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A video of the first public address by the new National Association of Realtors CEO abruptly vanished Wednesday morning before resurfacing again in the evening with a slight, but significant, modification regarding NAR’s history of commission-setting.
At 8:05 a.m. Central on Wednesday, Jan. 30, Chicago-based NAR sent out an email to its members in which new NAR President Kevin Sears touted the launch of NAR’s sixth “That’s Who We R” national consumer advertising campaign.
He also linked to a two-minute video featuring NAR’s new interim CEO, Nykia Wright, “setting the record straight on commissions in light of persistent misinformation on that subject.” Sears encouraged the trade group’s more than 1.5 million members to share the video with their own social networks.
NAR posted the video to its competition.realtor site, gave it a dedicated page on nar.realtor, and posted it to its own social networks. But by around two hours later, the video had disappeared from those websites. Inman was able to capture a screen recording of the video from a tweet before that link stopped working as well.
“[T]he notion that the National Association of Realtors controls what real estate professionals get paid is wholly untrue,” Wright says in her debut video as NAR CEO. “NAR does not set commissions. It never has, and it never will. Period, end of story.”
Then, at just after 5 p.m. Central, NAR sent out another email to members titled “Update on Nykia’s Video” in which Katie — almost certainly NAR Chief Legal Officer Katie Johnson — informed them the video was once again live on NAR’s website.
The updated video contains exactly one change. The original video said: “NAR does not set commissions. It never has, and it never will.”
The new video says: “NAR does not set commissions. And it never will.”
The change reflects that NAR has indeed set commissions in the past — a fact apparently not caught until after the original video’s release. A 1983 study by the Federal Trade Commission called “The Residential Real Estate Brokerage Industry” (sometimes referred to as The Butters Report), details NAR’s history of using fee schedules, pointing out that before 1950, it was against the association’s code of ethics to charge less than a standard commission rate.
This video blunder seems to be just the latest example of the real estate industry’s most powerful trade group in turmoil, fighting scandals, multiple lawsuits, the departure of several high-profile leaders and an investigation by the U.S. Department of Justice.
NAR did not respond to multiple requests for comment for this story.
NAR isn’t actually being accused of commission-setting
On Oct. 31, in a historic verdict in a case known as Sitzer | Burnett, a jury found that NAR and franchisors Anywhere, Keller Williams, RE/MAX, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, conspired to inflate broker commission rates paid by homesellers. The jury awarded $1.78 billion in damages to a class of approximately 500,000 Missouri homeowners.
This case challenges NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service. NAR has stood by the practice of listing brokers making offers of compensation to buyer brokers.
In a phone interview, Michael Ketchmark, lead counsel for the plaintiffs in Sitzer | Burnett, told Inman they were not accusing NAR of setting commissions — a fact borne out at trial, which Inman attended.
“The odd thing about that video is it is defending the National Association of Realtors against something that they haven’t been accused of,” Ketchmark said.
“Nobody’s accused NAR of setting commissions. What they were found responsible for and guilty of is having rules and a process by which competitors can stabilize commissions and there’s just no question that that was done. They didn’t deny that the rules were being used to stabilize commissions [in that video] because they are.”
None of the ever-rising pile of other commission lawsuits against the trade group accuse NAR of setting commissions either, but rather of using its rules to raise, inflate or stabilize commissions. Price-fixing, which NAR is being accused of, does not require an explicitly set price, according to Cornell’s Legal Information Institute.
Even before NAR replaced the original video, Ketchmark pointed out to Inman that NAR had “a long history” of setting commissions, but that’s not what’s being litigated in the courts.
“They used to actually have commission cards that they’d pass out to the Realtors,” Ketchmark said. “That was a long time ago. But that’s not what’s at issue in this case. They know that. They can’t defend the rule under the law that exists today, so they want to shift the debate to something other than what’s really going on.”
Blaming lawyers and reporters
In both videos, Wright says, “The real estate profession has been vilified by certain plaintiffs’ lawyers, sensationalized by a few reporters and misrepresented by people who know little about this business.”
Wright is the former CEO of the Chicago-Sun-Times. Asked how the real estate profession has been sensationalized, by which reporters, and whether Wright mean to vilify reporters for their work reporting on the lawsuits or if there was some other intention behind that reference, NAR did not respond.
Regarding the mention of plaintiffs’ lawyers, Ketchmark said, “They’re in full scramble mode because they’ve been caught with their hand in the cookie jar. They’re putting up videos, issuing press releases, personally attacking the lawyers.
“You learn it early on in practicing the law, if the facts are on your side, you argue the facts. If the law’s on your side, you argue the law. If you don’t have either on your side, you pound the table, and they’re pounding the table right now.”
Competition from a new association
Ketchmark’s theory as to the motivation for NAR’s release of the video is that the trade group fears losing agents to new competition.
