• There is no evidence of conspiracy because offers of compensation are decisions independently made between a home seller and a listing broker, and always negotiable.
• The offer of compensation benefits sellers by ensuring they get more buyers to see their house and more competitive bids, and benefits buyers by ensuring they have more choices and access to professional representation. 
• No one gets paid until a property sale closes, which fosters competition and creates a marketplace where brokers are further motivated to always serve their clients’ best interests.
• Even if the cooperative compensation rule was not in place, evidence shows that the practice of cooperative compensation would still exist because it is good for sellers and buyers.

Keller Williams plans to present their witnesses on Friday, with closing arguments by all parties likely to begin on Monday, followed by jury deliberations.

Stay tuned to Ohio REALTORS Buzz for weekly updates as the trial unfolds. Read more about NAR’s position, what’s at stake, potential trial outcomes and what you can do to help tell the REALTOR story by clicking here.

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