After roughly a month of speculation, Anywhere Real Estate and RE/MAX made the terms of their proposed settlement agreements in the Moehrl and Sitzer/Burnett buyer broker compensation class action suits public on Friday.
In addition to the already publicized $83.5 million (Anywhere) and $55 million (RE/MAX) payouts, both settlements contained nearly identical terms, including provisions to no longer require agents to be members of the National Association of Realtors or follow NAR’s Code of Ethics or the MLS Handbook.
The settlement agreements also contain practice changes, including that the firms will require or encourage agents to make it clear to clients that commissions are negotiable, that agents will have the freedom to set or negotiate commissions as they see fit, and that agents will not be required to make offers of compensation or accept offers of compensation from cooperating brokers.
Both brokerages also said they will not provide agents with any software that filters or restricts MLS listings based on the level of compensation being offered.
For Steve Murray, the co-founder of RealTrends Consulting, none of these changes come as a major surprise and he said the industry should “breathe a sigh of relief.”
“The terms changing practices are reasonable and doable without huge changes to the practices of real estate professionals,” Murray wrote in an email. “These terms tend towards a focus on more transparency for consumers rather than wholesale changes to how the market operates.”
While neither firm will continue requiring NAR membership for their agents, industry analyst Rob Hahn noted that many agents, affiliates and franchisees of both firms will need to maintain their Realtor association memberships in order to gain access to their local MLS.
In the Sept. 18 edition of his Notorious ROB email newsletter, Hahn also called attention to the relatively low dollar amounts for both settlements, referring to them as “bargain-basement pricing.”
“The $55 million is… laughably small. I mean, I’m sure the plaintiff lawyers will claim to the court that it was the best they could do based on RE/MAX’s financials — just as they did with the [Anywhere] settlement,” Hahn wrote. “But RE/MAX itself literally says ‘we’ll pay cash.’ As for the end of Q2/2023, RE/MAX had $96.76 million in cash and cash equivalents. $55 million is slightly over half, so sure, it’s significant… but it’s not game-changing. Anywhere is paying $83.5 million to settle. They had $179 million at the end of Q2/2023 so about 45% of the cash on hand. Again, significant but not game-changing.”
For its part, NAR said that the proposed settlement will not impact how the trade organization’s case is presented in court.
“Based on their latest filing, it appears that they are agreeing to do things already required by our Code of Ethics or MLS rules,” Mantill Williams, NAR’s vice president of communications, wrote in an email. “NAR remains committed to our guidance for local MLS broker marketplaces that ensures consumers get comprehensive, equitable and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing.”
Regarding NAR’s Participation Rule, which requires listing brokers to provide buyer brokers an offer of compensation in order to list on the multiple listing service, Williams said the offers are always negotiable.
“Practically speaking, the difference between an offer of $1 or even one penny and $0 is negligible,” he wrote.
Williams also noted that the brokerages are independent entities that can make their own decisions, and that it is up to the local Realtor association to show brokers their value proposition.
“If these brokers continue to find value in belonging to the association, then they will choose to belong,” Williams wrote.
Despite having to pay out tens of millions, both RE/MAX and Anywhere see their settlement agreements as positives for the firms, their affiliates and their agents.
“We assert that protecting the U.S. RE/MAX network of Broker/Owners and agents from costly litigation and the risk of further damages makes this settlement the right course of action,” a RE/MAX spokesperson wrote in an email.
Ryan Schneider, the CEO and president of Anywhere, shared a similar view: “”We believe this is the right course of action to remove future uncertainty and ongoing legal expense, serving the best interests of the company, our affiliated agents and franchisees, and shareholders, and enabling Anywhere to focus on moving real estate to what’s next.”
In addition to NAR, Anywhere and RE/MAX, defendants in the lawsuits include HomeServices of America and Keller Williams. Keller Williams and HomeServices of America declined to comment on the settlement and counsel for the plaintiffs did not return a request for comment.
Filed in 2019, both lawsuits take aim at NAR’s Participation Rule. According to the plaintiffs, commission-sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.
Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.
The Sitzer/Burnett trial is slated to head to trial on Oct. 16, while a trial date for the Moehrl suit has yet to be set, it is expected start in early 2024.
