Editor’s Note: Don’t miss James Dwiggins along with Jessica Edgerton, Chief Legal Officer for LeadingRE and Anthony Lamacchia, CEO of Lamacchia Companies in an exclusive panel for brokers moderated by Darryl Davis, Founder of Darryl Davis Seminars and John Featherston, Founder, CEO and Publisher of RISMedia on Wednesday, Feb. 7 at 3 pm ET. The panel will take a deep dive on the antitrust lawsuits facing the residential real estate industry and offer clarity and direction in navigating what changes may come to the real estate commission structure. Register for this can’t-miss event here.
NextHome Co-Founder and CEO James Dwiggins thought the residential real estate industry’s current buyer agent commission structure would lose in court if challenged years before the Burnett trial even began. He was proved correct last October, when the National Association of REALTORS® (NAR) and other defendants were found to have conspired to inflate commissions in violation of federal law, with an award of $1.78 billion to the plaintiffs. Dwiggins now says it’s time to settle, however that can be worked out. In an interview with RISMedia on Jan. 12, he explained how he thinks the industry should move forward.
Is this the most worrisome time starting a new year that you’ve experienced?
JD: I’d say yes, for sure. I mean, there’s a lot of unknowns, right? We don’t know how the lawsuits are going to turn out. There’s really bad press about the industry. NAR obviously has some massive turmoil going on and can’t get underneath it. It’s trying to, but it keeps messing up, and it’s a very pivotal time in our industry. Lots of players want to do different things, and our industry doesn’t have a voice.
When the executives at NextHome franchises ask about strategies to keep agents amid the turmoil, what kinds of things do you say?
JD: First of all, we lead from the top. So every single issue that’s going on in the industry we talk about publicly and very transparently with our people. We treat them like adults, telling them and updating them on a regular basis about the lawsuits. What to do if they were to get named. We’re not hiding behind the fear of getting sued. We kind of assume that’s going to happen like everybody else. I just think there’s a significant lack of communication going on in our industry. The communication that is coming out from the top is borderline not truthful. So we just overcommunicate in times like this, and overprepare.
Have you undertaken specific steps regarding how to handle changes that may result from the Burnett lawsuit?
JD: Yes. Last September I took people from 70% of my offices to Utah for a retreat, and we retrained everyone for the way the industry will likely look at the end of 2024, changes in the MLS structure and changes in compensation in the MLS. They went back and retrained 6,000 agents.
What’s your take on how agents will do going forward if major changes must be made to commission structures?
JD: Agents are going to have a future, but it’s going to require them to get better at their job. They need to learn how to negotiate better. Crappy agents are going to go away. Good agents are going to excel. We have to take the bull by the horns, because you can’t fear it. You have to look at what the potential cards are going to be, and you have to play them, and that’s what we’re doing. I think our industry is going to come out the other side. It certainly will not look the same as it did before October of last year, but there’s always room for good players, and I think consumers want an agent. It’s proven by every study that I’ve seen. The question is in what capacity, and how are they compensated? I think those are some big questions we’re going to have to figure out.
Do you feel that the Burnett trial was fair?
JD: That’s an interesting question. I don’t know how to answer that. I mean, it was done through the courts of the United States, so if we believe that that’s a fair system, then yes. The jury found us guilty, but do I believe the verdict was correct? I do not. It’s what the jury thought, and that’s the outcome.
Do you think an appeal might be successful?
JD: I don’t think there’s a scenario where an appeal will actually benefit any part of the industry. That’s a much longer conversation. The reality of it is that the likelihood of an appeal and the industry surviving through the appeal process is not bright. My opinion is that the industry needs to find a settlement path that allows us to continue to keep the things that are important to the industry. The plaintiffs obviously don’t want to drag this out either, so I think a settlement is the best course of action. There’s very little chance that an appeal will work. And even beyond the appeal, even if we won the appeal, you have the Department of Justice that is investigating our rules, and you have the Federal Trade Commission, which has a complete statutory authority given to them by the current administration to rewrite the rules as it sees fit. So I do not think there’s any scenario that we are going to keep things the way they were. This industry is going to shift.
Did you see this coming?
JD: I did, because I’ve been researching this for years, and I’ve been talking about this for years. Everybody told me I’m a nut job because I’ve been talking about these cases, but I brought this up to my brokers two years ago, and did an entire presentation on it. We had (former NAR CEO) Bob Goldberg come and talk with our group in Chicago over two years ago.
About the fact that the trial was coming?
JD: Well, the lawsuits were already filed by then. I said, I don’t think we’re going to win these cases. Every single motion we filed has been declined by the judge or dismissed by the judge. I think there was certainly a lot of evidence presented that did not make us look good, even if the rules we have in place are not anti-competitive and are actually beneficial to the consumer. We weren’t allowed to present any of that because it was not a rule of reason case (wherein if any anti-competitive harm would be outweighed by the practice’s procompetitive effects, the practice is not unlawful). It was a per se case (wherein certain categories or agreements are presumed to violate antitrust laws, regardless of other factors such as business purpose or competitive benefits). The trial would have had a different outcome, potentially, if it was a rule of reason case versus a per se case. But once it went per se, I figured it was over.
