So far, week one of the Sitzer/Burnett bombshell class action antitrust buyer broker commission lawsuit has seen four of the five named plaintiffs testify in front of the jury.
During their testimony, attorneys for the defendants, which now include National Association of Realtors, Keller Williams and HomeServices of America, had the opportunity, if they wished, to cross-examine the witnesses in addition to the questions posed by Michael Ketchmark, the lead attorney for the plaintiffs.
The plaintiff to appear before the jury was Hollee Ellis, a former high school English teacher, who took the stand on Wednesday, according to reports from Inman News. Ellis is a Missouri homeowner and the daughter of a 30-year real estate industry veteran. During her life, Ellis has sold four homes and bought five, one of which was sold during the time period applicable to the suit. On the home sale at issue, Ellis said she paid 6% commission on the home sale.
According to Ketchmark, the buyer’s agent portion of the commission on Ellis home sale accounted for 20.55% of her net equity, meaning the commissions for both agents ate up roughly 40% of the equity she had accumulated on the property.
“It was a hard pill to swallow that we would walk away with so little,” Ellis said.
Ellis’ home sale was necessitated by a move to South Carolina for a new job. During questioning, Ketchmark asked Ellis is she considered herself a “cash-strapped buyer,” which NAR has claimed its Participation Rule, which is at the center of this lawsuit, helps by taking away the burden of having to pay their own agent.
Ellis, who said she did consider herself a “cash-strapped buyer,” noted that the 20% of the equity that went to the buyer’s agent in the sale of her previous home, would have helped improve her situation as a buyer.
“The buyer who chose them and who they’re working for should pay them,” Ellis said.
She said that prior to joining the lawsuit, she was unaware that clients could negotiate the commission and claimed that she would have “gone a different direction” if she had known.
In their cross examination, attorneys for the defendants established that Ellis had knowingly signed a contract to pay a certain commission and that she knew the commission would be shared with whoever the buyer’s agent was.
According to Ellis, a 6% commission has already been filled in on the contract prior to her signing.
Rhonda Burnett was the second plaintiff to take the stand. She is a former school psychologist and public school advocate. For her home sale related to the suit, Burnett worked with a listing agent from a HomeServices of America subsidiary. On her listing agreement, Burnett said it asked her to circle the commission rate she wanted to pay, offering 7%, 8%, 9%, 10%, or a “blank” option. According to Burnett 6% was already filled in on the blank and her agent told her that “nothing was negotiable.”
Burnett’s home was originally listed at $275,000, but ultimately sold for $250,000 with the agents involved receiving a total of $15,298 in commissions.
“I paid the buyer’s broker to negotiate against me and my husband, which resulted in a lower sales price,” Burnett said. “She did a good job for him [the buyer], but I had to pay her commission.”
Under cross examination from Robert MacGill, the attorney for HomeServices of America, Burnett said she had considered selling the home as a for-sale-by-owner, but ultimately decided not to, citing MLS access. She said she also considered using a so-called discount broker, which only charged a 1% listing fee, however, she would still have been required to pay a 3% commission to the buyer’s agent.
“We had no problem paying for an agent to sell our house,” Burnett said. But she was “not happy” about having to pay the buyer’s agent.
The third plaintiff to testify was Jeremy Keel, who works in elder law. Keel’s home sale in question was a $205,000 transaction in which he paid a 6% commission split equally between his Keller Williams’ listing agent and the buyer’s agent.
Keel was cross-examined by Barack Echols for Keller Williams. During his examination, Echols pointed out that Keel did not pay commissions when he was a buyer himself and that in one particular transaction Keel only paid a 5% commission. Keel denied negotiating this commission, stating that he was unaware you could negotiate a commission as the figure was already filled in on all the contracts he signed.
Home seller plaintiff Jerod Breit, a former police officer who is now a regional executive director of Mothers Against Drunk Driving, took the stand on Thursday. Breit said he joined the lawsuit after going through the experience of selling his first home.
“After my first experience selling a home, I was exposed for the first time to how it works and I didn’t think necessarily that it was fair,” Breit said. “I still don’t see the fairness in paying for somebody you’re never going to meet and never works for you in any way. I don’t think it’s fair.”
Breit, who did note he was satisfied with the selling experience his RE/MAX agent provided, said he originally signed a contract to pay 5.5% in commissions with buyer’s agent getting 2.7%. However, when he looked at the sale’s settlement statement with his attorney, he found out he had been charged a 6% commission.
“It was preloaded on the contract and I thought I was signing what I needed to sign,” Breit added.
Under cross examination by MacGill, Breit acknowledged, after going through the various contract that he signed, that he knew he was paying the buyer agent commission.
When asked by Ketchmark if he thought RE/MAX was part of a conspiracy “designed to pick your pocket,” Breit said “no.”
Craig Schulman, an associate professor of economics at Texas A&M, was also called to the stand on Thursday. He stated that NAR had a strong economic incentive in the alleged conspiracy to maintain high real estate commission rates, namely the $225 million per year, the trade organization brings in, in NAR member dues.
In addition to testimony, Thursday’s proceedings had a touch of drama. After the court adjourned for the day, one of the two women on the jury approached Judge Stephen Bough, who is overseeing the trial. The woman, who is a new mom with a roughly six-week-old baby at home, was dismissed from the jury. The jury now consists of seven men and one woman. Despite the dismissal the trial is expected to continue as planned as federal rules require between six and 12 jurors.
The fifth named plaintiff, Frances Harvey, is expected to take the stand on Friday or Monday. The defendants will begin their defense next week.
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