Realogy

Apache is functioning normally

Despite her initial misgivings, Boston U.S. District Court judge Patti Saris granted preliminary approval of MLS Property Information Network’s (MLS PIN) settlement agreement in the class action buyer-broker commission antitrust lawsuit.

In court documents filed last Thursday, Saris approved the agreement, stating that the releases in the agreement were “fair, reasonable, and adequate to the Settlement Class.”

Originally filed in December 2020, the Nosalek lawsuit, named after its lead plaintiff, alleges that the broker-owned MLS PIN is not directly required to abide by the National Association of Realtors (NAR) rules. However, it has nonetheless adopted a rule similar to an NAR rule requiring listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to MLS PIN.

Other defendants in the lawsuit include Anywhere, RE/MAX, Keller Williams and HomeServices of America. Unlike the two other buyer-broker commission lawsuits, Moehrl and Sitzer/Burnett, NAR is not a defendant in the Nosalek lawsuit. Additionally, while Anywhere has filed settlement agreements in the Moehrl and Sitzer/Burnett suits, it has not tried to settle the Nosalek suit.

MLS PIN, which is New England’s largest multiple listing service (MLS), filed the settlement agreement in late June. In the agreement, MLS PIN denied any wrongdoing, but stated that it agreed to the settlement in order “to avoid the further risk, expense, inconvenience, and distraction of burdensome and protracted litigation, and thereby to resolve this controversy, to avoid the risks inherent in complex litigation, and to obtain complete dismissal of the Action as to MLS PIN.”

The MLS also agreed to pay $3 million in the settlement, with up to $900,000 going towards attorney’s fees, up to $200,000 going towards expenses, $250,000 going towards notifying settlement class members, and each of the three named lead plaintiffs will get up to $2,500 for being class representatives.

According to the settlement agreement, the plaintiffs will use the remaining funds of at least $1.6425 million to pay for further expenses for the litigation against the remaining defendants “for the benefit of Settlement Class Members.”

In early August, Saris expressed skepticism over the financial portion of the proposed agreement.

“I’ve never seen a settlement agreement like this in my 30 years,” Saris said at an August hearing.

With the payment structure outlined in the agreement class members in the case will not be getting any money from the settlement agreement, however the plaintiffs’ class-action attorneys, “get fully funded for expenses to date, and they basically get a litigation fund open-ended for the future for as long as it takes, which may be another three to five years,” Saris said. A final approval hearing for the settlement agreement is expected before the end of the year.

In an emailed statement, a spokesperson for MLS PIN said the firm was “pleased with the Judge’s decision to move the settlement forward,” but would not comment further.

Attorneys for the plaintiffs did not return a request for comment.

Source: housingwire.com

Apache is functioning normally

After looking at listings online, a prospective homebuyer typically reaches out to a real estate agent who then gives them a list of recommended lenders and LOs. But three multibillion-dollar class action antitrust lawsuits looming over the real estate industry may soon reshape how buyers interact with agents.

Some of the nation’s largest real estate brokerages, including Keller Williams, RE/MAX, HomeServices of America as well as the National Association of Realtors, are facing three class action lawsuits (NAR is only named as a defendant in two lawsuits) that could result in the industry paying out tens of billions in damages. Anywhere Real Estate just settled two of the cases for a total of $83.5 million, which suggests major changes could be on the horizon. 

The three class action suits Moehrl, Sitzer/Burnett, and Nosalek, named after their lead plaintiffs, take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a Realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR, however, contends that the current commission structure, which has been in place for over 100 years, actually benefits consumers.

“The buyers want the listing brokers to pay their buyer representative so they can have the most money invested in their down payment and get the best loan terms and rates possible,” Katie Johnson, NAR’s chief legal officer, said. “Sellers want their listing broker to pay the buyer broker’s compensation because it will result in the most buyers being able to afford their house.”

At a time when affordability is constraining first-time buyers from entering the market and interest rates are still expected to climb, “it’s going to do nothing but hurt the potential buyer,” argued Michael Borodinsky, a vice president and branch manager at Caliber Home Loans.

“You’ve got current economic conditions that are not opportunistic for a homebuyer right now, inflation is still out there and it’s all constraining buyers’ ability to spend. So, if you take that, you add that to where mortgage rates are, which are currently at 20 year highs, you add that to the fact that as of today, there is a still a very, very big problem with housing inventory, which has put prices artificially higher than they probably should be in terms of valuation, the buyers are just going to be saddled with more pain”

It will be months or years until the final verdict in the three lawsuits comes out, but there will be clear winners and losers from the outcome, loan officers and housing industry experts said in interviews with HousingWire. If the traditional practice of sellers paying for both sides of the agents ends, housing agencies will have to weigh in to determine ways for buyers to finance their agents’ comp, LOs noted. 

Reshaping the home selling and buying process

Although Johnson anticipates a lengthy appeals process with all of these lawsuits, round one of the fight is quickly approaching. Sitzer/Burnett is scheduled to head to trial in mid-October and Moehrl is expected to head to court in the first half of 2024 with Nosalek most likely following shortly thereafter.

When the day comes that a final verdict is reached, Steve Murray, the co-founder of RealTrends Consulting sees three possible outcomes.  

“Worst case scenario, the broker representing the buyer will have to negotiate their own fee with their client and the seller can no longer be compelled to make a blanket offer of compensation in order to list on the MLS,” Murray said.

