Who was the attorney for the Plaintiffs in the NAR Lawsuit and what was his agenda?

The recent verdict against the National Association of REALTORS® (NAR) has been met with mixed reactions. Some have praised the verdict as a victory for consumers, while others have argued that it will harm the real estate industry and make it more difficult for people to buy homes. 

One of the most vocal proponents of the verdict is plaintiff’s attorney Michael Ketchmark, who led the lawsuit against the NAR. Ketchmark has argued that his lawsuit will help buyers by lowering home prices and increasing competition among real estate agents. 

However, there are a number of reasons why this is unlikely to happen. 

First, Ketchmark’s lawsuit is likely to lead to an increase in the cost of buying a home. If commissions are uncoupled, as Ketchmark has called for, it will make it more expensive for buyers to purchase a home. Buyers will have to pay their own agent’s commission out of pocket, which could add thousands of dollars to the cost of buying a home. If they choose to roll their commission into their mortgage financing, it will take them even longer to pay down, and be subject to additional interest. 

Second, Ketchmark’s lawsuit is likely to harm competition among real estate agents. Smaller real estate companies may not be able to afford the legal costs of defending themselves against lawsuits like Ketchmark’s. This could lead to more consolidation in the industry, which would reduce competition and drive up prices for consumers. More competition is healthy in an industry like this, and without the smaller brokerages that often offer better customer services than some of the real estate giants, buyers and sellers are the ones who will suffer. As they say, “competition breeds excellence” and without it, the few brokerages that remain have no need to prove themselves to buyers and sellers, and the quality of service often dwindles. 

Third, Ketchmark’s lawsuit is likely to have a negative impact on the quality of representation that buyers receive. If commissions are uncoupled, real estate agents may be less motivated to work hard for their clients if they are not getting paid as much. No matter what industry you’re in, not getting paid what you’re worth is one of the top motivation-killers, and real estate agents are not immune. This lack of motivation means buyers could potentially receive lower quality representation, which could make it more difficult for them to find a good home and negotiate a fair price. Buyers who are frustrated with this lack of quality representation may choose to fly solo, and the lack of representation at all spells trouble for buyers. 

The Real Victims of Ketchmark’s Lawsuit 

Here’s the hard truth: the real victims of Ketchmark’s lawsuit are first-time home buyers. These buyers are already struggling to afford a home at the current prices, and Ketchmark’s lawsuit is only going to make it more difficult. 

If commissions are uncoupled, first-time home buyers will have to pay their own agent’s commission out of pocket. This could add thousands of dollars to the cost of buying a home, and it could make it impossible for some first-time buyers to afford this next step in life.  Then, there is the issue of how our nation’s veteran’s will be able to purchase homes. Under the rules set by the U.S. Department of Veterans Affairs (VA) for VA-backed home loans, veterans cannot pay real estate agent or broker fees when buying a home with a VA loan. Some buyers may choose to approach the listing agent on their own and forgo the buyer’s agent entirely, which leaves them without an agent to represent them at the negotiating table, opening them to a bad deal, if not legal woes.  

Even if commissions are not uncoupled, Ketchmark’s lawsuit is likely to lead to higher home prices regardless. Unfortunately, this lawsuit is likely to increase the cost of doing business for real estate agents, who must now spend additional money to protect themselves and their business from legal problems, and these costs will ultimately be passed on to buyers. 

Related reading: How the NAR Class Action Commission Lawsuit Has Fundamentally Changed the Real Estate Industry  

The Truth About Contingency Pay 

The truth is, real estate agents don’t actually make a lot of profit with their commissions, once it’s divided among all parties. In fact, if you were to compare real estate commissions to an attorney’s contingency fees, you might be a little surprised.  

Related reading: The Commission Breakdown: How Much Real Estate Agents Really Make  

We decided to look into the New York City Bar Association’s website and found their outline for contingency fees for lawyers. In the example of a personal injury case, the lawyer doesn’t charge upfront or by the hour; their payment is contingent upon the client recovering for their injuries. In these Antitrust lawsuits, the burden for the plaintiffs is demonstrating that the real estate industry caused harm to their client and justifying the amount sought for those injuries. 

Further exploration on the American Bar Association‘s stance revealed that customary recovery rates typically fall within the range of 33-40%. This range is consistent across various bar association websites (we know because we checked). Interestingly, while this contingency rate seems standardized, these associations claim it doesn’t breach antitrust laws or constitute collusion in attorney fees, unlike the alleged commission rate collusion for real estate agents.  

Let’s look at an example: 

If an agent negotiates a 3% commission rate and the price of the home is $500,000, they walk away with $15,000. That covers their time, efforts, marketing costs, brokers and association fees, and feeds their family. In this particular lawsuit, the plaintiffs won $1.78 billion dollars, and their lawyers walked away with a minimum of $587 million dollars if their going rate was 33%. The plaintiffs (approximately 260,000), on the other hand, will likely only see a tiny fraction of that, perhaps only a few thousand dollars, though this number has yet to be confirmed. 

Related reading: Pot, Meet Kettle: Are Attorneys Breaking Antitrust Laws?  

Home buyers should be aware of the potential consequences of Ketchmark’s lawsuit before they support it. They should also be aware of the fact that Ketchmark has a long history of suing large corporations, and he has made millions (soon to be billions) of dollars in settlements and verdicts. The worst part is the damage that he is inflicting on the real estate industry as a whole, damaging trust in agents, brokers, and the industry alike, and all for a profit. 

When you look at the numbers, it’s clear that Michael Ketchmark’s lawsuit against the NAR is a classic case of putting profits over people. In fact, the day after this first ruling came down, he filed yet another lawsuit against another group of brokers. Is Mr. Ketchmark is more interested in making money for himself than in helping home buyers? It certainly seems that way. 

COMMISSION DISCLAIMER: The commission examples provided are for illustration only and do not represent actual rates. Real estate commissions are negotiable and not set by law. Professionals should independently determine appropriate commissions based on services provided and their marketplace. Professionals have sole responsibility for transparently communicating their fee structures to clients in compliance with applicable laws and regulations. These examples do not constitute financial, legal or real estate advice.   

Learn more about the POWER AGENT® PROGRAM 

• Join Darryl’s Inner Circle Facebook Group. We are always posting fresh ideas, training tools, strategies, and templates, along with hosting important, timely discussions with real estate professionals across the globe who are committed to their Next Level® of success and life.  

• Subscribe to our newsletter. Click the button below to fill out a simple form and tap into new resources, free downloads, premium content, and exciting promotions. 

• Reach out and talk to us. Not sure if this coaching program and community are right for you? Click that blue chat button on the bottom right of the screen, or call us at the number in the header. We are here to help!

---

Get the latest real estate training tips delivered to your inbox!

Subscribe

 

Not a POWER AGENT® yet? Give us a go! This comprehensive program provides affordable coaching, training, and customizable marketing tools for real estate agents. It’s proven to help thousands of agents significantly boost their listing inventory, solidify their business, cultivate lifelong customers, enhance authenticity and confidence, reduce stress, and craft fulfilling careers and lives.   

Check out the POWER AGENT® PROGRAM here!