By Realtor Brian Doherty, JD, LLM, ABR, PPS

You may have read a Missouri jury recently awarded the plaintiffs in a class-action lawsuit against the National Association of Realtors (NAR) and several other real estate companies almost $1.8 billion in damages. In short, the lawsuit alleged that the defendants had industry established policies and practices which resulted in consumers paying inflated commissions.

Many commentators are suggesting that the verdict may trigger a major shake-up in the real estate market, potentially changing the practice of buying and selling homes. More specifically, how homes are listed for sale and how brokerage fees are paid – and who pays them.

Due to my legal background, I have a heightened interest in the “nuts and bolts” of important litigation, so please allow me to highlight what I feel are a few important points in this lawsuit. The verdict was the result of a lawsuit home sellers in Missouri, Kansas, and Illinois brought against the nation’s largest professional organization of real estate brokers, the National Association of Realtors (NAR), and several other real estate companies.

The suit was Burnett v. National Association of Realtors et al, in which the plaintiffs alleged an NAR requirement known as the cooperative compensation rule amounted to price fixing. As a result of NAR’s policies, the plaintiffs further alleged they were forced to pay excessive commissions to real estate companies when selling their homes.

A jury found that the plaintiffs proved their allegations, so they won in the trial court. The NAR disputes the court’s finding and is planning an appeal. It is important to note that several defendants, including my company, RE/MAX, settled with the plaintiffs prior to the jury verdict. It is also noteworthy that other lawsuits alleging circumstances similar to Burnett have been filed and are yet to be resolved.
Interesting topic for sure, but what is the practical effect of this litigation to you, if you are contemplating buying or selling a parcel of residential real estate? As a person with a legal background and years of experience in the real estate world, it is difficult for me to conclude other than that the outcome of the litigation will bring significant permanent changes to the way an agent representing a buyer in a real estate transaction is compensated; AND that commission savings for home sellers will result.

How soon these changes will take hold in Arizona remains to be seen, but home sellers right now should be exercising extra caution when choosing a real estate agent to list their property for sale. On the other side of the transaction, home buyers need to understand that the representation provided by their real estate agent as they look for a home to buy will require a formal Buyer’s Broker Agreement, and that their agent’s total compensation may not be paid by the seller.

I feel an important outcome of these lawsuits is the reminder that that the buyer’s agent and the listing agent are meant to be on opposite sides of the transaction! It is more important than ever, as you contemplate a real estate transaction, that you to have a knowledgeable and experienced real estate agent on YOUR SIDE protecting YOUR INTERESTS!

Brian Doherty, JD, LLM, ABR, PPS, is an Associate Broker with the office of RE/MAX Fine Properties in Scottsdale. He specializes in the purchase and sale of Arizona’s finest luxury homes, with particular emphasis on the communities of Scottsdale, Carefree, Cave Creek, and Paradise Valley. In addition to a legal background, he has earned specialized real estate designations as an Accredited Buyer’s Representative (ABR) and a Professional Property Stager (PPS). He has more than 25 years of experience with Arizona residential real estate.