Sparks fly during HousingWire’s commission lawsuit debate

By Real Estate News

Sparks and personal insults flew between Anthony Lamacchia, the broker-owner of Lamacchia Realty, and Michael Ketchmark, the lead attorney for the plaintiffs in the Sitzer-Burnett commission lawsuit, during their virtual debate hosted by HousingWire on Friday afternoon.

The hourlong debate began with both participants discussing their motivations for participating. It devolved into a battle about historic facts, old-school MLS listing books, pronunciation corrections and even references to the kid-friendly restaurant chain Chuck E. Cheese.

Lamacchia kicked things off by stating that he made the choice in mid-October to begin speaking publicly about the lawsuits, due to some of the rhetoric used by Ketchmark in the media.

“I was sitting on my couch and I saw Michael on CNBC calling us a cartel, saying that we take money that doesn’t belong to us, and I was infuriated at that rhetoric and I was infuriated at what that infers about Realtors,” Lamacchia said. “It dehumanizes Realtors and turns us into money-making machines.”

He also said that the idea that agents and MLSs are colluding is “ridiculous.”

In response, Ketchmark said that he does not want to dehumanize Realtors.

“I think Realtors are awesome,” Ketchmark said. “My lawsuit wasn’t filed against individual Realtors; it was filed against the industry.”

Ketchmark told webinar viewers that when he and his wife went to buy their first home, they sat with their agent and looked at for-sale properties in a phonebook-style MLS listing book. According to Ketchmark, the listing book — which he produced on camera — said that it was intended for MLS members only, and that if it was distributed, the agent at fault would be fined.

“That was an attempt to put a stranglehold on the data, and to do it for one reason and one reason only: to keep the money,” Ketchmark said. “When the internet came along, it changed everything, except one thing — it didn’t change the way this business has run, and it is the corporate titans that are doing this.”

Ketchmark also told viewers that he had not heard of the National Association of Realtors until this lawsuit, but he decided to enter into the legal battle with the trade group after he “started learning about what they have done and how they have pared the country up into 800 different MLSs that are designed to make homeowners, who wish to put their house on the MLS to offer money to the other side,” a practice Ketchmark said is “wrong.” He added that NAR’s Participation Rule, which created this requirement, is “used to stabilize prices.”

Next, Ketchmark responded to claims that the various commission lawsuits are a money grab by attorneys like himself.

“It’s not the plaintiffs’ attorneys who are grabbing the money; it’s the defendants that grab the money. It’s the National Association of Realtors that set up these rules,” Ketchmark said. “The premise of our case is that the rules are rigged to stabilize prices and commissions, so that when you sell your house, it costs you more money than it would have without this collusion amongst competitors.”

Lamacchia, who could be frequently seen shaking his head and rolling his eyes at Ketchmark’s comments, began his rebuttal by correcting Ketchmark’s pronunciation of “Realtor,” which the attorney repeatedly pronounced as “Real-a-tor.”

“That’s just one of the small details of our business that Michael is unaware of,” Lamacchia said.

In regard to the fines related to the MLS listing books, Lamacchia said that he never used a hard-copy listing book during his career, but it makes sense that the information is guarded as it includes sensitive consumer information. Lamacchia also stressed that it is impossible to claim that the system is rigged because sellers can choose how much compensation they offer the buyers’ broker, or whether they even want to offer cooperative compensation.

“This is a free, open, capitalist society,” Lamacchia said. “Home sellers can do as they please, and if they don’t want to hire a Realtor, they don’t have to. If they want to hire just a regular agent, they are free to do that. If they want to put their home on the internet as an entry-only listing, they are free to do that.”

Ketchmark responded that while those claims might be true, the depositions and research he and his team have conducted do not support them.

“We proved statistically that this is happening,” he said. “What are the odds that out of 253,000 transactions, that all of them are going to hit exactly where they did? If it’s not collusion, then what is it?”

Like he did in the Sitzer-Burnett trial, Ketchmark referenced brokerage training materials and speeches given by CEOs like Gary Keller of Keller Williams, in which commissions are discussed.

“The reason it is done is that everyone out there knows that half the money that these agents are making and these corporations are making is from the sell side, and half from the buy side. That’s just wrong,” Ketchmark said. “Name another industry out there where that happens. It is not appropriate for that to happen and it should not be happening here.”

The plaintiffs’ attorney also addressed claims he made during the Sitzer-Burnett trial that, in the age of Zillow, there is no need to have a buyer’s agent.

“I’ve never said there is no need for a buyer’s agent, or that a buyer of a home shouldn’t have their agent, but if they want to have their agent, they can pay for it. Don’t require the seller to pay for it,” Ketchmark said.

Ketchmark said he also takes issue with the fact that the current commission structure does not allow sellers to take into consideration the skill of the buyer’s agent when determining their compensation.

