Burnett v. NAR Trial Updates

From Tracy Kasper, NAR President - Oct 31, 2023 1:19 PM 

Hi all, I have an important litigation update. After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom, came back Tuesday and found NAR and other corporate defendants liable in the case. 

This matter is not close to being final. We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition. We remain optimistic we will ultimately prevail.  In the interim, we will ask the court to reduce the damages awarded by the jury. 

In court, NAR presented evidence that consumers are better off and business competition is able to thrive because of our rules and how well local MLS broker marketplaces function. In fact, the NAR cooperative compensation rule for local MLS broker marketplaces ensures efficient, transparent and equitable marketplaces where sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. NAR also presented that REALTORS® are everyday working

Americans who are experts at helping consumers navigate the complexities of home purchases and advocates for fair housing and wealth building for all. 

NAR was formed 100 years ago because there was a need for a higher level of ethical practice. We should all be proud that REALTORS® continue to serve in that role. I know our mission to advocate for homeownership and always put our client interests first is unwavering. We recognize our legal team and outside counsel have worked tirelessly on this case. It will likely be several years before we reach a conclusion. 

I am grateful to our NAR staff and our 1.5 million members who work to serve their clients every day. We have an important shared purpose for consumers, and we could not achieve that without all that each of us do. 

Below are some key questions people may have that you can share. We will continue to keep you informed of any notable litigation milestones, and in the meantime, I encourage you to continue to refer to the Competition.Realtor website, which provides a comprehensive overview of and many resources for how REALTORS® and local MLS broker marketplaces benefit consumers. The need for each of us and every member to continue to express our value every day in as many ways as we can remains an imperative. 

Tracy 

Burnett Questions Answered 

In the case of Burnett v. NAR et al, on Tuesday, Oct. 31, the jury found NAR and the co-defendants liable. The plaintiffs claimed real estate commission rates are too high, buyer brokers are being paid too much and that NAR rules and corporate defendants’ practices lead to set pricing. 

The reality is that NAR rules prioritize consumers, support market-driven pricing and promote business competition. We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing. 

Following are answers to questions you might have. 

• What are next steps legally and the timing? This matter is not close to being final as we will appeal the jury’s verdict, and we remain confident we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury. Due to the nature of appeals, this case likely will not be concluded for several years. 
• What will be the basis for NAR’s appeal? We can’t speak to the specifics of that until we file our appeal, but we can say that we have a very strong legal basis for appeal.
• Is there anything REALTORS®, brokers, state/local associations or MLSs need to do differently because of this verdict? Not because of this verdict. But NAR has emphasized for many years two important things. One is the use of buyer representation agreements, which maximize transparency by putting all agreements in writing to ensure clarity and understanding, as all members are obligated to do pursuant to the NAR Code of Ethics. These agreements formalize the professional working relationship with clients and detail what services consumers are entitled to and what the buyer agent expects from their client in return. Second, it’s also an imperative for members to continue to express that commissions are negotiable and set between brokers and their clients; explain how local MLS broker marketplaces promote equity, transparency and market-driven pricing for consumers; and persistently communicate the incredible value agents who are REALTORS® provide.
• What does the future of buyer representation look like as a result of the verdict? 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 home buyers, among others, couldn’t afford to pay for representation out of pocket. It’s important that members take every opportunity to express how they are experts who guide consumers through the financial, legal and community complexities of buying or selling a home.
• Does NAR have the funds to pay the proposed damages or post a bond to file an appeal? NAR is going to appeal and has the funds to post bond, which allows us to proceed with our appeals and defer potential payment of damages. While appeals will take years, and we are confident we will ultimately prevail, we also are financially prepared for any final judgment.
• How does this verdict affect other ongoing litigation, including the other seller lawsuit? It doesn’t. Cases are tried separately, and we remain confident we will ultimately prevail because we have a strong case we’ll present on appeal and because our rules are pro-consumer and pro-business competitive.
• Is there any scenario where NAR would consider settling? NAR always has been open to a resolution that maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates our members’ risk of liability for the claims alleged. That being said, we remain confident we will prevail on our appeal. 
• Would NAR ever consider changing the cooperative compensation rule? This rule always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition. NAR consistently reviews and considers evolving its rules in a way that responds to changes in the industry and what best serves consumers. 
• Do you expect the plaintiffs to seek an injunction that would require NAR to stop making the rule mandatory or eliminate the rule altogether? We cannot predict what plaintiffs will do. We would contest any such effort because this rule always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition.
  What’s the status with the Department of Justice and has anything changed with this verdict? We reached an agreement with the DOJ nearly two years ago. NAR has upheld our end of the agreement, and we expect the DOJ to do the same as affirmed by a federal court’s careful ruling. That is a separate matter from the case of Burnett v. NAR et al. 