“The second thing that could happen, is that more and more buyers will go directly to the listing agent, in which case they are clearly unrepresented. The third thing that would happen is a whole new kind of buyer brokers arise that charge an hourly flat fee to represent buyers,” according to Murray.

In light of Anywhere’s recent settlement, Murray believes the other defendants may also consider settling the suits. 

But Ken Trepeta, the president of RESPRO, is holding off on making any predictions. It might depend on the terms spelled out in the settlement agreement, which still aren’t public yet, he said. 

“If they are settling this and it goes away and they don’t admit wrongdoing and there is no requirement to change policies,” he said. Potential damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit could reach up to $40 billion.

(An attorney for the plaintiffs in the Moehrl case said Anywhere will be making significant changes to its policies, but did not offer specifics.)

For its part, NAR says it is not giving up the fight.

“Settlement is always an option for any party in litigation. NAR’s commitment to defend ourselves in court remains unchanged and we are confident we will prevail in proving the lawfulness of the rules under attack. Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Mantill Williams, NAR’s vice president of communications, wrote in an email to HousingWire.

If buyer brokers and agents are no longer involved in most real estate transactions, as Murray suggests is a possibility, LOs and lenders who rely on agent referrals for transactions could have a smaller target group to focus on.  

“There will likely be fewer Realtors, the sales volume will be handled by fewer Realtors. But if you’re an originator, that simply means that your target group is now smaller,” said Brian Hale, CEO of Mortgage Advisory Partners. “If you’re not dealing with the top producing agents or teams in the industry, you may find that your client has gone away.”

Loan officers may increasingly place more importance on reaching consumers directly especially when a buyer takes initiative in the homebuying process rather than relying on agents. 

“If there isn’t a buyer’s agent involved – who’s just going to oversee step-by-step – I think consumers are going to take a little bit of that control back because they’re not willing to pay an agent for that level of hand holding and walking them through. So, they’ll reach out and they’ll find the companies that are publicly known as consumer-direct lenders,” said Mike Roberts, the co-founder of City Creek Mortgage. 

TV, billboard and radio ads are traditional ways to reach consumers directly in hopes that borrowers will think of the lender when it’s time to buy a home, Roberts explained. 

As industry players have begun preparing for a variety of potential outcomes in these lawsuits, some agents say they have seen lenders work to develop their consumer-facing marketing.

“I have seen some of the top loan officers go much more direct to the consumers,” said Gretchen Pearson, the broker-owner of Berkshire Hathaway HomeServices Drysdale Properties. “One of the top loan officers in the nation has set up webinars that he does four times a week and he is building up his own pipeline.”

Finding a way for buyers to finance their agents’ commissions is one of the critical issues that loan officers raise should the traditional practice of sellers paying for both agents’ commissions goes away.

The government-sponsored enterprises (GSEs) including Fannie Mae and Freddie Mac as well as the Federal Housing Administration (FHA) would likely have to weigh in, loan officers said. 

“I think that’s the most important thing so that these buyers don’t get impacted negatively by their inability to have sufficient funds for a down payment,” Borodinsky said. “Because otherwise it’s going to sort of end the whole concept of  how we define closing costs, because now we’ve got to add that in as almost as another tax or a fee.”

If Fannie Mae and Freddie Mac were to count the buyer’s agent fee as a seller contribution, listing agents would have more power in the homebuying and selling process, Roberts noted.

“I think listing agents are going to win. Agents who know how to get listings are going to win because buyers are gonna go straight to the listing agent and ask the listing agent to write a contract to present to the seller,” Roberts said.

Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development didn’t respond to HousingWire’s questions about whether they would come up with a mechanism to help buyers finance agent commissions. 

“There is a potential of buyers having to directly pay buyer brokers and that could impact the lending side, and I know they are aware, but I am not aware of them taking any action,” Johnson said. “And maybe that is intentional because there might not be an immediate need for action.”

HousingWire reached out to the top 10 mortgage originators to comment on the impact commission lawsuit results could have on the mortgage industry. Wells Fargo, Pennymac, U.S. Bank Home Mortgage and Planet Home Lending declined to comment. Others didn’t respond.

Plenty of buyers still want a personal advisor

Although buyer’s agency commission may disappear or greatly slowdown, Murray believes the relationship between real estate agents and LOs will remain integral to the transaction.

“If buyer brokers agency goes away, I am not sure that the habit of referrals will go away or change too much,” Murray said. “Buyers will still rely on an agent, whether it is a listing agent or their own buyer broker to get a recommendation on mortgage companies.” 

A significant number of consumers want a trusted advisor, Patrick Lamb, CEO of On Q Financial, said.

“They want somebody who knows the market, they want somebody who is advocating for them, and who is going to coordinate and go, drive around town and look at all these houses and do all the legwork. There’s some value in that,” Lamb explained.

A conclusion to these three lawsuits is not expected to come for several years. Industry experts believe there will be multiple appeals, giving real estate brokerages and lenders time to consider their options.

“I think it’s a tangential benefit. Whatever ruling likely comes out of this, you can’t change the world in 24 hours. It’ll take time for this to evolve through, there will likely be challenges, there could be appeals. You don’t know how all this goes,” Hale said. 

What is certain is that many current LOs would have to reconsider how they get referrals and leads if the environment changes, he explained. And not all would fare well.

“[Only] a minority of LOs are very savvy and very smart about how they pursue referrals. If many of the current LOs in our industry don’t change the way they’re searching for referrals and/or leads in this kind of an environment, they have a high likelihood of becoming extinct.” 

