Having previously criticized some of the forms generated as a result of the terms of the National Association of Real Estate Agents (NAR) National Commission Settlement Agreement University at Buffalo law professor Tanya Monestier is now objecting to NAR’s settlement.
In a document filed Monday in U.S. District Court in Kansas City — less than a month before the NAR settlement receives final approval for a hearing — Monestier took issue with the changes in company practice, saying they don’t do enough to protect consumers to protect. She also objected to the fees expected to be paid to the plaintiffs’ lawyers.
The objection is 132 pages long. Monestier claims she took so long to appeal because she doesn’t think anyone else will.
“This settlement seriously lacks a neutral, external analysis. “I wish there were more voices closely monitoring whether this settlement provides the value it claims for injured class members and whether the attorneys have provided a third of a billion dollars in value to the class,” she wrote . “As far as I know, those voices are nowhere to be heard.”
In her appeal, Monestier claims the settlement is “the worst of all possible worlds” and that the implementation of the settlement has been a “disaster.”
“The purpose of the settlement was commendable,” Monestier wrote. “It was based on the premise that buyer’s agents used commission rates posted on the website [multiple listing service] to steer buyers toward properties that offered higher compensation levels. … The settlement makes sense – but only on paper. It is an example of something made up by lawyers without a full understanding of how this would play out in the real world.”
While Monestier, who reportedly sold her Rhode Island home in 2022 and is part of the affected class, believes sellers were paying “high commissions,” she believes that before the settlement changes took effect, the rules for the sector ‘clear and there was no confusion.’
After the August 17th implementation date, Monestier now believes the industry is left with the “pre-NAR settlement system, with much more paperwork, headaches, lies, chaos and frustration. The settlement, as applied in the real world, is an abject failure.”
In her objection, Monestier claims there is “sufficient evidence” of agents asking buyers to sign amended buyer representation agreements, which allows the buyer agent to increase the agreed upon fee beyond what the seller is offering.
“In my opinion, amending a representation agreement to increase the compensation level for a buyer’s agent violates the NAR settlement agreement. In this regard, I do not think this is a ‘solution’, but rather an outright violation of the agreement,” Monestier wrote. “Practices like these where brokers scoop up ‘excess’ funds result in the preservation of the commission structure that the NAR settlement was intended to dismantle.”
Monestier claims that the ambiguity surrounding this practice in NAR communications and the settlement itself allowed this practice to occur. Additionally, Monestier claims that some buyers are asked to sign documents allowing for “seller paid bonuses” if the seller offers more compensation than what the buyer and their agent agreed to. In other cases, some buyers and their agents sign agreements on certain properties that tailor the buyer’s agent’s compensation to what the seller has to offer.
The filing also focuses on the tours and showing agreements that some brokers and agents initially use with buyers before entering into a more formal contract.
“The written agreement governing their relationship for that property visited is the one they executed prior to the tour, even if the scope of services was limited,” Monestier wrote. “The broker will not be able to collect fees in excess of what was agreed in the original agreement. In other words, an agent is limited to the amount set forth in the agreement signed before the showing – and not an amount reflected in a new buyer representation agreement entered into at the time the buyer decides to make an offer .”
Furthermore, Monestier’s objection also claims that officers are still in the process of directing. She wrote in her filing that she believes “many agents tell their sellers that they will not get offers if they do not provide compensation up front. This in turn deters sellers from offering buy-side compensation.”
Monestier also claims that buyers are told to skip showing homes if the seller doesn’t offer buyer agent compensation. According to Monestier, this practice would “blackball” sellers who do not offer compensation, which she said would take the industry “back to square one.”
Monestier’s objection also looks at the required buyer representation agreements. She claims that some agents, especially on the listing side, refuse to let an unrepresented buyer view one of their listings or grant them access to their open house without first signing an agreement with that agent.
This isn’t the first time Monestier has raised concerns about buyer representation agreements. In a report published in August, Monestier examined the agreements promulgated by 19 state and local real estate associations, concluding that “they are all generally very complicated and will not be understood by the average buyer and seller.”
She discusses this further in her legal objection. “If there’s one thing anyone can agree on, it’s that this settlement has caused massive confusion among buyers and sellers alike,” she wrote.
“Plaintiffs and defendants may think that this confusion will eventually be resolved, that these are just ‘growing pains.’ I don’t agree with that. I believe that if this settlement is finally approved, selling and buying homes will change forever – for the worse,” she wrote.
“I spent about six months trying to understand the settlement, the industry, real estate practices, forms, etc. And I’m confused. What hope is there for the average everyday consumer? Adding to the confusion is the fact that a large number of agents themselves do not fully understand the settlement. How then can they be trusted to put it into practice?”
Other concerns Monestier has with the settlement are that cooperative compensation remains permissible, and that there is still a lack of enforcement mechanisms to ensure agents and brokers follow the rules.
In addition to examining the changes in business practices, Monestier also looked at the fees the plaintiffs’ attorneys are asking for as part of the settlement.
In total, the settlement amount for NAR and the settlement brokers in the Sitzer/Burnett lawsuit is nearly $1 billion. Of that amount, more than $300 million is expected to be paid to plaintiffs’ attorneys, leaving less than $600 million for the plaintiffs after fees and expenses.
According to Monestier, this would be a “negligible recovery” for individual class members, of which there are estimated to be tens of millions.
“It’s simple math. The larger the denominator, the less valuable the recovery is. No expert or economist in this lawsuit has estimated the actual monetary value of this settlement to any individual member of the class,” she wrote. “This is because the plaintiffs want to cover up the fact that the monetary recovery is next to nothing for an individual home seller in Kansas City, Missouri. Meanwhile, lawyers will pocket a third of a billion dollars.”
Judge Stephen R. Bough will hold the final approval hearing for the settlements reached by NAR and HomeServices of America on November 26, 2024.
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