Unpacking the Burnett v. NAR Verdict: A Game-Changer for Real Estate

Today, we’re delving into a major legal development in the real estate world that’s poised to shake things up. Let’s take a closer look at the Burnett v. NAR et al case and its potential impact on the industry.

Legal Battle Royale

In a pivotal legal showdown, a federal jury in Kansas City delivered a verdict in the Burnett v. NAR et al case. The National Association of Realtors (NAR) and other major players, including powerhouse Keller Williams, were found liable for an alleged conspiracy to manipulate real estate commissions. The plaintiffs were awarded a whopping $1.78 billion, a sum that could potentially be tripled by the presiding judge, resulting in an amount just under $5.4 billion. Additionally, the judge may mandate the NAR to dismantle its purportedly anti-competitive regulation. This development throws a curveball at the traditional structure governing compensation for buyer’s agents.

The Plaintiffs’ Claim

At the core of the dispute lies the assertion of the plaintiffs, who argue that existing real estate commission rates are excessively high. They contend that buyer brokers receive an unfair share, and that the rules and practices of the NAR and its corporate counterparts artificially inflate pricing. Central to the debate is an NAR rule stipulating that home sellers must offer to cover the commission of the agent representing the buyer when listing their property on a local Multiple Listings Service.

Four-Year Legal Odyssey

The case has been a protracted affair, spanning four years in the federal judicial system and culminating in a two-week courtroom showdown. The jury, after deliberating for just under three hours, rendered their verdict. All defendants have expressed their intention to appeal.

What Comes Next?

Should the court opt to invalidate the NAR’s commission-sharing rule, it could potentially mean that buyers would directly compensate their agents. The underlying rationale is that this shift would compel buyer’s agents to compete for commissions, theoretically resulting in cost reductions for both buyers and sellers.

Differing Viewpoints

The NAR offers an opposing viewpoint, asserting that the century-old rule shields buyers from incurring immediate costs for brokers, which some may find financially burdensome. They argue that without the commission-sharing system, many buyer’s agents may find it financially untenable to continue offering their services. Conversely, the plaintiffs point out that in other countries, buyers seldom engage brokers, with negotiations, appraisals, and closings predominantly overseen by mortgage lenders and seller’s agents.

Charting a New Course

It’s too early to tell how, but the Burnett case seems sure to disrupt the entire real estate industry. The NAR and local realtor associations are actively exploring alternative avenues to clarify how buyer’s agents are compensated. This may include offering buyers the choice to proceed without representation or to negotiate for a reduced commission. Notably, the Louisiana Realtors Association is contemplating legislative measures in the 2024 Louisiana Legislative Session to mandate the use of Buyer Broker Agreements.

In conclusion, the real estate landscape stands on the cusp of transformation. As stakeholders navigate this uncharted territory, we’ll continue to monitor and provide updates on this evolving saga. Stay tuned for further developments!

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Everett Fineran, Esq.