KANSAS CITY, Missouri — Courtroom proceedings in the Sitzer/Burnett commission lawsuit continued on Wednesday — after some drama — with HomeServices of America CEO Gino Blefari taking the stand.
Blefari was cross-examined by Michael Ketchmark, the lead attorney for the plaintiffs.
As Ketchmark began his questioning, he tried to show that the structure of HomeServices as the parent company of so many affiliates and franchises had the effect of enforcing the National Association of Realtors’ commission and cooperation policies.
Ketchmark said that franchisees being members of their local Realtor associations and MLSs meant that they and their agents agreed to follow the bylaws of the Realtor associations.
In response, Blefari said that HomeServices does not require agents to become NAR members nor participate in the MLS.
“Maybe the local company or the MLS does, but we don’t,” Blefari testified.
Ketchmark then discussed the agreements HomeServices franchisees have their clients sign. According to Ketchmark, these agreements say that commissions are either 6% to 10% of the sales price (with no terminology specifying negotiation) or $295 to $1,000, plus 6% to 10% of the sales price unless otherwise negotiated.
Blefari said that commissions are always negotiable, and the parent company allows the CEOs of its various firms to operate their companies and franchises as they see fit.
He also noted that he expects HomeServices agents to act as fiduciary to their clients and follow the NAR Code of Ethics.
Ketchmark also questioned Blefari about the training video in which Blefari said, as an agent, his commissions started at 6% and went up.
“I was a successful agent. It was more of a way to teach them to be clear about the value they provide and be confident in what they do,” Blefari said. “The value I add, I believe, is worth 6%. It’s a negotiation with the seller.”
Ketchmark then moved on to the disclosure documents that show 6% to 10% and other figures on commissions. However, Blefari said that those are just ranges, and he cited appraisal fees being waived or points on the mortgage as reasons why commission fees could change.
Blefari doesn’t agree with conspiracy allegations “one bit”
Blefari also told the jury that he understands the allegations of conspiracy to stabilize or inflate commissions but “doesn’t agree with it one bit.”
Under questioning from Ketchmark, Blefari stated that HomeServices has not investigated whether the Cooperative Compensation rule (known internally as the Participation Rule) has inflated commissions in Missouri. He refused to provide evidence about the purpose of the rule, but he admitted the rule was a core component of the MLS.
Blefari also testified that even with the rule in place, an offer of compensation could be as little as a penny. However, he said this might not be in the best interest of the seller.
“If I’m not getting paid, I may not be as motivated,” Blefari said in justifying the rationale for cooperative compensation. “It’s in the best interest of the seller to have as many buyers as possible.”
Based on this testimony, Ketchmark said that part of the conspiracy is that the brokerage defendants have an economic incentive to enforce this rule so they make money on the buy side of real estate transactions.
Exposure to more buyers gets sellers best price
Blefari disagreed with Ketchmark’s comment, stating that the rule is good because requiring seller’s agents to put listings on the MLS after initiating marketing gets sellers the most exposure to buyers, which is likely to get them the best price.
Ketchmark then posed an example where a seller agrees to pay their agent 3% in commissions and the seller’s agent finds a buyer who wants to pay $300,000 for his home. The seller’s agent then finds a buyer at their local church and receives a $9,000 commission.
However, Ketchmark noted, if the seller’s agent brought a flier to the church to advertise the home, the agent would have had to put the listing on the MLS and potentially pay a buyer’s agent another 3%, meaning the seller would have lost $18,000 of the total sales price to commissions.
While Blefari acknowledged this scenario is possible, he noted that in a hot market, having a listing on the MLS could net the seller $350,000 for the house. That’s the right thing to do as the fiduciary, he added.
However, not putting the house on the MLS, “you, as a Realtor, just screwed yourself” on price, Blefari said.
Next, Ketchmark questioned Blefari about why an agent would need HomeServices’ CEO telling them they must put a listing on the MLS and pay more commissions to the buy side agent. Blefari responded that the seller can put any number they want as the buyer’s agent commission, and that the only companies that benefit from pocket listings are big companies that have a lot of listings.
Keller Williams, the final defendant in the suit, is expected to make its case later this week, with jury deliberation beginning as early as next Monday.
Editor’s note: Keep checking HousingWire.com for ongoing, live coverage from Kansas City from our editorial team on the commission lawsuit trial.