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 31, 2023

After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom came back Tuesday and found NAR and other corporate defendants liable in the case. 

NAR had presented in court that its rules prioritize consumers, support market-driven pricing and promote business competition. This matter is not close to being final as NAR will appeal the jury’s verdict. It will likely be several years before this case is finally resolved. 

NAR stands by the fact that its guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing. NAR will continue to focus on our mission to advocate for homeownership and always put consumer interests first.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 30, 2023

On Monday, the final defense witness took the stand, which was followed by instructions by the judge to the jury and closing remarks by lawyers for the plaintiffs and all co-defendants. During NAR’s closing remarks, outside counsel Ethan Glass presented to the jury how there was no evidence to support the plaintiff’s allegations against NAR.

1. NAR demonstrated there is no evidence or expert testimony to support allegations of antitrust violations claimed by plaintiffs. It makes no sense that hundreds of thousands of people got together to coordinate on a very public rule and public rule-making process involving hundreds of thousands of public documents. 
2. NAR affirmatively proved purpose and effect of the cooperative compensation rule, which enables brokers to know how much they will be paid before starting work. NAR’s model rule has expressly stood for the proposition that buyer brokers, like everyone else, have the right to know how much they will be paid prior to commencing work. Commission rates are market-driven and have fluctuated over time. Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction. And those costs are spelled out to buyers and sellers.
3. NAR reaffirmed that a trade organization can lawfully create rules. NAR illustrated how trade associations are legal and serve important purposes, including for consumers. It is common practice for trade associations to meet or talk amongst the industry and adopt a rule or industry standard. And membership is voluntary.
4. NAR showed that there is no harm to sellers. NAR doesn’t tell people what to charge or to receive a commission. NAR rules are very intentionally pro-consumer and pro-business competitive, and buyer brokers exist because consumer protection agencies thought they were important.

Jury deliberation begins Tuesday.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 27, 2023

On Friday, four more witnesses took the stand for the corporate defendants. The trial will continue Monday morning with one more witness expected, followed by closing statements, jury instructions and then jury deliberation, which could begin as soon as Monday afternoon. A verdict could then be delivered at any point and likely sometime next week.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 26, 2023

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.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 25, 2023

On Wednesday, four witnesses took the stand for the corporate defendants who will continue presenting their case through 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.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 24, 2023

Tuesday the defense continued their case 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 successfully 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; and 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.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 23, 2023

Today, 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:

       a. It is the best way to expose a seller’s property to the largest number of 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.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 23, 2023

On Friday, plaintiffs had three witnesses including one who talked about how commissions work abroad. Following are three perspectives about compensation and the consumer experience in other countries. 

• Local Broker Marketplaces: Insights From a Romanian REALTOR®(link is external) (Inman, September 2023)
• Opinion: Is Israel Adopting the U.S. Real Estate Model?(link is external) (Real Trends, June 2023)
• Why the U.S. MLS System Is the Envy of Other Countries(link is external) (Housing Wire, July 2021) 

Plaintiffs are expected to conclude their case on Monday when the defense is expected to begin presenting its case. 

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 20, 2023

On Thursday, another seller member of the class and an economics professor testified as plaintiffs' witnesses. Some of the discussion centered on the compensation model in local MLS broker marketplaces. For context: 

• Agent compensation is set between brokers and their clients and always has been negotiable at any point in the transaction. Those costs are spelled out to buyers and sellers, and NAR doesn’t tell people what to charge. The NAR Code of Ethics also requires members to advise clients about cooperation and amounts of compensation to be offered.
• Despite what may be months or even years of work, agents only get paid when a home is sold, and according to Real Trends(link is external), commission rates have fluctuated over time and are well below where they were in the ‘90s.
• The seller decides what fee they are willing to pay for their broker’s services and how much that listing broker should offer a broker who brings a buyer to close the transaction.
• Because of this practice, sellers have access to the largest possible pool of buyers, and buyers get access to the greatest number of homes for sale in one place all in transparent and efficient virtual marketplaces.
• Buyers also have the greatest chance to receive professional representation to guide them through the financial, legal and community complexities of buying a home in what is for many the single most complex and significant purchase they will make in their lifetime. 
• The future of that buyer representation is at risk in this case. 

