Understanding the Recent NAR Lawsuit in Missouri, Copycat Lawsuits, and How the Real Estate Industry May Change Forever

Unless you have been living under a rock for the last month or so, you have probably heard the news about the National Association of Realtors lawsuit in Missouri that could lead to a damages award of close to $5 billion. While the lawsuit is certainly far from over, it is likely going cause a tumultuous series of changes to the average residential real estate transaction over the next couple of years.



This blog is going to explore the nature of the NAR lawsuit to help you better understand why changes are coming, what copycat lawsuits are and going to be filed, what the likely changes will be, and how to educate and prepare yourself as a real estate agent.

What was the Lawsuit About?

The case is commonly referred to as Sitzer/Burnett v. NAR, et al. This is a class action lawsuit meaning the plaintiffs consist of a large number of people suing several defendants. In this case, it’s a very large group of people suing the NAR and 4 of the largest real estate brokerages in the country and their affiliated brokerages. The plaintiffs consist of a “class” of people who listed properties for sale on only 4 possible multiple listing services in Missouri and Kansas from 2015 to 2022.

The argument for the class action was that the sellers were effectively forced to offer buyer broker compensation when listing a property on these 4 MLSs because he NAR’s Cooperative Compensation Rule. The NAR’s Rule requires that brokers who list a property on an MLS must include an offer of compensation to the other MLS participants (subagents or buyers agents or the like) to help sell and market the listing. The class argued that the NAR and the other Defendants’ adoption of the Cooperative Compensation Rule served as a conspiracy to inflate agent commissions.

The NAR argued that there was no conspiracy and that the Cooperative Compensation Rule was implemented to incentivize buyer agents to produce a buyer for the listed property not to inflate commissions. The NAR pointed to their handbook on this Rule also indicates that the listing broker retains the right to determine the amount of compensation offered to subagents, buyer agents, or brokers acting in other agency or nonagency capacities, which may be the same or different.

The NAR also argued that they, as a trade association, do not receive commissions from sellers or buyers of real estate, do not set commission amounts, do not determine who receives commissions, and do not decide how commissions are paid.

What was the Outcome?

The jury took approximately 2 hours to quickly decide that all Defendants were guilty of conspiracy to violate anti-trust laws in the civil class action. The jury awarded nearly $2 billion to the plaintiffs. Two of the Defendants (RE/Max and Anywhere Real Estate a.k.a. Century 21, Coldwell Banker, and Corcoran) settled the claims against them for tens of millions of dollars each before the jury verdict. That was the outcome on November 1st.

Copycat Lawsuits Coming

With the success of the plaintiffs in Missouri, it is important to remember that the verdict only applies to the 5 defendants, and the damages were only agreed to be paid to that class of plaintiffs from Kansas and Missouri.

There has been a similar lawsuit in the U.S. District Court in the Northern District of Illinois since 2019 that has yet to receive a trial date but the allegations are the same. The Moehrl v. NAR et al. case makes similar antitrust allegations against the same defendants but the class of plaintiffs includes home sellers throughout Illinois and the surrounding areas covering 20 different multiple listing services. While the Sitzer/Burnett decision does not control the outcome of the Moehrl case, it is certainly going to be persuasive on appeal. The Moehrl case is expected to have damages exceeding $13-40 billion.

There is also another Missouri Lawsuit that was filed after the Sitzer/Burnett verdict. The Gibson v. NAR et al. case includes similar antitrust allegations against the NAR and 7 different real estate brokerages including Redfin, eXp World Holdings, Weichert Realtors, and Howard Hanna. This lawsuit is expected to award damages exceeding $200 billion.

What is more likely going to happen in Gibson and Moehrl is that there will be settlements from several defendants while the Sitzer/Burnett decision is appealed. The Appellate court will likely provide guidance on appropriate damages, a more definitive opinion on where the antitrust violations occurred, and guidance on what kind of contract changes could resolve these issues. However, it could take several years for the appeal to follow through.

There is also a copycat lawsuit filed in South Carolina and there could be lawsuits filed in every major U.S. Federal court against the same defendants and other brokerages.

How are these going to Change the Real Estate Industry?

In the short term, the most negatively affected parties are going to be buyer’s agents and first-time home buyers. It is far too often the common practice for buyer agents to not make a buyer sign a buyer agency agreement. Especially in the Midwest and more rural areas of the country, buyer agents will show lots of houses before ensuring their compensation in the written offer to purchase.

What should be an upside for the industry is buyer agency contracts will be more customary and more likely buyers will sign one. However, it will likely be more common for a buyer to go unrepresented or engage in a dual agency or transactional brokerage relationship than to sign a buyer agency agreement for now. There are reasons dual agency has strict guidelines and is prohibited in some states and the cooperative compensation rule was created to help buyer agents find representation.

A first-time home buyer is going to have to save up 3-20% for a down payment, 3-5% for closing costs, and an additional 2-3% to pay their agent. Considering first-time home buyers are already in a squeeze with the highest interest rates in 23 years, this change is going to make that squeeze even tighter.

Something in the market will eventually come up to help these buyers, even if the courts say that cooperative compensation is an antitrust violation. There a plenty of local programs designed to help lower-income home buyers fund their closing costs and downpayment. There will likely be a program for buyer's agent fees as well.

How to Prepare for the Changes

Talk with your principal broker and clarify what they expect of you going forward regarding the outcome of these lawsuits. Work with them to create a workable process for addressing buyers’ needs and setting their expectations. Remember, you are not just helping them write an offer. A good buyer’s agent asks questions and knows what their clients want, what they can get in the market, shows them appropriate houses, instructs and advises the buyer throughout the whole process, negotiates each step with the seller, and so much more.

You deserve to be paid for your work and a buyer should agree with that, but it is also your responsibility to make sure you get paid. You have to communicate your value to your clients, set their expectations as to what you are doing for them and their options on how you will be compensated, and make sure you get it in writing. And you can still write your compensation into the offer.

A good buyer agency agreement will maximize transparency by putting all obligations, terms, and agreements of the Buyer and Agent in writing. These agreements formalize the professional working relationship between an agent and a client. They detail what services consumers are entitled to and what the buyer agent expects from their client in return. Don’t make rookie mistakes and establish a clear plan your managing broker is comfortable with. While these lawsuits may change the real estate transactions as we know them, they won’t change a buyer’s need for independent representation.

One of the most fascinating elements of the real estate market is that it is everchanging. Sellers were completely in control only a quarter of a century ago. The playing field has now been leveled but some new challenges have surfaced. As a nation, we will find an equitable solution, under all is the land.