The stunning verdict in the landmark Burnett class-action case has sent shockwaves through the residential real estate industry. The follow-up news that the attorneys who represented the plaintiffs filed a new, nationwide lawsuit against the National Association of REALTORS® (NAR) and other major corporate brokerages, seeking similar damages for recent homesellers, was equally ominous.
But what of the rank and file? What about the REALTORS®, specifically buyer agents, who may see their careers take a turn for the worse? What about the team leaders who have to explain what it all means to their loyal team members?
It’s a bitter pill, no doubt. But just as no one knows how things will shake out for companies, and the same can be said for boots-on-the-ground agents, there will be money to be made, agree REALTORS® we queried.
Andretta Robinson, team leader for Chicago’s Titan Group powered by RE/MAX 10, was initially nonplussed by the verdict, but explained that it’s vital to keep calm.
“NAR will appeal to the higher courts and negotiate the settlement down,” she believes. “This is a hometown jury, and (the result) will now be decided by actual judges who are legal professionals. It will be appealed and it will be years before there is a final decision, but it will force agencies to change the way they currently present to sellers and buyers.
“However, the damage is done as REALTORS® are guilty in the court of public opinion. The perception will be the public’s reality. Adjust your practice now if you have not done so already. No real estate agent or brokerage is a winner in this.”
Robinson was asked what she thinks the future will look like post-trial.
“This verdict does not require a change in our rules, but if class action attorneys had it their way, buyer representation would be very much at risk because many first-time homebuyers, among others, couldn’t afford to pay for representation out of pocket,” she said. “It’s important that members take every opportunity to express that they are (real estate) experts who guide consumers through the financial, legal and community complexities of buying or selling a home.”
Pam Rosser Thistle, with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia, also thought an appeal was a certainty.
“I am surprised by the decision, but there is breathing room while the case is appealed,” she said. “I am a listing agent and a buyer agent. In my market, over half of my buyers are first-time buyers who have saved for their down payment and closing costs with not much room to spare.
“If they have to pay for the services of an agent to guide them through what is likely the largest, most important purchase of their lives, many will not have the resources to follow through. And what a shame for upcoming generations…missing this critical step in wealth building. This would be a landmark event that would further widen the wealth gap. The American Dream of homeownership would not be as accessible to as many. The (verdict) consequences are not being realized. It actually works against consumers.”
Anam Hargey, a broker and team leader with @properties in Chicago, was realistic about the outcome and what it will bring.
“I wasn’t surprised, since there’s been so much commentary in the real estate world that things will be changing soon,” she said. “Change is inevitable and part of life, and we have to roll with it. If we have to switch to buyers paying commission, then we’ll find more people going straight to the list agent. I think we need to figure out a system where clients are all well represented and REALTORS® are compensated fairly for their hard work.”
Broker Associate Jeffrey Decatur, with RE/MAX Capital in Latham, New York, understood both sides, and explains that the real estate industry will evolve like all other businesses.
“My reaction to the verdict is mixed, in the sense that I have been hearing varying stories about appeals, and settlements contingent upon other decisions,” he said. “So I am reserving judgment on the verdict until I have all the facts and understand them. Many people only read the headlines. I have many questions.
“I see room for growth and understanding on both sides. I feel as though any outcome that enhances the client experience and increases the agent’s knowledge or skill will ultimately be a benefit for all, especially the consumer.”
Decatur cited a lack of understanding in the general public as to how the residential real estate business works as being a major problem for the trial defendants.
“And also the lack of how representing a buyer came into being, and how the buyer representative’s commission was worked into a transaction. One of the briefs I read on the lawsuit stated that sellers/buyers were being forced to pay a fee and that they would be better off without representation and would save money. In all my years of selling real estate, I have never seen an unrepresented buyer or seller do better themselves than if they had been represented by professionals.
“I would never advise anyone in any type of situation to opt out of representation. Just like doing your taxes yourself, it’s fairly certain you are going to make out better with a tax preparer, or even better with an accountant, or a CPA. You can do it, but there are full-time professionals that know the ins and outs and the little nuances a member of the public may not. I know my accountant has helped me tremendously.”
Decatur predicts a settlement will be the likely eventual outcome, although with copycat lawsuits on the horizon, it’s anyone’s guess.
“I figured there would be some kind of settlement or finding in the favor of the consumer,” he expresses. “I am also expecting a lot of appeals. All involved determine potential costs, pros and cons, and settle. I know a number of companies, people, small businesses, landlords….that have been sued, and their attorney advises them to settle. They could very well be in the right, but settling is the most efficient and cost-effective option. I hope that no matter how all of this shakes out, that we as real estate professionals grow from this and elevate the experience for the public.
“Ultimately, change is in the air, and that change is going to be good for the consumer and industry. I think there will be a lot more communication and understanding on behalf of the consumer.”
Kristine Milkovich, with John L. Scott Real Estate, felt the verdict was cause for something that brokers will have to be ready for.
“These shifts and changes in our industry force us to examine our best practices to become even more vigilant about leading the market conversations we are experts on,” she said. “I do believe having a set base (to the listing agreement) to work off gives parameters to all those choosing to conduct business in real estate. But there is no denying that buyers will feel the pinch when many are already trying to pull together the money for a down payment and closing costs in an escalating home-value market.”