Source: housingwire.com

Apache is functioning normally

Anywhere Real Estate’s settlement agreement in two class action antitrust lawsuits dealing with buyer broker compensation raises important questions about the future of buyer’s agency and how other defendants are viewing the fast approaching trials.

Top of mind, of course, is what exactly the settlement agreements include, besides an agreement by Anywhere to pay a total of $83.5 million in damages for both the Moehrl and Sitzer/Burnett suits.

Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapiro LLP, which represents the plaintiffs in the Moehrl suit, said the “settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged.” However, the exact terms of the settlement won’t be known until the plaintiffs file a motion to approve the settlement agreement. Anywhere declined to comment on the exact terms of the agreement.

Meanwhile, Steve Murray, the co-founder of RealTrends Consulting, said he believes the changes Anywhere proposed to make could mark the end of buyer broker compensation as we know it.

“As far as cooperation and compensation, that is now pretty much over,” Murray said. “The biggest combined brokerage company in the country in terms of all their brands, just said, ‘We’re out. We are not going to defend this case anymore,’ so that will definitely lead to changes.”

Murray sees three possible outcomes for the lawsuits.

“Worst case scenario, the broker representing the buyer will have to negotiate their own fee with their client and the seller can no longer be compelled to make a blanket offer of compensation in order to list on the MLS,” Murray said. “The second thing that could happen is that more and more buyers will go directly to the listing agent, in which case they are clearly unrepresented. The third thing that would happen is a whole new kind of buyer brokers arise that charge an hourly flat fee to represent buyers,” according to Murray.

In preparation for these outcomes, Berkshire Hathaway HomeServices Drysdale Properties broker-owner Gretchen Pearson said she has been working with her agents to implement buyer’s agency agreements.

“If an agent files a buyer’s agency agreement for me, the broker, to review, the work flows just aren’t there in our document management system,” Pearson said. “The software we use isn’t built that way.” Therefore, it won’t just impact agents, but technology systems, she added.

While the lawsuits’ potential impact on buyer’s agency and buyer broker compensation is the largest question looming, Murray also wonders how the settlement agreement will impact Anywhere’s many franchise owners.

“Will the plaintiffs now just go and start suing individual Coldwell Banker franchises?” he posited.

When asked how the agreement would impact its affiliates, Anywhere highlighted a line from their initial statement.

 “Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees,” the company said.

Murray said he believes this could be the start of more settlements to come from the other defendants in the suit.

“They are all going to be running for settlements now,” Murray said. “I think this is a floodgate moment for sure.”

Ken Trepeta, the president of RESPRO, is holding off on making any predictions, suggesting it might depend on the terms spelled out in the settlement agreement.

“If they are settling this and it goes away and they don’t admit wrongdoing and there is no requirement to change policies,” he said. Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.

The National Association of Realtors, a defendant in both lawsuits, says it is not giving up the fight.

“Settlement is always an option for any party in litigation. NAR’s commitment to defend ourselves in court remains unchanged and we are confident we will prevail in proving the lawfulness of the rules under attack. Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Mantill Williams, NAR’s vice president of communications, wrote in an email to HousingWire.

The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having many buyer brokers participating in that local marketplace, NAR noted. 

For buyers, the NAR argues these marketplaces save them the burden of extra costs at closing, allowing them to get professional representation and make homeownership possible for more people. 

Keller Williams, RE/MAX, and HomeServices of America, the lawsuits’ three other defendants, declined to comment.

The Sitzer/Burnett lawsuit is scheduled to head to trial on October 16, 2023, while a trial date for the Moehrl lawsuit has yet to be set, but it is expected to take place in early 2024.

Originally filed in 2019, the Moehrl and Sitzer/Burnett lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.

Source: housingwire.com

Apache is functioning normally

Real estate giant Anywhere has reached a settlement agreement in two of the major class action antitrust lawsuits facing the housing industry.

According to court documents filed on Tuesday, Anywhere Real Estate and the home sellers suing the firm in both the Moehrl and Sitzer/Burnett cases, which both deal with buyer brokers’ commissions, have reached a preliminary settlement agreement, settling all claims in both suits. Before the agreements are finalized they must be approved by the U.S. District Court judges in Illinois (Moehrl) and Missouri (Sitzer/Burnett), who are overseeing the two lawsuits.

No details about either agreement were disclosed in the filings, but attorneys for the plaintiffs in the Moehrl lawsuit told HousingWire the agreement for both lawsuits was a total of $83.5 million, as the two plaintiff classes negotiated the settlement together.

“The monetary settlement was the most that could be obtained in light of Anywhere’s available financial resources. Critically, the settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged,” Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapirio LLP, wrote in an email. “Our antitrust team looks forward to continuing to pursue additional relief against remaining defendants for those who have been systematically overcharged for simply selling their homes in an already unstable housing market.”

Anywhere asked the court the firm be excused from the pretrial conference on the Sitzer/Burnett suit, scheduled for this coming Friday. The Sitzer/Burnett suit is slated to head to trial on October 16, 2023.

A trial date has yet to be set for the Moehrl lawsuit.

“We are pleased that Anywhere has reached a nationwide settlement with the plaintiffs in the Burnett and Moerhl lawsuits,” an Anywhere spokesperson wrote in an email. “The path to obtain final approval and implement the settlement is a long one, and Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees. We believe the settlement will remove future uncertainty with respect to the upcoming trial, potential additional claims, and legal expense, enabling Anywhere to focus on and continue delivering what’s next for agents and franchisees. Given ongoing legal proceedings and confidentiality agreements between parties, we cannot comment further at this time.”   