“The irony of ironies is that I think the reason they’re on the run now is because … there’s competitors are out there who are talking about setting up trade associations that are actually going to do the right thing and the proper thing which is not be used as a vehicle for fixing prices,” Ketchmark said.
“And there’s a lot of real estate agents that are excited about that. My office has been flooded with comments from supportive Realtors and brokers around the country who are very happy about the fact that there’s going to be an alternative for them.”
Many agents complain that they’re compelled to join NAR in order to access their local MLS.
“The big problem is that they’re making a quarter of a billion dollars a year … by forcing these agents to join their association in order to help people sell homes and agents are starting to wake up and realize they don’t have to do that anymore,” Ketchmark said.
“Competition is tough, but welcome to the free market. I think that’s why they’re doing it. The money they’re making off of this … they’re terrified that’s gonna go away.”
Asked whether the video was intended to dissuade members from leaving NAR, NAR did not respond.
In the videos, Wright mentions “a new association,” almost certainly referring to the American Real Estate Association (AREA), founded by Mauricio Umansky of The Agency and Compass agent Jason Haber and announced at Inman Connect New York last week. The two founded AREA as a response to the scandals and legal trouble they say NAR has not properly handled.
“We welcome competition from anyone who can match our impact and deliver the kind of value we bring,” Wright said in the video.
In a phone interview, Haber told Inman that that’s exactly AREA’s goal.
“I agree,” Haber said. “I think competition is a good thing. I have tons of respect for Nykia. I think she’s a great leader and I completely agree with her.”
Haber said he didn’t know what the intention was behind releasing the video but that if it was to encourage agents to stick with NAR due to the launch of AREA, that he thought that was “great.”
“Because if we can in some way help make them better, I would love that,” Haber said. Neither he nor Umansky believe that NAR has to fail for AREA to thrive, he added.
“If they make some changes and can thrive again, I think that’s amazing,” he said.
Asked whether he thought the video would be effective at accomplishing anything, Haber said, “I don’t know. I think it’s good that they released a positive message and certainly a message that I agree with.”
Focus on buyer agents – but no mention of who should pay them
Wright spends nearly half of the video telling viewers that the internet is not a replacement for Realtors’ “essential services.”
“A real estate transaction is not a simple click-and-purchase like buying a plane ticket online,” Wright said.
“Most Americans choose to use a real estate professional when buying or selling a home, not because they’re required to, but because of the help that one provides in navigating the challenges that are a part of the process of buying or selling a home.
“No amount of scrolling on the Internet can replace having a professional by your side during what can be a complex, unfamiliar and lengthy process. We take pride in the work we do and will continue to help sellers walk away having sold at a competitive price. And buyers get the keys to their dream homes.”
In response, Ketchmark indicated that once again NAR is defending against an argument that hasn’t been made. The crux of the matter is who pays and whether that amount has been unlawfully inflated, according to Ketchmark.
“NAR has this huge desire to argue that somehow the plaintiffs’ attorneys want to do away with buyers’ agents,” Ketchmark said.
“That’s just not the case. What we’re saying is that NAR needs to get out of the business of being a means for competitors to stabilize prices. When they’re bringing buyer brokers together and seller brokers together and these corporations together to stabilize prices, that’s the problem that they have.
“This is not a lawsuit that’s against buyers’ agents or buyers’ brokers. This is against forcing sellers of homes to pay for it. And they know that. They absolutely know that’s what’s going on here. They’re just trying to shift the story to something that they hope they can defend. Because obviously they can’t defend their conduct.”
Below is a transcript of the original video:
I’m Nykia Wright, the CEO of the National Association of Realtors, and I want to set the record straight about our industry and the women and men who make it their profession.
The real estate profession has been vilified by certain plaintiffs’ lawyers, sensationalized by a few reporters and misrepresented by people who know little about this business.
First, the notion that the National Association of Realtors controls what real estate professionals get paid is wholly untrue. NAR does not set commissions. It never has, and it never will. Period, end of story. But there are many things NAR actually does to help our members better serve buyers and sellers.
Second, there’s some talk about a new association. We welcome competition from anyone who can match our impact and deliver the kind of value we bring.
Finally, let me make one thing abundantly clear. The internet can be a tool, but it is not a replacement for the essential services agents who are Realtors provide. A real estate transaction is not a simple click-and-purchase like buying a plane ticket online. Most Americans choose to use a real estate professional when buying or selling a home, not because they’re required to, but because of the help that one provides in navigating the challenges that are a part of the process of buying or selling a home.
No amount of scrolling on the internet can replace having a professional by your side during what can be a complex, unfamiliar and lengthy process. We take pride in the work we do and will continue to help sellers walk away having sold at a competitive price. And buyers get the keys to their dream homes. I invite you to find out more about us at the website below. And I look forward to continuing the conversation.
What do you think of NAR’s video(s)? Please let us know in the comments below.
Email Andrea V. Brambila.
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