Brokers fear losing commissions, agents if lawsuits succeed: Survey

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In November 2017, Christopher Moehrl sold a house.

The home was located in Shorewood, Minnesota, and Moehrl used a RE/MAX agent to represent him. A Keller Williams agent represented the buyer. Moehrl and his agent listed the home in the Northstar MLS, and when the deal went through, Moehrl paid a 6 percent commission, 2.7 of which went to the buyer’s broker.

Court documents that mention the sale provide few other details about the deal, so presumably it was pretty standard. Many millions of home sales happen every year in the U.S., most of which involve a pair of agents and, in the end, a commission.

But Moehrl was apparently not thrilled with what went down because in 2019 he did something that made the sale of his house one for the history books: He and his attorneys sued the real estate industry’s biggest players.

That suit, now known simply as Moehrl after its plaintiff, is still ongoing and is one of two bombshell cases that have the potential to topple the real estate industry’s status quo. Broadly speaking, the cases accuse the industry of carrying out a “conspiracy” — the word is mentioned more than 30 times in Moehrl’s complaint and more than 70 times in Sitzer/Burnett, the other bombshell case — that among other things requires sellers to pay commissions to buyers’ agents.

The homesellers who filed the suits believe that the National Association of Realtors and major industry franchisors such as Anywhere and Keller Williams are breaking antitrust laws by enforcing these commission norms.

The lawsuits have sent shockwaves through the industry since they were filed. But with trials looming in both cases — Sitzer/Burnett is scheduled for October while Moehrl will likely happen early next year — Intel wanted to know how real estate professionals feel. Will the cases really upend the status quo? Are brokers preparing now? What might happen to agent pay if the homeseller-plaintiffs win?

To find out, Intel recently published its first bombshell commission lawsuit survey. The survey ran for a week and ultimately racked up more than 1,000 responses, most of them from agents and brokers at companies with head counts of 50 or more. And a couple of very clear takeaways emerged from those responses.

First, most see the commission lawsuits as big deals with many also believing they could reduce both income and the number of agents working in the industry. The consensus, in other words, is that the cases will have a negative impact on today’s real estate practitioners.

However, despite a somewhat ominous consensus view on the cases, many in the industry are also waiting to do much about them for the time being. Action is not exactly widespread, with many survey respondents instead framing the issue as a medium-term challenge.

Real estate pros think the lawsuits are a big deal

Possibly the most significant finding of all from the survey was the simplest: The overwhelming majority of respondents think the bombshell cases are a big deal. More specifically, when asked to rate the significance of the lawsuits on a scale from one to five with five being the most significant, just shy of 60 percent chose five. Another 22.6 percent chose four.

That means more than 80 percent of respondents believe the cases are very serious business.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

The survey also revealed some ambivalence about the suits’ outcomes. Most respondents, or about 54 percent, expect the parties to settle the cases rather than for either side to publicly win in a trial.

Additionally, when asked how confident they were on a scale from one to five that NAR and the other defendants in the cases would prevail, more than 40 percent of respondents selected three. The answer garnered more than twice as many responses as any other option in the question, and the results indicate industry members aren’t exactly placing bets on one side or the other to notch a clear victory.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

It’s not surprising that the bombshell cases are making waves.

But it is eyebrow-raising that nearly everyone in real estate thinks these cases are as big a deal as they possibly can be and no one is certain about the outcomes. It wasn’t so long ago that the real estate establishment was so entrenched and had so many legal options with which to counter the suits that, when talking to industry members, the status quo seemed inevitable. Today, however, industry members don’t appear to be presuming that anything is inevitable.

Less money, fewer agents

One possible explanation for the consensus that the bombshell lawsuits matter so much is that agents and brokers widely believe the cases could have a negative impact on their businesses. For example, 47.3 percent of respondents said that if NAR and the other defendants lose the cases, the respondents’ businesses will make less money. Slightly fewer thought their businesses wouldn’t suffer, but only 8.3 percent thought a loss by the real estate establishment would lead to them making more money.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

In a similar vein, most respondents — or 54.5 percent — believe their agent counts will fall if NAR and the other defendants in the cases lose. Just over 41 percent thought that their agent counts would stay the same after such a loss, while a mere 4.3 percent of respondents indicated they’d actually increase their agent count if NAR and the major franchisors lost.

Put more simply, a clear majority of respondents believe their companies will shed agents if the real estate establishment loses. That’s a significant finding; sure people have been saying as much anecdotally lately, but the survey’s results suggest this is actually the consensus view in the industry.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

Unsurprisingly, a vast majority of respondents, or nearly 65 percent, also believe that a loss by NAR and the major franchisors will most severely impact brokerages and franchisors rather than other organizations, such as Realtor associations and multiple listing services (MLSs).

