Sexual Harassment Bombshell on the Horizon
On August 8, 2023, at Inman Connect, Brad Inman dropped the biggest bombshell of the week when he told a rapt audience inside the Aria Resort & Casino in Las Vegas about a text message he’d received earlier that week from an unidentified source. It was a big public confirmation of what many had already been whispering about before the event.
“New York Times is investigating NAR for sexual harassment,” he announced to the crowd, apparently quoting from a source privy to a big expose The Times may or may not be working on involving recent allegations, since withdrawn,
made against the trade organization in June.
Spokespeople for both the National Association of Realtors and The New York Times declined to comment when asked by Inman to confirm whether a story about the trade organization was in the works, with NAR saying it can’t comment without first seeing the contents of the article and The Times saying it doesn’t comment on stories that “may or may not run in future editions.”
But if The Times has evidence of widespread sexual harassment at NAR with multiple people coming forward on the record — which, to be clear, has not been confirmed — it would give credence to sexual harassment and retaliation claims Janelle Brevard made in her short-lived litigation. Even more importantly, it would completely discredit the narrative being put out by the current leadership team and their attorneys.
What’s ahead for NAR and any perpetrators
If allegations of sexual harassment and retaliation are indeed true, additional litigation is on the horizon. Below is a list of the type of actions that could be filed against both NAR as well as any perpetrators of these acts. An even bigger bombshell would be if the current NAR leadership team has engaged in a coverup of these acts that was paid for with membership dues.
Civil lawsuit complaints alleging sexual harassment
Sexual harassment is a form of sex discrimination under Title VII of the Civil Rights Act of 1964, administered by the Equal Employment Opportunity Commission (EEOC).
Victims may file civil lawsuits against the perpetrator(s) and the organization for monetary damages. The organization can be held liable, especially if it is proven that they were aware of the harassment and failed to take appropriate action.
EEOC complaints 
The EEOC enforces federal laws against workplace discrimination, including sexual harassment. According to the EEOC website, sexual harassment can include:
Unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. Harassment does not have to be of a sexual nature, however, and can include offensive remarks about a person’s sex. For example, it is illegal to harass a woman by making offensive comments about women in general.
Both victim and the harasser can be either a woman or a man, and the victim and harasser can be the same sex.
Although the law doesn’t prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted).
If the employer has 15 or more employees, victims must file a complaint with the Equal Employment Opportunity Commission (EEOC) within 180 days. After investigating the complaint, the EEOC may sue the employer on the victim’s behalf or issue a “right to sue” letter, allowing the victim to file a lawsuit.
Criminal charges
In some cases, if the sexual harassment includes criminal conduct such as sexual assault, the perpetrators may face criminal charges. In this scenario, the state attorney general and/or local law enforcement would prosecute the accused. The victim would likely serve as a key witness.
Retaliation and whistleblowers
What is retaliation? According to WB&S LLP:
The Civil Rights Act protects employees from sexual harassment in the workplace. What many people don’t realize is that these laws also protect employees from retaliation. Retaliation occurs when an employer punishes an employee for filing complaints regarding sexual harassment or discrimination in the workplace. Various federal laws protect against retaliation and establish the rights of “whistleblowers” (people who file complaints about unsafe workplaces). Retaliation can take a variety of forms, including:
- Demotion
- Salary reduction
- Job termination
- Denial of a raise
- Denial of promotion
- Missed training opportunities
- Job reassignment
- Less desirable schedule
- Poor performance review
- Micromanagement
- Exclusion from staff activities
Some forms of retaliation are obvious while others are subtler. Any negative action from an employer following a harassment claim is potentially retaliation. The Equal Employment Opportunity Commission (EEOC) deems retaliation illegal, regardless of whether the claim was true, if the employee made the claim in good faith. In other words, an employer isn’t legally justified to commit retaliation just because sexual harassment never really occurred in the workplace.
Defamation claims
If an organization or its representatives make false statements about a victim in an attempt to discredit them, the victim may have grounds for a defamation lawsuit. According to Britannica, defamation is: The act of communicating to a third-party false statements about a person that result in damage to that person’s reputation. Libel and slander are the legal subcategories of defamation. Generally speaking, libel is defamation in written words, pictures, or any other visual symbols in a print or electronic medium. Slander is spoken defamation.
Constructive discharge or dismissal
According to the U.S. Department of Labor,
The term “constructive discharge” is when a worker’s resignation or retirement may be found not to be voluntary because the employer has created a hostile or intolerable work environment or has applied other forms of pressure or coercion which forced the employee to quit or resign. This often arises when an employer makes significant and severe changes in the terms and conditions of a worker’s employment. What constitutes a constructive discharge is usually defined in state law and varies from state to state.
