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Several real estate brokerages remain in limbo a month after a June 18 deadline for firms seeking to opt into the National Association of Realtors’ $418 million commission settlement agreement, Inman has learned.
JohnHart Real Estate in California, ARC Realty in Alabama and Nebraska Realty all confirmed with Inman that they had been included in a court-approved list of brokerages with $2 billion or more in residential sales transaction volume in 2022 following their inclusion in the 2023 Real Estate Almanac, an annual report compiled by the firm T3 Sixty that tracks various real estate metrics.
In conversation with Inman, brokerage leaders described being trapped in a legal maze after it was ruled this year that sales figures published in the Almanac would be considered an “irrebuttable presumption” of the brokerages’ total transaction volume for 2022. The legal term describes a set of facts deemed in the eyes of the court to be true, even if contradictory evidence emerges later on.
“We weren’t even at the $2 billion” threshold, JohnHart Real Estate General Counsel Brittany Porter told Inman. Porter couldn’t explain the discrepancy with the data but said T3 Sixty told her Wednesday it would issue a correction.
The fallout stems from a decision shortly after the National Association of Realtors came to a settlement agreement in March with homesellers in which both sides agreed to the $2 billion threshold to determine which brokerages would be covered by the settlement and which would have to mediate on their own.
According to the settlement agreement, brokerages that transacted less than $2 billion in residential sales volume in 2022 would be covered legally. The more than 90 firms that closed in excess of $2 billion that year would need to opt into the settlement, opening themselves up to millions of dollars in additional legal costs.
Now, the phrase “irrebuttable presumption” has become a curse for brokerages that may have self-reported sales figures to T3 Sixty in 2022 claiming in excess of $2 billion in transactions, only to reverse course in some cases, disputing data they now believe to be flawed. Attorneys, for their part, don’t know how to proceed, and it may be left to a judge to determine what happens next.
Michael Ketchmark, a lead plaintiff attorney, told Inman he hadn’t closely tracked how many brokerages were disputing the Real Estate Almanac, but that he could “only remember a few.”
“We have not made a decision yet on how to proceed with this group of cases,” Ketchmark said. “It is clear, however, that these brokers are not covered by the release.”
The issue will likely be settled in the coming weeks, given that the deadline to mediate is Aug. 10, and the deadline to agree on terms is Aug. 30. It isn’t yet clear if Judge Stephen R. Bough, who presided over the landmark Sitzer | Burnett class action lawsuit, would ultimately rule on how best to resolve the dispute.
Michael Ketchmark | Lead plaintiffs’ attorney
In the days leading up to the June 18 deadline for brokerages to indicate their opt-in plans, Inman reached out to each of the brokerages that were on the list of firms with a sales transaction volume in excess of $2 billion. Plaintiffs’ attorneys have said they plan to file amended complaints naming brokerages who aren’t covered by the NAR settlement if they don’t opt into mediation, according to a letter the attorneys sent to brokerages on May 21.
Disputing the Almanac
Brittany Porter | JohnHart Real Estate
According to Jack Miller, CEO of T3 Sixty, “the vast majority” of numbers in the Almanac are self-reported.
“In the survey question regarding sales, we ask: What was your brokerage’s 2023 U.S. residential sales volume? Do not include sales of undeveloped land or building lots, leases, timeshares, apartment buildings or commercial properties,” Miller told Inman. “We also ask for them to affirm the submission number as accurate and not including anything other than residential sales.”
Jack Miller | T3 Sixty CEO
T3 Sixty made three corrections to its 2023 report. In two cases, the brokerages indicated they provided incorrect information. In another case, a company neglected to provide its information, and T3 Sixty made its own estimate.
“We have published the Real Estate Almanac since 2018, and this is the first year we were asked to change a sales volume number,” Miller said.
The Real Estate Almanac showed that JohnHart Real Estate, a brokerage based in California, transacted $2.68 billion in 2022. The firm now says it transacted far less.
The leaders from two other brokerages, Nebraska Realty and ARC Realty, also told Inman they shouldn’t be included and should instead already be covered by the NAR settlement.
Beau Bevis, CEO of ARC Realty, said his firm acquired another brokerage in the middle of 2022. Not including that firm’s volume would keep ARC Realty below the $2 billion threshold.
He said Wednesday he didn’t have an update on where things stood in his attempt to show plaintiffs’ attorneys his brokerage transacted less than $2 billion in 2022.
Edward Zorn, vice president and general counsel of the California Regional MLS, told Inman he expected the issue to arise.
There are not many brokers willing to pay the base fee outlined in the settlement agreement. They will either negotiate a deal through mediation or challenge the plaintiffs to take legal action against them. JohnHart Real Estate’s Porter made it clear in an email to plaintiffs’ attorneys that they are only interested in mediation if it involves presenting evidence of their mistaken inclusion in the T360 Real Estate Almanac. If the mediation focuses on monetary settlements, they are not interested and will wait for any civil filings. Essentially, they are saying, “If you want to sue us, go ahead.” The potential financial implications of being included in the NAR settlement are significant for brokerages. The options outlined in the settlement agreement require brokerages to either pay a substantial amount based on their transaction volume or participate in costly mediation. JohnHart Real Estate and ARC Realty would be required to pay millions of dollars based on their transaction volumes if they choose Option 1. sentence: Please make sure to complete the form before leaving.