Anywhere is just one of the many defendants in these lawsuits, which also include Keller Williams, RE/MAX, HomeServices of America and the National Association of Realtors.

The two lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.

Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.

The other defendants in the suits have yet to file settlement agreements.

Attorneys for the plaintiffs in the Moehrl suit did not return a request for comment.

Source: housingwire.com

Apache is functioning normally

A little over a month after filing an agreement in one of the ongoing buyer broker commission lawsuits, New England’s largest multiple listing service (MLS), MLS Property Information Network (MLS PIN)’s attempt to settle the Nosalek case, has hit a snag.

Originally filed in December 2020, the Nosalek lawsuit alleges that the broker-owned MLS PIN is not directly required to abide by the National Association of Realtors (NAR) rules. However, it has nonetheless adopted a rule similar to an NAR rule requiring listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to MLS PIN, which has over 46,000 subscribers.

Nosalek is one of three ongoing class action lawsuits deal with buyer broker commissions. However, unlike Moehrl and Burnett, NAR is not named as a defendant.

Judge Patti Saris, the U.S. District Court judge in Boston presiding over the Nosalek case, expressed skepticism over the financial portion of the proposed agreement during a preliminary hearing to consider approval of the agreement on Wednesday.

“I’ve never seen a settlement agreement like this in my 30 years,” Saris said.

In the proposed agreement MLS PIN said it would pay $3 million, change its commission policies, and cooperate against the remaining defendants in the suit, which include Anywhere, RE/MAX, Keller Williams and HomeServices of America.

According to the proposed settlement, of the $3 million MLS PIN has agreed to pay in the settlement, up to $900,000 will go toward attorney’s fees, up to $200,000 will go toward expenses, $250,000 will go toward notifying settlement class members, and each of the three named lead plaintiffs will get up to $2,500 for being class representatives. The remaining $1.6425 million would be used to pay for further expenses for the litigation against the remaining defendants “for the benefit of Settlement Class Members,” according to the filing.

With this payment structure, class members in the case will not be getting any money from the settlement agreement, however the plaintiffs’ class-action attorneys, “get fully funded for expenses to date, and they basically get a litigation fund open-ended for the future for as long as it takes, which may be another three to five years,” Saris said.

Saris asked the Robert Izard, an attorney for the plaintiffs, if there was a way to give some of the $3 million paid by MLS PIN to class members. She said that this was the part of the settlement she is “struggling with.”

According to Izard, there are well over 300,000 class members and if the court awarded the plaintiffs’ attorneys their expenses to date, plan a 30% fee that would add up to between $1.5 million and $2 million, meaning that class members would get less than $5 each.

While Saris said she found the argument “persuasive,” she questioned why the settlement would cover plaintiffs’ attorneys’ fees for dealing with all of the defendants and not just their costs for dealing with MLS PIN. In his response, Izard said it was unclear if there would be a way to fairly divide the time the plaintiffs attorneys spent with just MLS PIN.

Moving forward, Izard said the money would be held in an attorney trust account until his firm asked the court to approve the expenses at “an appropriate time.”

Saris said that she had never done something like that before, but said it was “very creative.” She also noted that she “loves” the proposed rule changes in the settlement, which would make the offering of compensation to buyer brokers optional. The changes are contingent on the settlement’s approval.

“I do love what you’ve accomplished,” Saris said. “I had problems with that [rule], so I denied the motion to dismiss and I think two other courts did as well.”

Saris added that she also “loves” the idea of ending the practice of requiring listing brokers to offer compensation to buyer brokers “so that at least it stops the damages. The other defendants might like that, too. It sort of caps it, if you will. I do think the rule change is important and congratulations. I’m just worried here about the fairness … of how you’ve structured it, which is the individual plaintiffs get no dollars.”

Instead of the proposed financial arrangement, Saris suggested that the plaintiffs’ attorney get paid some of their fees to date and take the rest of the money and put it in a pot. If the plaintiffs won the case, the post would grow and then it would be divided among the plaintiffs, and if the plaintiffs lost, the pot from the MLS PIN settlement would be what the plaintiffs received minus a “fair” attorney fee.

The plaintiffs’ attorneys have until September 5 to either redraft the settlement agreement or brief Saris on cases with similar settlements.

“I do ideally want to do this as quickly as possible because I actually think that the rule change is a good thing,” Saris said. “I don’t want to be the person who blows that up.”

Source: housingwire.com

Apache is functioning normally

A multiple listing service settled a lawsuit challenging Realtor commission rules for $3 million, a possible harbinger for several ongoing actions by home sellers alleging listing requirements are anticompetitive.

The case, Nosalek v. MLS Property Information Network, had class action status and was filed in the U.S. District Court for Massachusetts. Only the MLS agreed to a settlement, according to a June 30 legal filing. Other defendants in the case, both franchisors and brokerages, were not part of the agreement.

Sellers, along with the Department of Justice, are pushing for a major change to the real estate industry’s compensation structure that both its proponents and opponents agree will affect every party involved in home buying. 

“​​Life after all of this is gonna be quite different,” Dennis Norman, a real estate broker and owner of More, Realtors, said. “And I don’t know if NAR survives because we’re talking about massive, massive amounts of money.”

Rules by the National Association of Realtors and associated multiple listing services, which are databases real estate brokers use to list and search for properties, are at the crux of all three major lawsuits — Nosalek v. MLS PIN, Sitzer v. NAR and Moehrl v. NAR. All three cases cite the Sherman Antitrust Act.