In a sexual harassment case, constructive discharge occurs:
When sexual harassment becomes intolerable, a woman may quit her employment and sue for constructive discharge (forced resignation). Constructive discharge claims are in many respects like unfair firing claims and permit the same remedies, such as damages for emotional distress and lost wages. To establish a constructive discharge claim, a sexual harassment victim must show that the employer either intentionally created or knowingly permitted working conditions that were so “intolerable” or aggravated at the time of the employee’s resignation that a reasonable employer would realize that a reasonable person in the employee’s position would be compelled to resign.
Employment contracts and arbitration clauses
Some employment contracts include arbitration clauses, which means that disputes, including those about sexual harassment, must be resolved through arbitration rather than through the court system. While these clauses can sometimes be seen as favoring employers, they can also result in settlements for victims.
Breach of contract or breach of duty
If an employer fails to uphold certain contractual promises or duties regarding workplace safety and environment, they may be liable for breaching those obligations.
Systemic issues
Inman has continued to report example after example of inappropriate behavior throughout the real estate industry: embezzlement, sexual harassment, and sex trafficking. If The NYT has indeed found extensive evidence of sexual harassment and other related claims arising from those allegations, the fallout for NAR will be catastrophic.
The litigation would further bury an organization that already has three major antitrust cases on the horizon. It would put the national spotlight on NAR’s integrity, and it would put NAR’s leadership team and its ability to lead in question, which could potentially trigger mass resignations.
What Happens to NAR and the Industry If They Lose the Bombshell Lawsuits? (Part 2)
Click to read Part 1, which gives background on these lawsuits.
Major risks if the suits are not settled:
Failure to settle these suits could force a complete overhaul of the industry:
- Copycat lawsuits ensue nationally. Brokerages, MLS’s, and associations across the country are all named.
- There is no coverage by E&O, D&O, GL Insurance because these are antitrust claims.
- This can result in massive bankruptcies taking place across the industry.
How can the industry prepare? 
The most important step that the industry can take across the board is to make buyer-broker agreements mandatory in every transaction. Dwiggins described what this would entail.
Where buyer broker agreements are required before a listing (can be posted) in the MLS has shown that is a smart, tactful decision that should be enacted today. There are a lot of things that need to be worked out about that (especially) if dual agency is banned in your state. But in general, it should happen. It’s important for fiduciary to the buyer, it creates less looky-loos coming through a property for the seller (because) they know that there’s actually a genuine client working with an agent. There’s (also) no downside from a consumer perspective.
It also levels the playing field, so it’s not just one agent asking for a buyer broker agreement—it’s a requirement. By the way, there are 12 states currently in the US that require this anyway.
He went on to say:
I don’t think you’ll see the FTC, or the DOJ have an issue with any of that. It’s pro consumer and they’ve been wanting to establish fiduciary for a long time—you’ve now done it. That is a smart move that should occur.
Dwiggins also made the following suggestions for NAR, MLSs, brokerages, and agents to be better prepared for what’s coming.
NAR should:
- Rescind the Buyer Broker Cooperation policy to make it optional since MLS’s are going to do it anyway.
- Immediately pass a mandatory rule to its MLS policy and Code of Ethics that requires buyer’s brokers to have signed buyer broker agreements that clearly spell out compensation terms signed before showing MLS-listed properties.
- Mobilize national lobbying resources to explicitly allow mortgage loans to finance the buyer broker compensation and educate members on how to talk to consumers about the value of buyer representation.
The Multiple Listing Services should: 
- Make Buyer Broker Cooperation optional, just like Bright MLS, Northwest MLS, and now MLS Pin have done. It’s going to happen regardless.
- Prepare for commission pressure and attrition amongst their membership and continue to focus on consolidation to bring MLS’s costs down further. Dwiggins believes this could result in a 30-40 percent drop in NAR membership.
- Think beyond being a repository of homes for sale and work together on driving more innovation for their membership.
According to Dwiggins, many of the MLSs he works with are starting to prepare for these changes by considering how they can change their value propositions and thinking about how MLSs will function in a new world. What can they offer their membership? How can they offer cooperation?
Brokerages should:
- As soon as possible, require signed, executed buyer broker agreements at the beginning of their agents’ engagements with buyers.
- Develop educational, marketing, and training materials for agents that clearly explain the specific value of their buyer agent services and audit their existing materials to comply with NAR rules on buyer agent compensation messaging.
