In the real estate industry, the past eight months of work culminated Tuesday when Judge Stephen R. Bough gave the final approval National Association of Realtors‘ (NAR) commission settlement agreement.
Although many in the industry had their complaints when the Nov. 26, some were very confident that this would be the result.
“That settlement is ongoing,” said Marx Sterbcow, managing attorney Sterbcow Law Grouphe told HousingWire earlier this month.
Based on Bough’s decision, which was filed Wednesday, he also felt strongly about giving the NAR final approval.
“Given the many uncertainties of the ongoing litigation, significant recovery and something favors approval of the proposed Agreements,” Bough wrote. “As discussed above, the case was difficult and expensive, and if it continues without resolution it will remain so. If unsettled, the Redeemed Defendants are likely to present multiple challenges on appeal. The Court has seen firsthand the complexity and cost of this case.”
Additionally, Bough did not find that there was strong enough opposition to consider an alternative to approval. According to his decision, more than 491,000 class members filed, with 36 opposing and 39 withdrawing.
In his decision, Bough said he made the decision to waive all objections, but faced common concerns among the applications. In defending his decision to certify the class nationwide, he wrote that it was warranted “because the plaintiffs have learned so much about the allegations of a nationwide conspiracy and have completely refuted these claims, providing a strong record of testing the claims and underlying arguments. “
“Statewide settlement was a necessary condition to obtaining any settlement for the benefit of the class, statewide settlement would save legal and private resources, and Class members were fully informed of the meaning of the settlement clause through the notice process,” added Bough.
He also faced criticism for financial damages to be paid by NAR once HomeServices of Americawho approved and his place of residence.
“The NAR and HomeServices Settlements also have only partial restitution that the class has received, or may receive, with respect to claims arising out of the alleged conspiracy,” he wrote. ”Specifically, Class Counsel has obtained other settlements with other defendants than those previously approved by this Court, and has ongoing litigation against other defendants. Although some Class members have argued that they may not be recouping every dollar they paid to real estate agents, that’s the kind of settlement, which shows a compromise.”
This decision also highlighted that the amount of money was not the only factor included in this compensation. The NAR also agreed to “major changes in practice.”
Bough’s final decision on the settlement came despite a last-minute filing Department of Justice (DOJ). In a statement of interest filed Sunday evening, less than 48 hours before the final approval hearing was set to begin, the DOJ objected to a payment provision that requires buyers to sign a seller representation agreement before visiting a home with an agent. The DOJ believes that consumer agreements have the potential to “restrict how sellers compete for customers.”
“They are very similar to prior restrictions among competitors that courts have found to violate antitrust laws in other practices and may restrict — rather than enhance — consumer competition among consumers,” the DOJ wrote.
The DOJ also noted that approval of the settlement “does not prevent any future enforcement actions by the United States, and compliance with the proposed settlement or new NAR rules implementing such settlement does not provide immunity from any such enforcement actions.”
While Bough did not specifically address the DOJ filing, he wrote that “the changes to the NAR Settlement were developed in consultation with industry experts in economics and real estate. Associate Advisor has extensive expertise in fiduciary and has developed a knowledge of the real estate industry based on detailed factual findings and research and extensive research.”
A bleak future
Due to the DOJ’s statement of interest, a veteran of the real estate industry and San Diego MLS CEO Saul Klein has mixed feelings about Bough’s decision.
“The completion of the proposed agreement is a good thing because you get closure on one side,” said Klein. “But is it good news? I think it’s great news and it leaves people with a lot of questions.”
For Klein, many of these questions pertain to consumer representation agreements that the DOJ has now clarified are in its possession.
“As Realtors, for years we have been very afraid of not being trusted. We knew that talking about commissions was not a good thing, but now with these agreements and what the DOJ wrote, it is so unclear that it is difficult to say what is a violation or what is not,” said Klein.
“I’m glad that I don’t have to make a decision on whether or not I agree with this court decision, which the DOJ has clearly stated that they are not arrested and have concerns about.”
In an ideal world, Klein would like to find out more about how the DOJ views consumer representation agreements as an antitrust problem. He said there is a possibility that only certain types of agreements (such as special or multi-month deals) present problems in the eyes of the DOJ. But he’s not optimistic, especially considering such clarification can only come after the DOJ files suit against the NAR.
Unfortunately for the industry, you see this as a real possibility.
“I wouldn’t be surprised if the DOJ is ineffective in some way in the next 60 days,” Klein said. “In 2018, as soon as the 2008 consent decree expired, they held hearings, so I would expect the same. I think the next shoe to drop will be something from the government – the DOJ or the Federal Trade Commission.”
Klein is not alone in his beliefs.
“Now one wonders if the DOJ will take the case to the appeals court,” said Steve Murray, the organization’s founder. RealTrends Consulting “That’s definitely a possible option.”
Despite this dire warning, Murray believes the Trump administration’s involvement will lead to a softening of the DOJ’s approach to the NAR. But because the DOJ’s latest investigation into NAR began under the Trump administration, some are less optimistic.
While the future remains uncertain, even with the NAR deal approved, industry experts agree that the ongoing antitrust saga is far from over. “I’m one that thinks it’s not over until it’s over – and this is not over,” Murray said.
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