For more information: REALTOR® Magazine - Burnett Trial Preview

From Tracy Kasper, NAR President - Oct 19, 2023 1:03 PM 

As you know, opening arguments began Tuesday and the plaintiffs are well on their way to presenting their case in the Burnett trial. As we've talked about before, the next few days will continue to be particularly tough as the focus is more exclusively on the plaintiff's arguments. Things are still on schedule for the defendants to present the pro-consumer, pro-business competition side of this case, as we rightfully refer to it, beginning next week. 

With the media in full gear on coverage, we were disappointed to see a Wall Street Journal editorial that grossly mischaracterized what is at stake for consumers. I immediately wrote a letter to the editor (see also full text below) that the Wall Street Journal published that helped give the fuller story.  Fortunately, there have been many more positive stories, on balance, about REALTORS®, local MLS marketplaces and NAR over the last year and leading into the trial. And outlets such as Housing Wire and Yahoo Finance are taking an objective, balanced approach to their trial reporting. That said, it's an imperative that we continue to get our voice into stories, and we will.

We also want interested members to know what resources they have. A reminder you can direct them to "Burnett Trial Updates" at www.nar.realtor/competition-in-real-estate. In addition to timely updates, they will find the overarching NAR position and pre-trial REALTOR® Magazine there too. See also things like the newly added Consumer Testimonials at the site that provide anecdotes of real people who've had real experiences with REALTORS® and how local MLS broker marketplaces work. Traffic has been markedly up at the site and would encourage you, other members and interested parties to keep looking there for quick facts, infographics, fact sheets, videos and other content they can refer to or distribute. There is also realestatecommissionfacts.com, which is a good one-stop shop to direct consumers or others to for a better understanding about the basics of how compensation works. We've also been distributing social media content through state and local associations to reach members and the general public where they really are day to day.

All these tools and information are great, but I will say that there's nothing more authentic and true to who we are as REALTORS® and all we do than the one-on-one experiences, connections and conversations each of us with our clients and other people in the community. Each of those moments taken collectively are at the heart of our reputation and who we are. I appreciate all that each of you and all of our members do to represent REALTORS® each day. We know how much and how hard we're working for our clients every day, and I know that shows through.

Thank you all! Tracy

Realtors Respond on the Antitrust Case:

'The market-and hence the consumer-is in the driver's seat when it comes to real-estate commissions.'

Oct. 18, 2023

Your editorial "Realtors Face an Antitrust Reckoning" (Oct. 16) mischaracterizes what is at stake for consumers in Burnett v. National Association of Realtors. Don't fall for the hype by class-action attorneys about how local multiple-listing service (MLS) broker marketplaces work.

In response to the marketplace, and at the urging of consumer advocates, the National Association of Realtors has developed guidance for local MLS broker marketplaces. It is part of a very public rule-making process aimed at creating the most consumer-friendly market possible.

These virtual marketplaces are efficient, transparent and accurate because of cooperation among real-estate professionals. Listing brokers make offers of compensation to buyer brokers, who bring buyers to the table. Those offers can be of any amount, even zero, and the National Association of Realtors doesn't tell practitioners what to charge.

That compensation is set between the brokers and their clients and is always negotiable. According to Real Trends, commissions rates are well below where they were in the 1990s.

Realtors deliver a lot of value for the $50,000 they make annually, on average, as they guide consumers through all the legal, financial and community complexities of buying a home. Class-action attorneys would take away buyer representation, and black, Hispanic/Latino, first-time and low- and middle-income buyers would be hurt the most, according to a May 2022 study.

The National Association of Realtors looks out for consumers with its rules for local MLS broker marketplaces. In reality, the market-and hence the consumer-is in the driver's seat when it comes to real-estate commissions. That will all be evident as the National Association of Realtors makes its case in court.

