A jury today issued a verdict in the Sitzer-Burnett federal class-action lawsuit finding that the National Association of Realtors and major real estate franchisors conspired to inflate real estate commissions, by requiring home sellers to offer a commission to the agent representing a buyer, as a prerequisite to listing their property.
Damages of $1.8 Billion
The jury awarded damages of $1.8 billion to the plaintiffs, who are based in Missouri. There is a similar lawsuit representing plaintiffs in Illinois, seeking damages of $40 billion. The Department of Justice has also been closely watching these cases.
Redfin Has Been on the Right Side of History
The size of the verdict has already led, in just the past few hours, to at least one copycat lawsuit, with plaintiffs in other states, and with every major brokerage named as a defendant, including even Redfin. As a company that exists to give real estate consumers a better deal, Redfin is proud of our unwavering consumer advocacy. Redfin has saved our clients more than $1.5 billion in fees.
A Tireless, Lonely Advocate for Lower Fees
For many years, recently and in the distant past, we offered an online service for people to buy homes unrepresented. Prior to this verdict, we announced our resignation from the National Association of Realtors. For our entire history, at Congressional hearings, in press appearances, in sensationalized debates, and in public and private industry meetings, we’ve campaigned tirelessly for lower fees, commission transparency, and broader consumer access to real estate listings. When I first used Redfin to list my own property, our yard sign was felled by a chainsaw, presumably in opposition to our stand on fees. Every day to this day, Redfin agents are denigrated by other agents as discounters.
Even if the Judge Doesn’t Require Structural Change, Structural Change Is Coming
The judge may take days or weeks to decide what structural changes the jury’s verdict will entail. There will also be years of appeals about the legal standard used in the case and other issues. For now, the initial size of the damages alone will ensure major change. In the weeks leading up to the verdict, the National Association of Realtors already updated its guidelines to let agents list homes for sale that don’t offer a commission to the buyer’s agent.
Traditional Brokers Will Train Their Agents To Give Sellers All Their Options
Traditional brokers will undoubtedly now train their agents to welcome conversations about fees, just as Redfin has been doing for years, especially when advising a seller on what fee to offer to buyers’ agents. Rather than saying that a fee for the buyers’ agent of 2% or 3% is customary or recommended, agents will say that a buyers’ agent fee, if one is offered at all, is entirely up to the seller. This is as it should be.
But A Bigger Change May Be Afoot: Buyers Pay the Buyer’s Agent
But it’s also possible that buyers will become the ones who decide how much to pay a buyer’s agent. Even without a judge’s injunction, the local Multiple Listing Services that agents use to list homes may decide to stop supporting cooperation between buyers’ and sellers’ agents on fees. In this event, many buyers will still hire a buyer’s agent, but at a fee they negotiate, constrained in part by the buyer’s heightened awareness of the fee, but also because the fee may not be a part of the home price, which has long been financed by a mortgage.
More Significant Change Is Possible
More significant change is also possible. Industry observers who imagine that American real estate could easily become like Great Britain, New Zealand or Australia, with one agent representing both buyer and seller, haven’t noticed what Redfin learned through painful experience in our earliest years: American consumers, long accustomed to the convenience of a buyer’s agent who can show all the homes for sale, dislike calling different listing agents to see different properties.
Buyers Should Be Able To Choose Whether to Hire an Agent at All
But some may ask what will happen if this case, or if one of the cases that follow, ends cooperation, so that it becomes cost-prohibitive for many homebuyers to hire an agent at all. Redfin’s position is that no one should hire a buyers’ agent who doesn’t want to; people should hire buyers’ agents to see properties listed by a wide range of agents, to get guidance on how home-buying works, to understand the advantages and defects of the homes they’re buying and the deals they’re striking. Buyers can choose to work directly with a listing agent if they seek to avoid the fee paid to a buyers’ agent, and if they understand the tradeoffs involved.
Redfin Is Prepared for Whatever the Future Brings
It’s hard to say whether the future will bring reformed cooperation, where the commission paid to the buyers’ agent is optional, negotiable and open for all to see, or if cooperation ends entirely. Either way, Redfin will be ready. Since Redfin uses technology to operate more efficiently than just about any other major broker, with a national, low-cost home-touring service already in place, we’ll be better prepared for this future than any other broker.
If Buyers’ Agents Mostly Go Away, Redfin Will Take Market Share
But if buyers’ agents become less common, Redfin will prosper in that world too. We run the largest brokerage website in America. We’ve built self-service technology for buyers to set up their own tours and to make offers. We’ll use that technology to market the properties listed by our agents directly to consumers, taking market share from other brokerages. We may open that platform to other listing agents who work with us as partners.
Change Is Good
Change, in whatever form it takes, can be painful for many industry incumbents, but it could be good for consumers, good for innovators, and good overall. I spent the first year or two of my now-18-year Redfin career proclaiming every other month that a revolution was at hand, only to discover how impervious to change our industry is. No matter what happens with the Missouri judge, or in any other courtroom, one thing is certain: there’s no going back to the way things were. What Redfin wants in this uncertain world is what we’ve always wanted: to give real estate consumers a better deal.
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