A Phil Hall Op-Ed : I just did a Google News search for the phrase “real estate” and I came up with a remarkable collection of headlines from major news outlets. These headlines and their sources included the following:
“After a $1.8 billion verdict, the clock is ticking on the 6% real estate commission.” – CNN
“A Class Action Suit Could Upend the Entire Real Estate Industry” – NPR
“Lawsuit Against Real Estate Brokerages, Realtors Will Reshape Home Buying” – Business Insider
“How the Real Estate Broker Business Could Change” – The New York Times
I have to give credit to headline writer at The New York Times for not assaulting readers with clichés and broad assumptions – their headline simply stated the real estate broker business could change, not that it would and not that the entire industry will be shaken up.
Still, these are not the kind of headlines that the real estate industry wants to see online – and we can thank that wave of bad press on last week’s verdict in the Sitzer/Burnett case involving the National Association of Realtors (NAR). That trade group has been harvesting bad press this year – there is still the residue of sexual harassment media reports that percolated in August, plus Redfin’s decision to pull out of NAR and the recent news that the U.S. Department of Justice is trying to void a 2020 settlement in order to pursue new antitrust litigation.
So, how can the industry in general – and NAR in particular – come up with a crisis management strategy to address the negative coverage? As someone who ran a public relations agency for 10 years, my advice is simple: time is your ally.
Okay, NAR probably doesn’t need that particular advice because it seems to be focused on the same strategy. As Mantill Williams, NAR vice president of communications, told CNN, “This matter is not close to being final as we will appeal the jury’s verdict.”
Indeed, the case could easily find its way up to the U.S. Supreme Court – and if that entity maintains its pro-business conservative-majority set-up, there is an excellent chance that the final verdict will be in NAR’s favor. While getting to the Supreme Court will be a long and costly journey, smart money would go on NAR having the final victory in this fight.
As for the Justice Department’s itching to launch more antitrust lawsuits against NAR, that also has to go through the courts – another lengthy process. And if a certain real estate developer is back in the White House come January 2025, I suspect that the department will shift its focus away from NAR.
As for the brokers, there is a lot of speculation regarding what could happen next. The New York Times quoted some fatalistic analysts at Keefe, Bruyette & Woods who forecasted that “as much as 30% of the industry’s commissions could disappear” and “lower fees could drive down the number of U.S. agents as much as 80%.” But that could only happen if the industry panics and starts to realign its fee structures before the next NAR trial starts – and that doesn’t appear to be happening.
One consideration that the media coverage is not citing is the lack of consumer opinion on this issue. The American public is not fixated on changes in how real estate brokers concoct their fees – with elevated mortgage rates, home prices at record highs and inventory at record lows, people are happy that they can buy a home. If there is a controversy about broker fees, it exists with the government lawyers and the financial media, not the homebuyers and sellers.
NAR faces another trial in Illinois early next year (the Moehrl case) and it will be interesting to see how the trade group’s lawyers learn from the Sitzer/Burnett case in how they present their evidence and frame their arguments. Until such time, the industry should put a “to be continued” sticky note on the subject and go about doing its important work.