The Nosalek plaintiffs didn’t sue NAR, although they did go after realty companies like Century 21, HomeServices of America and Keller Williams. Their initial complaint, filed in December 2020, cites MLS PIN rules on Realtor commissions that say listing brokers must include a fee for the buyer’s representation on each property. 

This is because of a coupled compensation structure: most home sellers pay for both the buy-side and sell-side broker fees. 

Sellers who don’t offer a fee on the MLS PIN can’t list their home on the service. The lawsuit says this complicates the selling process because buyer agents use the MLS to search for their clients and popular websites like Zillow also use it for their home listings.

Another complaint in the lawsuit says if sellers offer a lower-than-normal fee, buyer agents can see this on the MLS and will likely steer their clients away from the listing. 

As part of the settlement, MLS PIN agreed to change its rules on the topic, eliminating the compensation listing requirement. They will also require brokers to inform buyers that they can negotiate the buyer-broker fee and inform sellers that they can elect not to pay it. 

HomeServices of America and its affiliates recently filed for summary judgment on the case, arguing there’s no evidence the company conspired with the MLS PIN to inflate commissions. 

Both the Sitzer and Moehrl cases contain similar complaints, but are focusing on the NAR as well because of its strong influence on listing service rules: 97% of regional MLSs are affiliated with the NAR and follow its code of ethics, according to by T3 Sixty, a real estate consultant firm. 

If the Sitzer and Moehrl lawsuits compel NAR to uncouple with MLSs as some industry voices like Norman are expecting, on top of large damages, the organization and its local chapters would lose their major draw: member-only access.

“I think that’s almost the last bullet for the associations,” Norman said. “MLSs are gonna have their challenges too… but they still have what everybody wants and they’re good for the consumer.”

How Realtors get paid
Coupled commissions have been around for a long time. With this system, home sellers pay their listing broker 5% to 6% of the final sale price after closing. That commission is then divvied up evenly between sell-side and buy-side agents, who interact with the customers, and their broker agencies. The majority of each half goes to the agent.

For example, after selling a $300,000 house, a seller pays $15,000 in Realtor fees. Agents receive $6,000 each and their brokers $1,500 each for the sale. The buyer doesn’t pay any fees.

“The whole compensation system doesn’t make a lot of sense,” Steve Brobeck, a senior fellow at the Consumer Federation of America and a self-described public interest advocate, said.

Why are Realtors compensated this way? It evolved from the original system used in 1908 when the first iteration of NAR, the National Association of Real Estate Exchanges, was founded, according to a report by T3 Sixty. 

Back then, the industry relied on an exclusive representation system: sellers hired a single listing broker for a fee. Buying brokers were sub-agents of listing brokers, and both sides had a fiduciary duty to sellers. When property sold, listing agents gave their sub-agents a portion of the commission fee.

Eventually, the industry moved away from the subagency model to properly align fiduciary duties, but it didn’t move away from coupled compensations.

“It’s a weird system,” Ann Schnare, a former Freddie Mac executive who ran a study on the compensation structure, said. “Admittedly, it wouldn’t be the first to come to mind, but the fact is that’s what exists… changing it, I think, would be unnecessarily disruptive.”

The NAR has a similar outlook: it resists the lawsuits’ efforts to outlaw shared commissions because they say it’s optional and the rate is negotiable.

Critics of the system like Brobeck point to uniform commission rates despite this negotiability. Brobeck found that in 24 cities across the country, 88% or more of home sales had buy-side commission rates between 2.5% and 3% in a CFA report.

Source: Consumer Federation of America

“This rate uniformity is striking evidence of the lack of price competition in the residential real estate industry,” Brobeck said in the report.

Other antitrust lawsuits
Legal action over commission fees began in 2018, when a 10-year settlement between the DOJ and the NAR expired. Before crafting a new agreement, the DOJ and Federal Trade Commission held a joint workshop about competition in the real estate industry.

In 2020, the DOJ filed a new lawsuit against the NAR under the Sherman Antitrust Act and simultaneously settled with the association. The settlement required several changes to NAR’s code of ethics to provide “greater transparency to consumers about broker fees.”

The settlement banned buyer brokers from advertising their services as free unless they receive zero compensation from any source. It also prohibited these brokers from searching MLSs by filtering out properties with low commission fees and pushed for greater transparency on those sites.

Because of the settlement, many MLSs began to publicly post commission fees for each property. Redfin and Zillow followed suit. For the first time, homebuyers saw how much their agent would earn from each listing.

But then, the DOJ pulled out of the settlement in 2021 because it prevented them from investigating the association’s rules further. 

The Moehrl and Sitzer lawsuits popped up around the same time as the DOJ’s initial workshop.

On March 6, 2019, Christopher Moehrl sued Realtor companies “for conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.”

Then, in April 2019, Joshua Sitzer and Amy Winger, Scott and Rhonda Burnett and Ryan Hendrickson filed a similar lawsuit in Missouri.

Both plaintiffs sued the NAR along with large national broker franchisors: Realogy (now Anywhere Real Estate), HomeServices of America, RE/MAX Holdings, and Keller Williams Realty, as well as HomeServices affiliates BHH Affiliates, HSF Affiliates and The Long & Foster Companies.

Real Estate Exchange, a real estate brokerage, also filed an antitrust lawsuit in 2021 against the NAR, Zillow and Trulia. The lawsuit alleges that Zillow’s search features prevent “transparent access to home inventory.”

