Opinion Provided By Anthony Phillips | Realtor
I am a member of NAR, and for full disclosure, I am not an attorney. I reviewed the various complaints and performed research, discovering information that could aid in the defense.
In my view, Plaintiff (Conti-CA) makes misleading claims and adds assertions to muddy the waters.
“Requiring every seller‐broker, when listing a property on an MLS, to make a “blanket unilateral offer of compensation” to any buyer agent who may find a buyer for the home;”
This is misleading; compensation is not paid to Agents who “find a buyer for the home.” Commissions are earned upon an Agent procuring a Buyer who successfully closes on a transaction that includes mutually agreed terms and conditions. This is not an adversarial transaction, despite how Attorneys try and frame it. Sellers want to sell; Buyers want to acquire, and Agents facilitate.
Moreover: “Requiring that the offer of compensation to the buyer agent be a blanket offer — i.e., the exact same compensation terms must be simultaneously offered to every buyer agent without regard to their experience, the services they are providing to the buyer, or the financial arrangement they have made with the buyer;”
If a Buyer’s Agent procures a Buyer who successfully acquires a residence at a price and terms agreeable to the Seller, then “compensation terms must be simultaneously offered to every buyer agent without regard to their experience” is irrelevant. This also suggests Plaintiffs assume Buyers are too incompetent to select an Agent that can represent them well, despite hundreds of online review websites.
Furthermore, I challenge these “high power” law firms to name a profession where compensation is not established upfront.
Additionally, they claim “NAR’s requirement that offers of compensation be expressed in specific dollar or percentage terms enable buyer agents to easily compare the financial compensation offered to them by home sellers and steer their clients to higher commission homes.”
Would the Plaintiff’s counsel share an alternative method for conveying compensation? Maybe the Peso so Agents would take extra steps using currency converters?
In the same complaint, Plaintiffs assert, “According to data from the NAR, many homebuyers no longer locate prospective homes with the assistance of a broker, but rather independently through online services. Buyer agents increasingly have been retained after their client has already found the home the client wishes to buy.”
These assertions obliterate the Plaintiffs’ allegations of massive steering. If a Consumer finds a home, and a Realtor refuses to show the house, the Consumer will find another Agent. Zillow had 9.8 billion page views in 2020.
Plaintiffs assert commissions percentages have maintained consistent over the years and that advances in technology should reduce commissions while mentioning a few industries favorable to their argument. This claim fails as commissions have declined over the prior 30 years, as shown in the following graph.
Plaintiffs’ counsel conveniently omits that the legal profession, which has maintained a customary 33% contingency fee despite IBM LegalMation AI software that “helps legal teams draft high-quality litigation work in minutes and drive down costs by 80 percent.”
Commission Modification Rules
“Even if a home buyer were to obtain enough information to negotiate a lower buyer agent commission, NAR’s ethics rules expressly prohibit buyer agents from attempting to reduce buyer agent commissions offered on MLSs through the submission of purchase offers.”
Nothing precludes Agents from negotiating fees pre-offer, and commissions can be adjusted via addendums/escrow fee credits post executed offer, which happens often to offset home inspection repair item costs. Plaintiffs MUST provide one single transaction in MLS history where a Buyer’s Agent attempted to credit Buyer Agent commissions to the Buyer and was denied.
Furthermore, a purchase offer that conflicts with the terms of the listing agreement would create an “intentional interference with the contractual relations” scenario between Listing Agent and Seller.
Also, “After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction.”
The keyword is “unilaterally.” Nothing impedes Agents from negotiating commission structures to aid in closing a transaction. Should the listing Broker have the ability to receive an offer and reduce commission cooperation to zero despite the Sellers’ contractual commission obligations per listing agreement? How would this benefit the Seller, Buyer, or Buyers Agent?
The most significant allegation is that a conspiracy exists between NAR members to use the MLS to create a supracompetitive pricing scheme, and decoupling agent commissions (each Consumer pays their agent) would result in a significant decline in commission structures.
This claim fails.
1st Plaintiffs attempt to frame the argument based on the percentage of the sale price when the fees to transact are a superior factor. Consumers bank dollars, not percentages. Moreover, they emphasize Singapore as an example of a market with lower commission percentages.
In a three-minute discovery session, I researched the US v Singapore markets, and these are my findings.
- The average price of a US residence totaled $389,400 (based on 2019 data.)
- The commission paid, based on the US average of 4.94%, totaled $19,236
- The average price of a Singapore residence totaled $874,372 USD.
- The commission paid, based on the Singapore average of 3%, totaled $26,231 USD.
Moreover, some publications suggest there is commission sharing between Buyer/Seller Agents in Singapore. Again, Consumer’s bank dollars, not percentages, it appears that the Plaintiffs’ counsel is oblivious to this variable. Plaintiffs’ hyper-focus on percentages are a feeble attempt to create an apples-to-apples comparison to other markets; however, the information included in this opinion renders these claims defective.
It is MORE expensive to transact in Singapore.
I have found no evidence that decoupling reduces commissions. As shown in the following images, I discovered the opposite based on a 2015 study by the Wall Street Journal. The WSJ articles display in the first position when performing a simple Google search; however, I have yet to see WSJ commission studies cited in any complaints. Alternatively, they cite studies from 2002. Furthermore, the US average rate is only slightly higher than the 10-Country average.
Data | WSJ
Moreover, requiring Buyers to pay commissions/fees upfront vs absorbing via a mortgage may result in the end of FHA and VA loan programs as these loans are specifically for Consumers who likely do not have the 20% down required for conventional loans.
If Plaintiff Conti sold a residence prior to acquiring the residence named in the complaint, then by Plaintiffs assertions, Conti engaged in a conspiracy to force the Buyer to pay an inflated commission.
Furthermore, the argument of who pays commissions is irrelevant and undeterminable because Sellers will claim they are deducted from net proceeds while Buyers will claim it is baked into the purchased price, thus commissions are paid by Buyers. Even the various class-action claims conflict regarding the party paying commissions.
Obtaining a motion to dismiss and counterclaiming in the Conti case will impact all other cases. It is time to inflict an overwhelming response. My legal teams are exploring our options to counter-claim all Plaintiffs.
Regards, Anthony Phillips
President | Realtor