Buyer agents in the post-Burnett world must be more precise in their conversations with clients, while also being able to provide updated information on what’s happening in the legal realm regarding residential real estate sales. And getting contracts with new buyer clients that spell out how much they will be compensated is also crucial.
Those were two of the major points made in a virtual seminar titled “Answers to Your NAR Lawsuit Questions” held on Nov. 28 by Kriss Law/Atlantic Closing & Escrow in Needham, Massachusetts. President and CEO Scott Kriss led a discussion about how buyer agents should be adjusting to the Burnett class action trial in which a jury found that real estate power players conspired to inflate commissions in violation of federal law, awarding $1.78 billion to the plaintiffs.
“The decision is being appealed, and that process will take a great deal of time,” he began. “However, regardless of the appeal outcome, things are going to be different. In order to avoid litigation, you and your brokerage need to implement changes immediately.”
Kimberly Allard, an award-winning REALTOR® with CENTURY 21 Professionals in Braintree, Massachusetts, provided much of the information and suggested strategies going forward.
“None of us want to raise our hands and say, ‘Oh yeah, I did something that might have risen to the level of an antitrust violation,’ but whether we like it or not, the jury deliberated for less than three hours to come to a conclusion that they said we are in violation. So I think what we take from that is that we as practitioners (agents) have done an abysmal job of communicating what it is that we do because a jury didn’t deliberate on our innocence or our guilt. They deliberated on the amount of the fines. We need to face the fact that the jury did not feel any compassion for our industry.
“(Plaintiff lead attorney) Michael Ketchmark took a statement of a REALTOR® telling a seller that offering compensation was in their best interest and it was a company policy, and twisted it into a statement that sellers must offer compensation because nobody will show their listings if they don’t get paid a minimum amount. And that is in fact an antitrust violation. It alleges that we as practitioners sit together with other practitioners of different brokerages and talk about what a minimum fee is. Even though the initial intent was to market the seller’s property in a way to make it most attractive to eligible buyers, and was never to fix fees or set minimum fees, we were unsuccessful in making that argument.”
To that point, Allard stressed that MLS listings don’t necessarily need to change, but certain words within do, such as ‘customary’ and ‘standard.’
“We can’t in any way, shape or form allude to our customers or even express that there is a standard fee,” she said. “You have a company policy in your brokerage, you can refer to that all day long, but you cannot say that there is a standard or a customary fee because that implies that you have talked to other practitioners and set fees.”
Allard stressed that buyer agents now need to have a discussion with buyers that lead to contracts with them. “Your buyers hire you, and you agree to your fee at that time,” she said. “You can no longer be running around with buyers and just say, ‘Oh, I hope there’s something in the MLS that I’ll get paid from,’ because this is essentially what Ketchmark and these lawsuits are alleging, that no one’s discussing compensation with their buyers. That buyers don’t know they’re being charged, or are they? And then buyer agents are negotiating fees with listing agents behind the back of the buyer that’s supposedly their client.”
Lawsuit knowledge is crucial
It was stressed time and time again in the seminar that agents should be up to date not only regarding what happened in Burnett vs. NAR, but also be able to explain it precisely to clients. That means going past the legalese and talking about what the consequences are, what the jury decided, and how it impacts the anticipated transaction in regard to who pays commissions to the listing and buyer agents.
Shant Banosian, executive vice president of Guaranteed Rate in Waltham, Massachusetts, was also a speaker, and he talked about the importance in the current market of agents educating themselves and clients, and reinforcing the crucial role buyer agency plays in residential real estate.
“There’s almost no type of business out there where representation outside of real estate is not available to people when they’re buying and selling and transacting anything,” he said. “Representation is a very important thing, so I think ultimately we just have to be very clear in communicating expectations around what we bring to the table. Document all of it properly within compliant guidelines. Have a lender that’s going to communicate to your clients. It’s making sure clients understand all their options in the financing world, understand their budget and all that will be needed. With everything going on in the market, clients need to be nurtured and advised more than ever.
“That’s how we’re going to separate ourselves in this business. All of these different things that happen create opportunity, and the people that are able to get educated properly are going to be the ones who stand out for years and years to come. Get really comfortable and confident being able to communicate everything to clients, whether they’re on the selling side or buying side, and partner up with people that are going to have your back during this time.”
Allard ended the event by again emphasizing that while brokerages and companies cannot conspire to set prices, each individual brokerage can have its own rules and commission rates.
“Brokerages are allowed to set their own policies,” she said. “I can set a policy for compensation and commission for my own office. What I can’t do is tell a seller that I have the right to limit or set a fee for another agency. The language we need to adopt is that ‘My brokerage fee is this. This is the fee we get paid.’ What I have no control over is what amount, if any, does a seller want to offer to another brokerage? And if they ask you how much that number should be, say you don’t know, that you don’t set fees for other offices, but you may reflect on what your own fee is. You never want to state that that fee is standard.”