However, respondents do believe the impacts will be widespread. For instance, when asked on a scale of one to five how much the bombshell lawsuits might impact the real estate technology landscape, a plurality of respondents selected five to indicate the maximum possible impact.

The survey also asked respondents to identify what they believe will be the largest single consequence of the lawsuits for a variety of the industry’s policies and practices. Among the choices provided in the question, a plurality of respondents — or 29.1 percent — indicated a belief that “NAR and other industry groups will lobby to have buyer agent commissions rolled into the mortgage.”

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

The second most popular response, garnering 21 percent of responses, was that “commission-sharing will become optional or be banned outright.” And the answer that landed in third place, with 18.8 percent of responses, was that “buyer agent commissions will fall.”

Like the findings on pay and headcount, these results suggest that brokers are bracing for a high degree of disruption. A ban on commission-sharing would represent a sea change for the real estate industry and upend decades of established practice. And the idea that commissions could be rolled into a buyer’s mortgage, though potentially preserving something close to today’s homebuying experience, could require building new financial and regulatory frameworks.

Action has been slow to materialize

Though the survey makes clear that real estate professionals see the commission lawsuits as a big deal and as potentially being bad for business, it also reveals — somewhat surprisingly — that a lot of people are apparently waiting to take action. One question, for instance, asked respondents how many hours they’ve spent this year on training and planning efforts in response to the cases. But a plurality of respondents, or 35.2 percent, said they had only spent between one and five hours preparing so far in 2023.

Nearly as many respondents, or 33.8 percent, said they haven’t spent any time at all planning and training for the suits’ fallout.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

Similarly, 63 percent of respondents indicated that they have not spoken with an attorney, and have no plans to do so, about the suits’ potential impact on their businesses. Only 13.3 percent indicated that they plan to speak with a lawyer at some point.

A plurality of respondents, or 48.8 percent, also said that their MLS hasn’t yet reached out to inform them about the lawsuits. That compares to 36.8 percent who have heard from their MLSs. Interestingly, 14.5 percent indicated that they could not remember if their MLS had reached out or not.

One of the most curious findings from the survey further revealed that, despite a consensus that the suits really matter, many respondents also apparently believe that awareness is not particularly widespread. Specifically, only 30.5 percent of respondents said “most” of the agents at their company are aware of the lawsuits. Meanwhile, nearly 25 percent indicated that fewer than half the people at their firms know about the suits.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

None of this means that no one is doing anything. One question, for example, asked about changes to the industry before the cases are decided. In response, a plurality of the survey takers — or about 40 percent — indicated a belief that “more MLSs will eliminate the rule requiring that listing brokers offer buyer brokers a commission, making commission-sharing optional.” That’s a change that has already begun to happen, most notably with BrightMLS’s decision in July to let sellers’ brokers list properties without offering a commission to buyers’ brokers.

Evidently, many real estate professionals believe other MLSs will follow suit.

About a quarter of respondents also indicated a belief that “more brokers will start requiring buyer agents to use buyer agency agreements” — something that another survey question revealed is already standard at nearly half of the respondents’ companies.

On the other hand, 22 percent of respondents said that “nothing will change before the lawsuits are decided.”

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

Still, another question asked respondents about the timeline for making changes to their businesses. A plurality of the industry members who took the survey — or 34.6 percent — believe they’ll have to do something within the next one to three years. And another 33 percent said they might have to make changes within the next three to six months.

However, 27.2 percent of respondents did indicate that they’re making changes now.

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Source: Inman Intel commission lawsuit survey | Chart by Jim Dalrymple II

Clearly, some real estate professionals are doing something now to prepare. More than a quarter of the survey respondents indicated that they’re already taking action.

But also, more than two-thirds of respondents appear to see the commission lawsuits as a medium-term challenge, rather than an immediate issue. This survey question about timelines consequently works as a companion to the other question (mentioned above) about policy or practice changes, where a plurality said they weren’t doing anything. And together, both questions suggest that there is a widespread wait-and-see attitude in real estate regarding the bombshell suits’ outcomes.

Perhaps at this point, that’s all that can happen; though there are ideas about how to deal with changes, such as lobbying to include commissions in mortgages, it isn’t yet clear how badly such ideas may be needed or to what extent the status quo may fall — if it falls at all.

Still, the survey shows that the real estate industry is bracing for major and potentially painful changes. And with the trial dates for both the Moehrl and Sitzer/Burnett cases fast approaching, the hour of truth may be nigh.

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