- Cut down on overhead and expenses. They will need to be much leaner operationally in the next 12 – 24 months.
- Come up with different compensation model options for their agents. They will need to adapt just as their agents will. Buy side commission pressure will occur.
Agents should:
- Start using buyer broker agreements at the beginning of their engagements with all buyers.
- Start using buyer presentations, clearly articulating their value and why they get paid the compensation they do. It must be 10X better than they are today.
- Develop different compensation models such as (percentage, hourly, flat fee) depending upon clients’ needs.
- Listing agents should update their materials to address how they and any agent representing a buyer are compensated, the pros and cons of sellers offering or not offering compensation to buyer’s agents, as well as language in their contracts regarding compensation, services, and fiduciary duties in states that allow dual agency or transaction brokerage.
We don’t need to be fearful of this—the sky’s not falling, it’s going to change
Dwiggins believes the industry needs to be able to articulate its values to buyers and have the buyers pay us. These changes make sense—they need to happen.
The end result in three or four years will be (that) it’ll be a better organized business, and you won’t see any more DOJ investigations. You won’t see a lot of this government intervention because it’s set up in a structure where you are representing one individual, you are working as a fiduciary with that one individual, and that one individual is paying you for those services. It is going to end that way, one way or the other, and I think we will be a better industry long term for it.
What Happens to NAR and the Industry If They Lose the Bombshell Lawsuits? (Part 1)
The recent ruling by U.S. District Court Judge Patti Saris in the Nosalek case against MLS Pin put the real estate industry on notice that the clear cooperation rule needs to go. The most explosive damage to NAR and the overall industry would be if the defendants (NAR, Anywhere, Home Services of America, Keller Williams, and RE/MAX) were to lose one or both so-called bombshell lawsuits (Burnett/Spitzer and Moerhl).
I recently interviewed the CEO and co-founder of Next Home, James Dwiggins, whose company did over $12 billion in sales in 2022. To be prepared for the worst-case scenario, Dwiggins put together a comprehensive risk assessment examining potential outcomes from the current litigation as well as what their impact might be.
Nosalek—the canary in the coalmine
In terms of the Nosalek settlement, which was pegged at $3 million, Saris was unhappy that the attorneys would be getting the bulk of the money with the members of the class getting less than $5.00 per person.
Nevertheless, Saris was clear about her feelings about the clear cooperation rule, saying she “loves” the proposed rule changes in the settlement that would make offering compensation to buyer brokers optional.
Saris also said. “I had problems with that [rule], so I denied the motion to dismiss, and I think two other courts did as well.”
A quick overview of Burnett/Sitzer and Moerhl
Both suits allege that NAR conspired with Anywhere, Home Services of America, Keller Williams, and RE/MAX to inflate commissions through the Buyer Broker Commission Rule, a term that doesn’t exist in any NAR documentation and
that the Moerhl attorneys made up.
The reference is to the guidelines in MLS Policy Statement 7.23 and the Code of Ethics that govern commission sharing on the MLS. The complaint alleges that these policies have resulted in price competition among brokers being restrained and seeks damages:
The Buyer-Broker Commission Rule ensures that price competition among buyer brokers is restrained because the person retaining the buyer broker, the buyer, does not negotiate or pay his or her broker’s commission. In addition, the seller’s inflated commission offer cannot be reduced by buyers or their brokers, as Defendants also prohibit buyer brokers from making home purchase offers contingent on the reduction of the buyer broker commission.
Burnett/Spitzer claims that defendants conspired to inflate commissions by requiring all seller brokers to “make a blanket, unilateral and effectively non-negotiable offer of buyer broker compensation.”
Burnett/Sitzer is set for trial on October 16, 2023. Moerhl’s deadline for discovery is set for September, with the trial date expected to be set in late October 2023.
Key issues in the litigation
The most important point to note about this litigation is that these are anti-trust lawsuits. Consequently, treble damages can be applied. These can be in the billions of dollars. The end game is that buyers will pay their own commissions. The industry experts I have spoken with are all in agreement that this not a battle NAR is going to win—it’s coming.
According to Dwiggins other key issues in the litigation include the fact that:
NAR is represented by its membership, its directors, which are in many cases represented by the defendants. So, the largest real estate companies in the US, (the defendants) have people that are part of these committees that make
decisions on how any governance occurs over the multiple listing service.
Number two, the requirement of offering cooperation in the MLS; if you put a listing in the MLS, you have to offer cooperation on the other side of the deal.
