Welcome back to another edition of the Real Estate Weekend Digest, where we wrap up the week on all things trending in real estate.
This week, we’re doing something a little different. Our attorney, Jim Brown, will provide a summary and share his opinion on the most impactful lawsuit in real estate history. This edition is a bit longer than our previous digests. However, please bear with us because you’re going to discover information that you won’t find anywhere else. Jim is particularly passionate about this topic.
🏠 Overview: Breaking Down Sitzer Burnett Lawsuit
Plaintiffs: 500,000 Mousiouri home sellers and buyers.
Defendants: several brokerages including ReMax, Keller Williams, Anywhere, and NAR.
Important note: The plaintiff’s attorney is a highly sophisticated class action attorney, stands to make hundreds of millions or billions, the homeowners stand to make a couple of grand each, and this is the 1st of 3 similar cases going to trial shortly, each bigger in value than the prior.
At the core, plaintiff’s claim:
Real estate brokers and NAR conspired to fix and inflate real estate agent commissions, driving costs up to consumers.
The principal example was the buyer’s agent cooperation/compensation policy.
Not having a cooperation/compensation policy makes buying a home more difficult because it puts another cost and negotiation on potentially underfinanced and unsophisticated buyers.
If sellers don’t pay buyers agents many buyers will go without guidance on the most complicated decision of their lives
There is no buyer goal served by disallowing sellers to pay buyer’s agents.
Commissions are already negotiable, agents are already optional, and despite this, buyers choose to work with agents.
The case was expected to take 3 weeks or so to try, and a week or so for jurors to decide.
On October 31, 2023, after about 1.5 hours of deliberation, jurors asked to see the damages calculation, and in 2:28 found in favor of the homeowners.
The verdict was $1.85 Billion, and the judgment will likely be 3 times that or $5.4 Billion. Although no laws were changed, brokerages will now very likely:
Advise agents to explain commissions are negotiable and realtors are optional Selling agents tell sellers buyer’s agents can be paid as little as $0
Make buyer’s representation agreements with buyers pay commissions, standard practice
Winners: Plaintiff’s attorney stands to pocket 20% to 40% of $5 plus Bill in SitzerThe plaintiff’s attorney will pocket more in 2nd and 3rd suit.Real estate portals like Zillow and Realtor.com
Losers: Home buyers; first-time, FHA, VA, low down payment, and those not sophisticated.
Status Quo: Home sellers; how buyer’s agents get paid will become another negotiation point in an already complicated transaction, with no overall lowering of commissions.
💼 Attorney Jim Brown’s Opinion
So what’s Jim’s opinion? After 40 years in real estate transactions, dating back to when agents had “floor time”, the MLS was a 5” thick book snail mailed to brokers once a month, and price changes were faxed inserts for “the book”. With a steeped background in commercial and residential real estate transactions, working as a general contractor at 22, to veteran attorney assisting thousands of Realtors, buyers, and sellers. Although the Sitzer decision made no changes to actual laws, it will dramatically change the industry he loves… and not for the betterment of buyers or sellers. But it sure did line the pockets of the plaintiff’s attorneys and pave the way for real estate portals like Zillow and Realtor.com.
💡Did You Know: Leading up to the trial the Wall Street Journal published heavily slanted articles on the pending trial, portraying agents and the industry in a negative light, and the WSJ and Realtor.com have common ownership interests.
Jim believes that while the plaintiffs fell short in presenting the facts and law, they excelled in finding testimony that tugged at the heartstrings of jurors. He emphasizes, “In the courtroom, it’s often not just about facts and law, but the emotional impact of the story being told. This can have a profound influence on the final decision.”. In Sitzer there was compelling testimony from ordinary people plaintiff’s struggling to buy homes. The jury was composed of people who wanted to or had bought homes. Sitzer is not like a complicated manufacturing defects case with lots of technical nuances and cutting-edge law. Struggling to buy a home is a story everyone can relate to. And more importantly, everyone would like to blame someone for the high price of housing.
The almost insurmountable obstacle agents had to overcome is the misconception by the none-real estate agent world, that agents make too much money and don’t work hard. Unfortunately, this misconception is fueled by popular media like “Million Dollar Listing”, ‘Selling Sunset’ and ‘Real Housewives,’ where agents are portrayed as overpaid, underworked, free-time-loving, elites.”
Jim says “Real estate sales is the most complicated service on the planet. There are federal laws, state laws, local laws, ordinances, community rules, condo rules, lender law, lender policies and guidelines, zoning, land use, MLS rules, brokerage rules, portals like Zillow constantly bilking the agent, and the toughest one of all, personalities.”. Jim’s observation highlights the challenge the defense faces when dealing with jurors who may have already made up their minds in the court of popular opinion. How can you change years of media conditioning on the jurors in a week of trial? It’s a fascinating look into how the media can influence legal decisions and a billion-dollar industry. Not for the betterment of the players, but certainly for the betterment of a few plaintiff’s lawyers. In hindsight, this was an easy case, and the plaintiff’s lawyers would have been fools to have not taken the swing.
📢 Exclusive Opportunity for Agents with Questions
If you’re an agent with concerns or questions related to the Sitzer or any other real estate legal matter, we have good news. New Path Title and James Brown Law, are 100% Realtor-focused. Whether it’s Sitzer, a Title Advance, or agents texting Jim 24/7 for legal support; we are all about the agent.
Stay tuned as we continue to follow the Sitzer Burnett lawsuit closely and provide you with the latest updates. In the meantime, if you’re a real estate enthusiast or simply curious about the intersection of law and real estate, our Weekend Digest is your go-to source for information.
Thank you for being a part of the New Path Title community. We look forward to keeping you informed and engaged with our future newsletters. If you have any questions or topics you’d like us to cover, please don’t hesitate to reach out.
Wishing you an informative and inspiring weekend ahead!
Shae Bonifacio, Marketing Manager at New Path Title & James Brown Law