Tracy Kasper 

President, National Association of Realtors

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 19, 2023

NAR Position: In response to the marketplace, NAR has developed guidance for local MLS broker marketplaces that supports consumers getting comprehensive, equitable, transparent and reliable home information while brokerages of any size, service or pricing model get a fair shot at competing. The result is an efficient model for brokers to serve sellers and buyers and to enable market-driven pricing and buyer representation for consumers. REALTORS® adhere to a strict Code of Ethics and bring incredible expertise to guide consumers through the financial, legal and community complexities of buying or selling a home. 

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 18, 2023

On Wednesday, three members of the class took the stand to testify as to their experience as home sellers, along with other Plaintiff’s witnesses. In addition, the plaintiffs’ attorneys presented recorded video deposition testimony from three NAR witnesses who discussed NAR MLS guidance, including The Clear Cooperation Policy.

• The Clear Cooperation Policy (CCP) ensures brokers and agents serve the best interest of consumers and promote equal opportunity for all. The CCP advances equal access and opportunity in housing by ensuring listings are widely available and accessible to all consumers and requires MLS participants to submit their listings within one business day of marketing the property to the public. Without the protections from the CCP, consumers would be disadvantaged because agents could refuse to give agents or customers access to those listings.
• The CCP is especially important in competitive markets where properties sell extremely fast, and to help inoculate against circumstances in which properties are publicly marketed to limited groups of people.
• CCP was enacted in response to concerns about confusion in the marketplace about the availability of properties – often to the disadvantage of both home buyers and sellers. Brokers and local MLS broker marketplaces across the country asked NAR to consider a policy reinforcing the pro-consumer, pro-competitive benefits of listing a property in local MLS broker marketplaces.

Shared on https://www.nar.realtor/competition-in-real-estate on Oct 17, 2023

Tuesday plaintiffs, co-defendants and NAR outside counsel, Ethan Glass, presented opening remarks in the case of Burnett et al v. National Association of REALTORS® et al. Glass noted that: 

• NAR rules are made as part of a very public rule-making process and are persistently and publicly shared and available.
• The compensation rule ensures the buyer broker knows what they will be paid before they commence work and that buyers can afford representation.
• Plaintiffs envision a world where there is no buyers’ agent and buyers would have to go it alone in what is the single most complex and significant purchase most people will make in their lifetime.
• If buyers had to pay out of pocket for representation, that would reduce the number of buyers and the money buyers have to purchase homes from sellers.
• NAR does not seek, track, receive or set commissions for buyers’ or sellers’ agents. Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction, as set forth in NAR’s publicly available guidance for members. And those costs are spelled out to buyers and sellers.
• Every plaintiff in this case knew the commission they were paying to their agent and agreed to it in writing.
• Article 1 of the NAR Code of Ethics requires a REALTOR® to “protect and promote the interests of the client.” NAR also has rules that prohibit antitrust behavior. 

From Tracy Kasper, NAR President - Oct 16, 2023 8:51 AM 

The Burnett v. NAR et al trial is underway with jury selection happening today and opening remarks expected to begin Tuesday. I wanted to send this note as a reminder of the high-level updates NAR will be providing on the trial at the competition.realtor homepage under "Burnett Trial Updates" and our overall communications approach during the trial.

We've already published a pre-trial summary of what to expect at REALTOR® Magazine and at the conclusion of the trial, another article will summarize the outcome. These are good resources to explain to interested members what's going on in more depth. NAR is not otherwise planning more detailed day-to-day updates during the trial. As defendants in this case, we are inherently more vulnerable to negatively affect the arguments our lawyers are making in court by saying more publicly. It is a best practice that we don't litigate the details of what's happening in the trial outside the courtroom, and we need to abide by that here.

We know some media outlets are likely to report on the trial every day and may even be there live. We also know there are some who may present the information in a sensational way. NAR will, of course, share statements, provide context and correct gross misinformation with the media. But please be reminded and encourage everyone to not get caught up in those daily speculations and commentary. Plaintiffs will present their case first and for several days, so you should expect the coverage to be critical as it reports the plaintiffs' position. Defendants will present our case beginning next week. At the conclusion of trial, the jury will deliver a verdict at which point there will likely be years-long appeals before there is a final outcome. So, yes, there will be short-term news, but we all also need to stay grounded in what will necessarily be a longer-term view.

The NAR legal team and outside counselors have been preparing for this moment for a long time and are confident as they plan to present the absolute strongest pro-consumer, pro-business competition case at trial. I appreciate your support, patience and understanding as we navigate through this moment knowing NAR always has and always will be on the side of consumers and competition.

Thank you, Tracy