Will cash-constrained homebuyers suffer?
NAR argues in press releases about the lawsuits that the coupled compensation system fosters market competition because it frees up cash for buyers, allowing them to make a larger down payment.

A study funded by HomeServices of America, a defendant in all three suits, supports the claim. It declares that unless lending changes come in tandem with revisions to this commission structure, it would hurt “minorities, lower income households, and first-time home buyers” the most.

Consumer advocates argue that agent fees won’t hurt buyers because their cost is currently built into home prices. If sellers no longer pay both agent commissions, home prices will fall, and buyers will have the same net cost. 

Schnare, one of the study’s authors, said because most finance their home with a mortgage, that’s not true.

“If everything was cash, it wouldn’t make a difference,” Schnare said. “What seems like a small adjustment can make a big adjustment on what they can afford to pay and, you know, potentially hurt the lower end of the market, but with ripple effects upwards.”

Brobeck says this concern is exaggerated, and that lenders will adapt accordingly: “the only reason that argument has any force at all is because the industry supports buyers not being able to finance their commission on the mortgage.”

But Schnare’s study found it’s not that simple. 

In order to avoid hurting cash-constrained buyers, lenders would need to change underwriting standards, specifically the loan to value ratio, which represents the borrower’s equity position in the property. This is the most powerful measure of default, the study says, and including an “extraneous factor” like buyer agent fees in the ratio could decrease its predictive accuracy. Schnare says government-sponsored enterprises, the Federal Housing Administration and the Department of Veterans Affairs are unlikely to approve of this change. 

Even if they did, it would “require regulatory approval and coordination across multiple parties along the mortgage supply chain,” so Schnare expects it to be a lengthy, expensive process. In the meantime, first time homebuyers would struggle to pay broker fees out of pocket.

“We have what we have, we’re not starting from scratch,” she said. “That’s a big ask for something where the benefits are not entirely certain.”

But the CFA and REX both dismissed the study, citing its funding and accusing it of a faulty premise.

Either way, the industry might be forced to change — both the Sitzer and Moehrl lawsuits are going to trial and many expect the plaintiffs to win. The Sitzer trial is scheduled for Oct. 16, and the Moehrl trial will likely begin early 2024. 

“I would not be surprised if there was a settlement before them in both cases,” Brobeck said. “And then the question is, will this settlement really lead to effective price competition?”

Source: nationalmortgagenews.com

Apache is functioning normally

If you haven’t heard of “Guaranteed Rate,” there’s a good chance you’ve never applied for a home loan before. Or maybe you just don’t live in the Midwest, where they’re headquartered.

Despite being from Chicago, they offer home loans to borrowers in all 50 states and Washington D.C., so they can be included in your mortgage search if and when it comes time to apply.

Their goal is to become the top retail mortgage lender in the country, which while ambitious, isn’t necessarily out of reach given their tremendous growth in such a short period of time.

The Relatively Short History of Guaranteed Rate

  • The retail mortgage lender was founded in the year 2000
  • Its headquarters are in Chicago, Illinois
  • They have roughly 4,000 employees and nearly 350 offices nationwide
  • One of the top-10 largest retail mortgage lenders in the country
  • Funded nearly $50 billion in home loans during 2020

While they’re a pretty big name in the mortgage world, they only got started back in the year 2000. That means they’re less than 20 years old, which is pretty short stint for a such a successful lender.

In 2020, they originated more than $48.8 billion in home loans, which should put them in or close to the top 10 in terms of total volume for all mortgage lenders.

Part of their growth can be attributed to acquisitions, including Manhattan Mortgage in 2012, and Sun State Home Loans, Nationwide Direct, Arbor Mortgage, and Firstrust Mortgage in 2014.

They also took over a call center and roughly 75 loan officers from Discover Home Loans after it went belly up in 2015.

Most recently, they acquired Stearns Lending, which funded roughly $7.6 billion in home loans themselves in 2019.

The move is a serious attempt to become the country’s #1 mortgage lender, though competition is certainly fierce as you near the top.

You might also recall that the company hired Ty Pennington of Extreme Makeover fame a while back to market the company.

A recent joint venture with Realogy’s real estate brokerage company NRT known as “Guaranteed Rate Affinity” has made them a major player in the home purchase financing market as well.

The lender also created another partnership with @properties known as “Proper Rate,” which will extend home loans to home buyers in select regions in the country, namely those represented by @properties’ 2,800 real estate agents.

And their latest JV is known as “OriginPoint,” an independent mortgage lender created with real estate brokerage Compass.

Guaranteed Rate boasts a very high customer satisfaction rating of 95% whom said they were “satisfied.”

Additionally, 94% said the company “made it easy for them to obtain a loan,” and 95% said they’d use the company again in the future.

This is similar to PrimeLending, which also touts one of the highest customer satisfaction ratings in the country for mortgage lending.

Getting a Mortgage with Guaranteed Rate

  • They have a fleet of mortgage loan officers you can search by name
  • And a few hundred branches in cities throughout the country
  • You can also apply online or via their smartphone app without assistance
  • And the home loan process is close to or fully digital in some cases

The company is a consumer-direct retail mortgage lender with what they call an “Intuitive Loan Finder.”

In my experience, it’s basically a lead form that gives you loan options after you answer the typical borrower and property-related questions.

They have since renamed it “GRafforable” in what appears to be an effort to show off their silly side.

