‘On-Fire’ Lawsuits, the DOJ, and Sleeping With Contracts: RISMedia Panel Digs Deep Into Legal Landscape
In around a dozen federal courtrooms across the country, and percolating in the offices of the Department of Justice (DOJ) Antitrust Division, change is brewing for real estate. Class-action lawsuits are advancing on multiple fronts, and regulators seem poised to come down hard on the industry.
But that foreboding image should not be cause for panic, according to a panel of brokers and experts speaking on RISMedia’s February 7 “Brokerage in the Balance: Addressing Antitrust Lawsuits Head-On” webinar. As more and more companies choose to settle, and the possibility of maintaining the status quo fades, it is time to move forward with the goal of ensuring your business can adapt and thrive.
“I actually think long term, the future is going to look different, but actually better,” said James Dwiggins, CEO of NextHome, Inc. “I’m no longer having the seller’s agent dictate my compensation.”
Massive uncertainty clouds what exactly will change as pressure from the lawsuits (and a currently dormant DOJ investigation) grows. Everything from MLS ownership to buyer agency to the entire system of “cooperative compensation” is potentially in flux.
Though it will be lawyers, judges and law enforcement that steer these outcomes, panelists reminded the audience of 3,000 agents and brokers tuning in from all over the country that they still have control over their businesses—how they are preparing, planning and training for a new environment.
“It’s not business as usual,” said Darryl Davis, storied real estate coach and co-moderator of the panel. “As business owners, you need to lead your people.”
Not knowing exactly what to expect as far as changes to buyer agency or other issues is not an excuse to bury your head in the sand, or bet your livelihood on a total repudiation of the plaintiffs and regulators in these cases. Rather, panelests advocated for reorienting and retraining in ways that will create value regardless of the outcome of these lawsuits, with specific focuses that can be implemented now—if not sooner.
“It’s time agents start taking training real serious,” said Anthony Lamacchia, broker/owner and CEO of Lamacchia Realty. “If their company and their broker are not talking about these things and preparing them, they need to be thinking about making a change…the time to get serious about this was three months ago.”
The big bad
A necessary starting point for being prepared is having accurate and up-to-date information, according to Jessica Edgerton of Leading Real Estate Companies of the World® (LeadingRE), who not only serves as the company’s chief legal counsel but also leads their training.
“While cautioning listeners to seek their own independent legal advice, she painted a picture of a multi-faceted, multi-variant legal process that might move faster than some people expect
“I think we probably need to prepare for changes to be (handed) down and implemented before the end of an appeal process (in Burnett),” Edgerton said.
Besides the long-running and growing list of seller-driven class-action commission lawsuits, Edgerton pointed to two legal threats that have received less attention: namely, lawsuits filed by buyers, and the aforementioned DOJ investigation that could be revived by an appeals court any day now.
“(Buyer lawsuits are) real. This is the next on-fire car on the track. We need to make sure that we are, in any resolution, paying attention to both sides of the table,” Edgerton said.
Notably, the companies that have settled Moehrl and Burnett—Keller Williams, Anywhere and RE/MAX—are not necessarily protected from these lawsuits, which are outnumbered by seller-side litigation but also more expansive in their claims.
And while these lawsuits target most of the same rules as the seller plaintiffs, it is still unclear if they could catalyze even more changes to the real estate process.
Even more importantly might be the DOJ, which has pursued an investigation into the National Association of REALTORS® (NAR) since around 2019, initially reaching an agreement to close the investigation before reopening it under a new presidential administration.
While saying she felt that defendants have strong grounds to appeal the Burnett verdict and noting that settlements have proven a viable path to end the class-action litigation, Edgerton characterized the DOJ as much more likely to be successful at implementing major changes to real estate.
She pointed out that federal law allows the DOJ to intervene in class-action cases and weigh in on settlements, potentially upending the kind of rule changes that brokerages have already agreed to. Assuming the DOJ is allowed to reopen its investigation—something that Edgerton admitted is very likely based on a recent appeals court hearing—they will have a bigger influence on what real estate will look like in the future than any of the class actions.
“Any rule changes and other changes to the way that we practice business will be dictated in great part by the federal government,” she claimed.
Agents in the spotlight
As all this plays out in the months and years ahead, besides keeping up with the latest, panelists urged agents and brokers to start thinking more about certain priorities within their business—particularly around representing buyers.
“Regardless of any of these outcomes…I think you need to plan for a future where contractual offers of compensation do not exist in the MLS,” said Dwiggins. “Plan for it. If it doesn’t happen, great, but plan for it today because you’re going to get better at your job. You’re going to need to sit down and start treating your buyers like a seller.”
While many companies and even whole states have standard buyer contracts, Dwiggins, Lamacchia and Davis all went further and urged real estate practitioners to put extra effort into the entire process of working with a buyer. That includes everything from articulating your value to negotiating the kind of compensation you will get if the commission is not paid by the seller.
“Those types of things should be standard procedure,” Lamacchia said.
He added that his company has trained on buyer contracts “almost weekly” since 2012, but noted that the pandemic left many agents “rusty” because of how fast the market was moving.
“If an agent is serious about their business and serious about living through this change that is upon us, they better make some actionable moves,” he emphasized.
Edgerton jumped in to refocus the conversation on transparency and on the client, reminding agents they need to go through their buyer agreement or contracts with the buyer and make sure that person understands everything in the document.
And when articulating value, she urged agents to make that more of a conversation than a pitch.
“Filter (your presentation) through a vein of listening. You cannot provide value…unless you know what your client values,” she explained. “As you talk to that buyer, make sure you are creating huge swaths of space for you to absorb what they value before laying your value on top of something that may not be on the top of their list.”
And Dwiggins joined in to hammer in the work that needs to go into those buyer agreements, and how it is important to start using them now even while the vast majority of transactions still have the seller compensating the buyer.
“Get used to doing (buyer agreements and presentations) right now when you potentially don’t have to have the buyer pay anything,” he said. “Make that part of your routine, fall in love with those documents, use them as a pillow—I don’t care what it is. Get used to those two documents and those presentations, and you’ll be fine.”