When Rhonda Burnett went to sell a home in 2016, she knew she would have to pay a commission to her real estate agent.<\/p>\n
The house was a second home \u2014 she and her husband, Scott Burnett, had purchased the three-bedroom house in the Hyde Park neighborhood of Kansas City, Mo., as a place for their oldest son to live after he was accepted to law school in Kansas City in 2008. <\/p>\n
Her real estate agent presented her with a form that detailed how much commission they would pay, with choices in four boxes: 6%, 7%, 8% or 9%.<\/p>\n
Burnett was instructed to select one, and she picked 6%.<\/p>\n
The rest of the form, which stipulated that the commission would be evenly split among the buyer and seller agents, was already filled out; Burnett asked if she could lower the commission paid to the buyer\u2019s agent, but her agent told her doing so would discourage agents from showing her home. <\/p>\n
\u201cI shop sales,\u201d Burnett, 70, said with a laugh. She spent three decades as a stay-at-home mother while her husband, Scott Burnett, 72, worked for a waste management company and spent 20 years working as a local legislator. \u201cI\u2019m always looking for a break. But when I asked her if I could negotiate, she said, \u2018No, you really can\u2019t.\u2019 \u201d <\/p>\n
Three years later in 2019, Rhonda Burnett became the lead plaintiff in a landmark legal case about home sale commissions against the National Association of Realtors that led to a settlement this month that real estate experts say will rewrite the housing industry in the United States. <\/p>\n
The settlement followed a federal jury verdict in October in favor of the Burnetts and four other plaintiffs, on behalf of 500,000 Missouri home sellers, that ordered NAR to pay $1.8 billion in damages. Under the agreement, sellers\u2019 agents will no longer be able to make offers of commission to buyers\u2019 agents on most of the databases where homes are listed for sale, a shift that will, experts say, lower commissions across the board. For decades, most agents in the United States have charged an industry standard of between 5% and 6%, which is higher than in nearly any other developed country. <\/p>\n
The plaintiffs argued that NAR and several large real estate brokerages had conspired to inflate real estate commissions, pointing to several NAR rules that required a seller\u2019s agent make an offer of commission to a buyer\u2019s agent. Those commissions, the home sellers argued, were negotiable in name only, and unnecessarily high, forcing home sellers to pay unnecessary fees to close a sale. <\/p>\n
Burnett spoke for both herself and her husband. She told the jury how she felt that the rules of the real estate industry had seemed fixed, and she believed she was forced to pay a commission that was never truly negotiable.<\/p>\n
In an interview, Burnett stressed that she didn\u2019t blame her real estate agent, whom she believes was just doing her job. Burnett spent several years as an advocate for the Kansas City public schools, meeting with educators and parents that helped her district. Her real estate agent was also a school advocate, and they often saw each other at district meetings. She blamed the industry, and the powerful National Association of Realtors, which had set the rules. <\/p>\n
\u201cIt\u2019s not the Realtors. But the Realtors are controlled by a huge spiderweb,\u201d she said. \u201cAfter I joined the lawsuit, I learned so much about how the industry is run. It goes all the way to the brokerages and up to NAR.\u201d<\/p>\n
Despite the settlement, which is pending a federal judge\u2019s approval, NAR continues to deny any wrongdoing in terms of its rules for agent compensation.<\/p>\n
\u201cNAR does not set commissions, and commissions were negotiable long before this settlement. They are and will remain entirely negotiable between brokers and their clients,\u201d the organization said in a recent statement.<\/p>\n
Before the lawsuit went to court, NAR \u2014 a powerful trade organization with 1.5 million members, more than $1 billion in assets and a cash-flush lobbying arm \u2014 seemed impregnable. It had fended off a Justice Department inquiry into anti-competitive behavior for more than a decade, and successfully sued upstart real estate companies that challenged its stance. The Justice Department inquiry is ongoing. <\/p>\n
But in U.S. District Court for the Western District of Missouri, the home sellers were speaking directly to a jury of their peers. It offered them an opening.<\/p>\n
Michael Ketchmark, 58, a plain-spoken personal injury lawyer who became lead lawyer on the case, sensed his advantage on the first day of the trial.<\/p>\n
Stepping to the front of the courtroom on Oct. 17, he gestured to his mother and father, who are in their 80s and attend all of his trials. On that day, Margaret and Eugene Ketchmark were seated in the front row.<\/p>\n
\u201cI told the jury that everything I needed to know about this lawsuit, I learned from my mom and dad when I was in kindergarten,\u201d Ketchmark said in an interview. \u201cIf you take something that doesn\u2019t belong to you, you have to give it back. And that\u2019s what this case was. It was a refund case. It was about giving the money back.\u201d <\/p>\n
Ketchmark was referred to the case by a friend and fellow attorney who knew the Burnetts. He then began looking for other plaintiffs across Missouri who might have similar grievances.<\/p>\n