They say the GRaffordable loan finder tool is the best mortgage calculator out there, which allows borrowers to gain access to real-time mortgage rates in seconds.

I gave it a whirl and it did indeed take just seconds to generate loan options including a “best match” based on my inputs.

The only drawback was that it didn’t list interest rates for all products displayed.

The good news is you don’t have to provide any contact information to get a bunch of real mortgage quotes in just seconds.

If you like what you see, you can apply for a loan or connect with a loan officer.

The company says it created a “Mortgage Pod” model that surrounds their LOs with a team of “highly-trained specialists” to ensure you’re in good hands.

They also have a “Loan Expert” search feature on their website if you know who you want to work with already.

Or you can simply contact a local branch near you if you want assistance from someone in your area.

Those who prefer to do things without much human interaction can just begin the process online and stay there the entire time if desired.

The company claims to have the “World’s First Digital Mortgage” with proprietary tools like their Transfersafe secure document transfer to streamline the process and eliminate paper waste.

They also say you can get an automated approval from Fannie Mae or Freddie Mac within minutes, likely a mortgage pre-approval, and you can apply for a mortgage using their mobile app.

Their “Red Arrow Approval Express” brings back same-day underwriting with “real approvals” generated in as little as four hours that are probably more robust than their automated pre-approvals.

And their “Appraisal Express” option delivers a home value within 48 hours of the appraiser’s visit to your property to cut down the lengthy loan process.

So it’s clear they’re big on technology and speed, similar to other major players like Quicken’s Rocket Mortgage and newcomers like SoFi.

Guaranteed Rate FlashClose

In light of the coronavirus pandemic, Guaranteed Rate wants you to know that they’ve got a contact-free digital mortgage experience from start to finish.

This includes options that limit or completely eliminate the time an appraiser needs to spend in your home or soon-to-be home.

The finishing piece is known as “FlashClose,” a technology powered by Notarize that allows borrowers to sign most of their closing documents either online or even from their smartphone or tablet.

This may also alleviate some of the stress of signing a bunch of loan documents in one sitting while a notary waits, giving you more time to review and ask questions.

Aside from allowing you to safely social distance, you also get an efficient, simple and secure experience from application to closing.

What Loan Options Does Guaranteed Rate Offer?

  • Home purchase, refinance, construction, and renovation loans
  • Conventional, government, jumbo, and non-QM loans
  • Fixed-rate mortgages and ARMs with various loan terms
  • Interest-only mortgages
  • Rate buydowns and long lock periods

They have a variety of different loan products available, including home purchase loans, construction loans, renovation loans, rate and term refinances, and cash out refis.

You can get a conventional loan backed by Fannie or Freddie, or a government loan backed by the FHA, USDA, or VA.

They participate in HUD’s Good Neighbor Next Door program, which allows law enforcement, teachers, firefighters, and EMTs to get mortgages with as little as $100 down payment.

Speaking of low down payments, they also offer a 1% down mortgage program, which combines the 97% LTV program with Fannie/Freddie and a 2% grant.

In the home improvement channel, you can get an FHA 203k loan or a Fannie Mae HomeStyle renovation loan to renovate and finance your property in one convenient loan.

Additionally, they have both conforming and jumbo loan amounts available to their customers in more expensive regions of the country, along with both fixed-rate loans and ARMs.

In terms of available programs, you can get a 30-year fixed, 20-year fixed, or 15-year fixed.

In the adjustable-rate category, they’ve got a 5/1 ARM, 7/1 ARM, and 10/1 ARM. They’ve also got interest-only options for those who believe their money is better spent elsewhere.

The Guaranteed Rate 2-1 Buydown

Guaranteed Rate also offers a 2-1 buydown, which offers a rate 2% below the note rate in year one, and 1% below the note rate in year two before returning to the actual rate offered.

For example, if you qualified for a rate of 5% on a 30-year fixed, you’d get a rate of 3% the first year, 4% the second year, and 5% for the remaining term.

When it comes to locking in your rate, they offer a “Lock n’ Roll” option that allows you to renegotiate your rate if interest rates go down.

Lock terms are also pretty lengthy, with 55-, 70-, and 85-day options available.

For those doing construction, they offer the “Lock n’ Build” option with lock periods as long as nine months, or 270 days.

I don’t believe they offer second mortgages or home equity loans/lines, which would be the only major product category missing here.

Guaranteed Rate Mortgage Rates

  • You can find their daily mortgage rates right on their homepage
  • They don’t appear to be noticeably higher/lower than most other major lenders
  • Check the loan assumptions to see what’s required for the advertised rates
  • And take the time to shop around if price is your number one concern

One thing I like about Guaranteed Rate is the fact that they advertise their mortgage interest rates right on their homepage.

This means there’s no guessing as to where they stand pricing wise. Of course, advertised rates always contain lots of assumptions, such as a specific credit score, loan-to-value ratio, and so on.

For example, their rates require a 25% down payment, as opposed to the typical 20% you often see advertised, a 740+ FICO score, and the property must be a one-unit primary residence.

In other words, you may not actually qualify for the rate seen on their website, though it should at least give you an idea if you compare their advertised rates to those of other lenders.

I felt their rates were in line with what other major lenders advertise – not necessarily cheaper or more expensive.

Guaranteed Rate Reviews

They have a 4.96 star rating out of 5 on Zillow, which is as close to perfect as you can get.

It’s based on more than 10,000 customer reviews, so the company has certainly been heavily vetted by those who have used them.