“There is only one reason: It’s because of this rule, and it’s wrong,” he said. “We proved in the trial that the purpose or effect of the rule is to stabilize commissions.”

Lamacchia responded by saying that he was unwilling to accept this as the purpose of NAR’s Participation Rule. The broker-owner then went on to discuss what he felt were flaws about how the trial was handled, noting that the defense was not allowed to reference a Missouri law which allows for the practice of cooperative compensation (which Ketchmark said was not true).

Lamacchia also noted that nowhere on the NAR website is there information telling agents what they should charge for commissions, but there is a page dedicated to the topic on the websites of the American Bar Association and the American Trial Attorneys Association. Lamacchia also took aim at the jury and the Kansas City court where the trial took place.

“Michael was able to get this case lined up in such a way that it really tied the hands of the defense,” Lamacchia said. “I learned all kinds of things like how Michael’s sister-in-law is a judge in the same court, like how the wives of two of the plaintiffs’ attorneys are friends with the judge’s wife on Facebook. Now, there is nothing illegal about that at all, and I am in no way insinuating that Michael is doing anything illegal, but it’s interesting.

“When you are going into a boxing match and your defendant can’t use their arms, it’s a lot easier to win,” Lamacchia added.

As expected, this ruffled the attorney’s feathers.

“You are now the mouthpiece for the corporate defendants who came to trial … and they argued everything that you just said, and they lost and you don’t like. It’s just like a petulant child when the rules are being enforced by parents,” Ketchmark responded.

He also noted that his sister-in-law was a federal prosecutor and is now a federal judge working on criminal cases in a separate part of the courthouse, and that he has not tried a federal case in that courthouse since 1997.

Lamacchia went on to ask Ketchmark how the rules could be so anti-competitive when the real estate industry is widely considered as highly competitive.

“I’ve been on hundreds and hundreds of listing appointments in my career with sellers talking about how they have an agent who will only charge me X or Y, just always pushing back on commissions,” Lamacchia said. “There is more competition in our space than arguably any other space as far as consumers go.”

As an example, he said that if he wanted to replace the windows in his house, there might be five local contractors he could call and only three would call him back. But if he wanted to sell his house, there are 9,500 Realtors who cover the Greater Boston area and at least 9,000 would be willing to list his home.

“You are trying to act like consumers don’t have choices, and it’s completely crazy to me,” Lamacchia said.

The broker-owner then asked Ketchmark how he could claim he doesn’t want to take down NAR, when he was quoted in the The New York Times earlier this month as saying that he wants to “topple” the trade group.

“What I said in The New York Times is that it is a game of whack-a-mole, that machine they have at Chuck E. Cheese, and every time NAR gets whacked with something,” Ketchmark said. “Back in the 1920s, they had a card they were giving out to real estate people, saying, ‘Fix prices at this level,’ and they get whacked. … What I am saying is that I want to unplug the whack-a-mole machine.”

Ketchmark also claimed he never said there was no competition in real estate. Rather, he is saying that “competitors are getting together and using this rule to stabilize prices.”

Lamacchia responded that this is some of the misinformation that Ketchmark is perpetuating.

“There is a tremendous number of misconceptions that Michael is peddling out to the media,” Lamacchia said. “He is constantly undermining what Realtors do, and undermining the value of a real estate agent or Realtors.”

The debate participants also touched on how getting rid of cooperative compensation would impact first-time homebuyers and those using U.S. Department of Veteran Affairs (VA) loans.

“Our current mortgage finance system does not allow commissions to be plopped on top,” Lamacchia said. “First-time buyers barely have enough money to put down to buy a home. No one is going to be more harmed in this case than first-time homebuyers who do not have the money to come out of pocket on these kinds of things.”

The broker-owner also noted that federal rules prohibit VA borrowers from paying for buyer’s representation.

“It will be impossible for them to hire an agent to represent their fiduciary duty,” Lamacchia said. “We are going to end up in a situation where buyers from all walks of life, especially veterans, can’t get anyone to help them make these financial and emotional decisions, and I think that is terrible.”

Ketchmark said that Lamacchia’s claims were untrue and that first-time buyers would be able to pay for their representation out of pocket if they utilized down payment assistance programs.

“It is underutilized in the state of Missouri because agents and corporations like the defendants in this case are not training buyers to use those programs,” Ketchmark said. “But what would also help first-time buyers is if the system wasn’t rigged, where these commissions are so high that it inflates the house’s value.”

The debate concluded with Ketchmark reiterating a point he made throughout the Sitzer-Burnett trial, that the “system needs to change.”

“Your system of getting competitors together to found and enforce rules that are designed to stabilize prices is wrong,” he said. “It is against the law. It was against the law in the 1890s [when the Sherman Antitrust Act was created] and it is against the law today. As long as that continues to go forward, you can attack attorneys all you want, but the fact of the matter is that the law is the law and your industry isn’t following it.”