NAR won’t use lobbying chops for ‘legislative fix’ to commission suits

At a forum for reps of 50 large brokerage firms, The Realty Alliance CEO Craig Cheatham asked why the nearly 1.6 million-member trade group can’t use its political influence for an “existential threat.”

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The National Association of Realtors is a lobbying powerhouse, but there’s no clear “legislative fix” to the ever-rising pile of antitrust commission lawsuits launched against real estate organizations and brokerages.

That’s according to Shannon McGahn, NAR’s chief advocacy officer, who spoke at the 50 Large Firm Directors Forum at NAR’s annual conference, NAR NXT, in Anaheim, California, this week. The forum was put on by NAR’s Real Estate Services Advisory Group.

McGahn referenced the Sitzer | Burnett case, which went to trial last month and returned a historic verdict against NAR and major real estate franchisors.

On Oct. 31, after less than two and a half hours of deliberations, a Kansas City jury found NAR, Keller Williams, Anywhere (formerly, Realogy), RE/MAX, HomeServices of America and two of its subsidiaries BHH Affiliates and HSF Affiliates conspired to inflate broker commission rates paid by homesellers, awarding the plaintiffs nearly $1.8 billion in damages, which will be tripled by law to nearly $5.4 billion.

McGahn said that NAR had been educating lawmakers about the suit.

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Shannon McGahn | Photo credit: NAR

“The No. 1 comment that we’re getting from folks on the Hill is ‘What is going on? Can you brief us on what is happening with the class action suit? How can we better understand the issues?’” McGahn told conference attendees.

“The second comment we get is ‘How can we help?’ The first and most important thing is that they’re educated on what the process looks like and that there’s an appeal that will be in the works and understanding the economic and consumer facts of the case.

“We’ve had incredibly positive feedback from everyone we have met with.”

Craig Cheatham, president and CEO of brokerage network The Realty Alliance, probed McGahn on the offers of help from representatives and senators.

“What is the conversation internally about a legislative solution to our lawsuit problem?” he asked.

According to McGahn, because Sitzer | Burnett and other, similar suits are going through the court system, it’s unclear what change can be made legislatively to affect them.

“With this being a class action suit before a jury there’s there’s not much that a federal official is going to do in that area,” McGahn said, noting that NAR had been providing lawmakers with information and resources to understand the ramifications of the suit and having discussions around financing buyer representation.

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Craig Cheatham

Still, Cheatham pressed. He pointed out that NAR’s political action committee, RPAC, is on track to meet its goals and “flush with money” from member donors.

“We went to the mat on banks and real estate,” Cheatham said. “We were ready to go the mat on mortgage interest deduction [and] the 2008 downturn tax credit. We’ve got this handy lever. I think brokers just want to know: Can we pull that lever in this situation? This is an existential threat for the organization. Is this not a time to try?”

But McGahn reiterated that she wasn’t sure what legislative action was needed “when this is going through a different process” and NAR feels “very confident” about its appeal and that what it is doing is lawful.

The NAR rule Sitzer | Burnett and other suits are challenging under the Sherman Antitrust Act is 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.

Cheatham asked: Why can’t NAR seek a carveout of the Sherman Antitrust Act for real estate?

McGahn repeated that NAR does not believe it is violating the law, so she wasn’t “sure exactly what change would be occurring there.”

Katie Johnson, NAR’s chief legal officer, also stopped by the forum briefly and said NAR would be proving that the “way that consumers have been served over the past 100 years is very lawful and continues to be lawful.”

Kathryn Johnson

Katie Johnson

She told attendees she would take “no questions” and “if you have questions you can call me” and she could address those questions “one-on-one.”

Attendees did end up insisting on a couple of questions, one from a Florida broker who asked if the fact that most brokers in that state were transaction brokers would matter to the cases (Johnson said no, because the cases were about the use of the MLS).

Cheatham also asked at what point NAR would try to move Sitzer | Burnett from being analyzed under per se to rule of reason. Johnson said that would be when the trade group appealed to the Eighth Circuit.

Email Andrea V. Brambila.

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