A good chunk of the reviews indicated that both the interest rate and closing costs were lower than expected, a good sign if you’re looking for the best deal.

You’d think with a name like Guaranteed Rate that the mortgage rate would be good, right?

At last glance, their Better Business Bureau (BBB) profile was rated ‘A’, with about 40 customer complaints over the past 12 months.

They are an accredited business with the BBB since 2009.

Those looking to dig even deeper should consider searching for individual loan officer reviews online.

Many if not all of their employees have reviews that can be easily found, and with such a large company, it may be a better indicator than overall ratings.

Why Choose Guaranteed Rate for Your Mortgage Needs?

  • They claim to offer the World’s First Digital Mortgage
  • And offer a lot of tools to close your loan quickly and easily thanks to tech investments
  • They’ve won a lot of best lender awards
  • Have high levels of customer satisfaction that beat most others in the industry

They claim to be a technology leader in the mortgage space with the “World’s First Digital Mortgage,” so if speed and convenience is your thing, they might be a good choice.

The same-day underwriting and 48-hour appraisal turnaround time can certainly make a traditionally slow and painful home loan process a lot faster.

They’ve also been able to cut the closing appointment down to around 10 minutes thanks to electronic signing.

And being able to do most, if not everything, from a computer or smartphone should ease the burden of obtaining a mortgage.

There are plenty of loan options to suit most borrowers’ needs, and their customer satisfaction numbers are some of the best in the industry.

They were recently named in the Best Mortgage Lenders of 2018 list by U.S. News and World Report and received the 2018 FinTech Breakthrough Award for the Best Online Mortgage Lender.

They could be a good choice for a home purchase seeing that they’re partnered up with Realogy and likely trusted by lots of real estate agents nationwide to close your loan on time without any hiccups.

The company also offers insurance, including homeowners insurance, auto insurance, and life insurance via one of their subsidiaries. So they might be a one-stop shop for all your homeownership needs.

Guaranteed Rate is also committed to being transparent and promise low rates and fees, which after all, is kind of in their company name.

Of course, they might not offer the lowest mortgage rates around, so shopping is always recommended.

Guaranteed Rate Pros

  • Appear to have competitive mortgage rates
  • Offer a fully-digital mortgage experience (contact-free)
  • Can apply online, in-branch, via smartphone, etc.
  • Lots of different loan programs to choose from
  • Excellent reviews from past customers
  • ‘A’ BBB rating, accredited business
  • They have a free smartphone app
  • Offer entire mortgage experience in Spanish

Guaranteed Rate Cons

  • They charge a $1,290 lender fee
  • May require higher minimum credit scores than other lenders
  • Don’t appear to offer second mortgages or home equity lines of credit (HELOCs)
  • Will likely transfer your mortgage to a third-party loan servicing company

Source: thetruthaboutmortgage.com

Apache is functioning normally

Real estate giant Anywhere is launching a title insurance joint venture exclusively for Anywhere Brands franchisees, according to an announcement on Wednesday. 

Upward Title & Closing is a full-service title and settlement company. The joint venture capitalizes on Upward’s local housing expertise, as well as Anywhere’s technology, including virtual quote tools and options for a fully digital closing. 

“We’re thrilled to be able to provide our franchisees with this innovative opportunity to generate additional revenue,” Sue Yannaccone, the president and CEO of Anywhere Brands and Anywhere Advisors, said in a statement. “Partnering with Upward, they’ll have confidence that their affiliated agents and clients are receiving the support they need for a seamless closing experience every time, and they’ll be able to focus more time and energy on growing their businesses. It represents another way Anywhere is empowering everyone’s next move.”

The first joint venture with Upward Title & Closing Agency franchisees has launched in Florida, but Anywhere said it plans to open the option of an Upward JV in more states in the coming months. 

Upward joins more than 40 title companies that are part of the nationwide Anywhere Integrated Services family. 

“The launch of Upward is an example of how we’re leveraging the national scale and expertise of our title business to benefit our franchise network,” Don Casey, the president and CEO of Anywhere Integrated Services, said in a statement. “We’re bringing efficiency, clarity, and simplicity to the experience for brokers, agents, and consumers alike.”

Source: housingwire.com

Apache is functioning normally

Real estate giant Anywhere is launching a title insurance joint venture exclusively for Anywhere Brands franchisees, according to an announcement on Wednesday. 

Upward Title & Closing is a full-service title and settlement company. The joint venture capitalizes on Upward’s local housing expertise, as well as Anywhere’s technology, including virtual quote tools and options for a fully digital closing. 

“We’re thrilled to be able to provide our franchisees with this innovative opportunity to generate additional revenue,” Sue Yannaccone, the president and CEO of Anywhere Brands and Anywhere Advisors, said in a statement. “Partnering with Upward, they’ll have confidence that their affiliated agents and clients are receiving the support they need for a seamless closing experience every time, and they’ll be able to focus more time and energy on growing their businesses. It represents another way Anywhere is empowering everyone’s next move.”

The first joint venture with Upward Title & Closing Agency franchisees has launched in Florida, but Anywhere said it plans to open the option of an Upward JV in more states in the coming months. 

Upward joins more than 40 title companies that are part of the nationwide Anywhere Integrated Services family. 

“The launch of Upward is an example of how we’re leveraging the national scale and expertise of our title business to benefit our franchise network,” Don Casey, the president and CEO of Anywhere Integrated Services, said in a statement. “We’re bringing efficiency, clarity, and simplicity to the experience for brokers, agents, and consumers alike.”

Source: housingwire.com