Ketchmark had never tried a housing case before, but he was no stranger to big wins \u2014 in 2002, he won a $2.2 billion civil judgment against Eli Lilly and other drugmakers, claiming that they failed to uncover the scheme of a Kansas City pharmacist who was diluting chemotherapy drugs. The drugmakers, who never admitted any wrongdoing, later settled for $72.1 million. <\/p>\n
Ketchmark had a similar upbringing to the plaintiffs in the case against NAR, with parents who didn\u2019t make a lot of money and who saw a house as their biggest investment. He grew up in West Des Moines, Iowa, as one of four children, and his father worked at a bank. His mother didn\u2019t finish college until he himself was in law school \u2014 she put herself through night school. <\/p>\n
He had a strategy: Talk to as many average Americans as he could about the case, and find out what resonated. His team began running and filming mock trials.<\/p>\n
\u201cWe would watch the tape, and start developing out the themes of the case,\u201d he said. By the time they got to trial, Ketchmark estimates he had watched 2,000 hours of video of mock jurors discussing the case.<\/p>\n
\u201cI intuitively knew when the trial started that if we could win this, that if the jury followed the law and reached the right result, that it would change the industry. And it has,\u201d he said.<\/p>\n
He pressed Burnett, who grew up in Georgia and met her husband when they were both working in President Jimmy Carter\u2019s White House \u2014 Scott did field organization, Rhonda worked as an administrative aide \u2014 to describe her childhood with a stay-at-home mother who sold Tupperware and a father who worked at the federal penitentiary and took on shifts selling sporting goods at the local Sears for extra cash. <\/p>\n
Burnett\u2019s agent listed the house for $275,000 but it sold for $250,000. Burnett paid $15,298 in commission.<\/p>\n
Ketchmark guided Jerod Breit, 42, another plaintiff in the case, to share stories of working as a police officer in St. Louis before saving up enough to buy his first home in south St. Louis. And he encouraged Hollee Ellis, 53, to tell the jury about her mother, who worked as a real estate agent. <\/p>\n
Ellis, a former high school English teacher who now works in nonprofits, talked about joining her mother at real estate showings as a child, and later even working as an assistant at her brokerage at one point. She joined the lawsuit, she told the jury, not in spite of her mother but because of her. <\/p>\n
If real estate agents were actually able to negotiate commissions, she said, she believed her mother could have made more money, rather than less.<\/p>\n
\u201cShe operated under that assumption and that practice and that standard for so many years,\u201d Ellis said of the split 6% commission. She shared with the jury that her mother is now suffering from Alzheimer\u2019s and has advanced dementia. \u201cWhereas I know she worked very, very hard for some of her buyers and possibly could have negotiated a different rate.\u201d <\/p>\n
Ellis described selling a modest three-bedroom, single-level brick house in 2016 and feeling that she could not negotiate the 6% commission she paid that was split between her agent and her buyer\u2019s agent. \u201cIt\u2019s not about money at all,\u201d she said of the case. \u201cIt\u2019s about reversing a practice that I feel is unfair.\u201d <\/p>\n
Ellis and her husband, Jerry Ellis, a forklift driver, were looking to sell their house in Ash Grove, Missouri, because Hollee Ellis had a new job opportunity at a nonprofit in South Carolina.<\/p>\n
They owed $107,000 on their mortgage. They hired a real estate agent who sold the house for $126,000, netting them just over $18,000. Forty percent of that ended up going to real estate commissions for both their agent and the buyer\u2019s agent. <\/p>\n
\u201cIt was a hard pill to swallow that we were walking away with so little,\u201d she said.<\/p>\n
Breit also said he felt he had money taken from him.<\/p>\n
He spent more than a decade as a police officer. He bought his first home, a two-bedroom brick Tudor in south St. Louis he described as a \u201cgingerbread house,\u201d with the help of a fellow officer\u2019s father \u2014 a retired paramedic who worked as a real estate agent on the side. <\/p>\n
When it came time to sell that home, Breit said, that same retired paramedic offered to help again, he said, and promised he would only take the \u201claw enforcement special\u201d of 5.5% commission.<\/p>\n
Breit took issue with the commission to his buyer\u2019s agent, and had joined the class-action lawsuit when lawyers began reviewing the contracts of his home sale. It was only then, one day before he was scheduled to take the stand, that he learned he hadn\u2019t been offered a law enforcement special anyway. <\/p>\n
He sold the home for $149,900 in 2017. He was charged $4,946.70 in commission to his seller, and $4,047.30 in commission to his buyer, totaling $8,994. When the numbers were brought to his attention, he did the math in his head several times, disbelieving. His agent, using forms that were preprinted, had gone ahead and charged him the full 6%. <\/p>\n
\u201cI know people say it\u2019s negotiable,\u201d he said. \u201cBut it\u2019s really hard for me to believe that it\u2019s negotiable when the documents are pre-filled and we don\u2019t question it.\u201d<\/p>\n
Breit left the police force in 2017 and now serves as a regional executive director for Mothers Against Drunk Driving.<\/p>\n
\u201cI\u2019m just a person who sold a house,\u201d he said. \u201cI don\u2019t go to Jiffy Lube to pay for an oil change next week, and I don\u2019t pay for someone else\u2019s Hulu account because we live on the same block. People should only have to pay for what they use.\u201d <\/p>\n