Iowa Perspective: Burnett v. NAR Verdict

On Tuesday, October 31, the jury in the Burnett v. The National Association of REALTORS® class-action commission lawsuit returned a verdict in favor of the plaintiffs, awarding $1.78 billion in damages and determining that a group of home sellers were harmed by the commission rules and practices. 

While this jury completed its work, the case is far from over. NAR, along with HomeServices of America and Keller Williams Realty, maintain they have not colluded to inflate or maintain high commission rates. The pro-consumer Broker cooperation rules have elevated an untold number of Americans into homeownership. 

We understand that you may have questions and concerns following this verdict. This is your livelihood and one of the benchmark rules in our industry. We want to answer your questions and provide reassurance. 

Know this fight is not over. NAR plans to appeal and is already seeking a reduction in damages awarded to the jury. However, this is a long process and final resolution is likely years away. 

While we await next steps, know that the real estate market in Iowa continues to be stable and business will carry on. 

Following the jury's verdict on Tuesday, plaintiffs filed a nearly identical lawsuit in the Western District of Missouri. This lawsuit, which also names NAR, was filed against seven major brokerages: Compass, eXp, Redfin, Howard Hanna Real Estate, United Real Estate, Douglas Elliman and Weichert Realtors.

The new lawsuit is just the latest in this line of legal battles. Another commission lawsuit, Moehrl, is set to proceed in Illinois in early 2024. Each of these lawsuits alleged that the common practice of listing brokers paying buyer broker commission unfairly inflates costs to sellers. They contend that cooperation is effectively non-negotiable, resulting in a conspiracy to set prices in violation of federal antitrust law.

This is an inaccurate and harmful belief. We urge you to remind buyers and brokers that commissions are negotiable. Per Article 3 of the REALTOR® Code of Ethics: “The obligation to cooperate [with other brokers] does not include the obligation to share commissions, fees, or otherwise compensate another broker.”

In Burnett, the trial lawyers were able to sway the jury and convince them that this was not enough, though we know that it has worked correctly and in favor of agents for decades. 

While the prospect of paying billions of dollars in damages is unfathomable, it is equally distressing to know the impact this lawsuit will have on generations of homebuyers in Iowa. 

Homeownership is a cornerstone of the American Dream and should be accessible to all Iowans. Eliminating cooperation for homebuyers will mean fewer Iowans are able to afford homes or the professional representation they need to embark on, perhaps, the largest purchase of their lives. 

The ramifications of the Burnett trial means there could be changes to compensation and how buyer’s agents are paid. With that, many first-time, low-to-moderate income homebuyers in Iowa could be squeezed out of the market or lack quality representation to help guide them through a life milestone. 

We know that homeownership is a conduit to building wealth. In Iowa, over the last five years, homeowners on average gained roughly $92,000 in equity. We also know that it is in the best interest of all Iowans that prospective buyers are able to purchase their own homes, as economically the purchase of a typical home in Iowa helps boost the state’s economy by $74,600 on average.

Despite this week's verdict and the long legal road ahead, the Iowa Association of REALTORS® and its members are dedicated to elevating homeownership in the state by providing resources and education not only to REALTOR® members but all Iowans. But, first we must start with you. 

As REALTORS® we are obligated to put clients first, but brokers also deserve to be fairly compensated for their hard work and professional duties. IAR will be an advocate for you, always. We are working to create clear, robust and workable forms that adapt to our changing circumstances. We will continue to champion the protection of private property rights, pro-consumer policies and your ability to operate your business as a REALTOR® in Iowa. 

We strongly suggest that you: 

  • Educate your clients on the services you provide and value you bring to the homebuying journey. 
  • Negotiate compensation between brokers. 
  • Execute buyer representation agreements. 

While NAR and IAR believe that we will prevail in the long run with the Burnett case and similar lawsuits, we must be clear-eyed about the future. There will be changes in the real estate profession. Over the coming months and years, IAR will be at the forefront of any changes to make sure your business and the real estate profession continues to be pro-consumer and the high level of professionalism that we expect of Iowa REALTORS®. 

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