These requirements are what the plaintiffs claim to be a “conspiracy” to fix prices.
Dwiggins went on to explain that NAR’s “clear cooperation policy” is where the DOJ has been focused, especially on having to post a new listing on the MLS within 24 hours. According to the plaintiffs, this benefits the large brokerages:
If you are a member of the MLS, you have to put the listing in the MLS within 24 hours, thereby guaranteeing compensation on the other side of the deal, which benefits the large real estate companies (i.e., the defendants) a majority of the time because they have the most agents.
Best possible outcomes?
The best possible outcome would be if NAR and the other named defendants win the lawsuit and cooperation in the MLS becomes optional. Dwiggins went on to say:
At a minimum, this is going to happen one way or the other. Cooperation in the MLS becomes optional. You have a use case of Northwest MLS that enacted this (policy) last year in October (and it) hasn’t really changed much. It just hasn’t affected the business the way people thought it would actually occur. I think that’s a minimum that occurs.
Other potential outcomes?
Based upon his conversations with attorneys and industry leaders, Dwiggins outlined the following list of other potential outcomes.
- NAR and other defendants settle. They open the class further to bring everyone into the settlement, but “there’s only so much money in that pot.”
So, it makes sense to come up with some type of settlement structure that gives everybody a little bit of cash. And essentially, we move on and what I call “remove chess pieces from the table.”
Let’s hypothetically say the settlement was $2 billion. Everybody’s going to throw some money in. NAR comes in and they do an assessment. I hate to say it, some of the math I’ve heard is if a $2 billion settlement (were) paid out over four years, every member pays $400 a year.
In my opinion, if NAR were to assess members $400 more a year in dues for four years to pay for this type of settlement, that would be the death knell for the organization. - Cooperation in the MLS becomes optional nationally. Dwiggins believes there is 50 percent chance it may be completely banned.
- NAR passes a mandatory rule to its MLS policy and Code of Ethics that requires buyer’s brokers to have signed buyer broker agreements that clearly spell out compensation terms signed before showing MLS-listed properties. Some dual agency states have hurdles to get past in order to do this.
- NAR lobbies legislative policy changes so buyers’ agent compensation can be financed in the loan.
- There’s 50 percent chance that the clear cooperation policy is rescinded, and off-market listings become normal.
- Brokerages, as well as local MLS’s and Realtor Associations will consolidate, reducing costs and relying more on virtual operations.
- There will be a 25 – 50 percent reduction in buyers’ agents.
- Unless dual agency is banned at the state level (which is currently that’s the case in nine states), more double-ended deals will occur.
- Flat fee and hourly service models gain traction.
- There’s a 100 percent guarantee that pressure on buy side commissions will occur.
- Buyer agents are either paid by the buyer (directly or financed) or paid by the seller through the purchase agreement.
Stock prices for publicly traded companies and real estate portals could take a major hit if there is an unfavorable outcome.
A major wildcard
The federal judge presiding over these matters could ban cooperation on the MLS. This is not only within the judge’s purview, it could happen as soon as October 2023. This would be a huge blow to industry, but most notably, to first time buyers who cannot afford to pay the commission and may decide to transact without representation.
Everyone keeps saying this is going to take five to seven years to play out. That is partially true in the sense of the damages portion of this case. The key use cases will take time because whoever loses is going to appeal guaranteed. That might take five to seven years.
But what if the judge says that while the appeals are going on, there’s an injunction in place where cooperation is no longer allowed in the multiple listing services?
Stay tuned for Part 2 on August 18, 2023!
A Simple Secret to Unleash Your Business Success
A recent study provides some insight as to why so many businesses fail. A leading research firm asked 1,000 people what they want from life. They received the same answer from 97 percent of them: “I don’t know.” 
In other words, most people are missing the level of clarity needed to be successful in their business. If you want to grow your business, begin by identifying the most important things that you’re working does for you emotionally. For example, it may be pay for food for your family or help you to care for an ailing parent.
It’s also important to identify the fun things being successful will let you do. Knowing your most important emotional reasons for being in the business is the secret to powering the drive you need to succeed.
Help Your Buyers Escape the Hustle and Bustle
Most real estate ads read like a laundry list of the property’s physical characteristics or “features.” Features don’t motivate buyers to purchase. Instead, the decision to purchase is based upon the emotional benefits the buyer believes the property will provide. 
To do a better job of marketing your listings, use your ads to paint a picture of the lifestyle. For example, “Relax on the patio overlooking the panoramic view,” “Unwind in the spa tub,” or “Snuggle up with a good book in front of the fireplace on a cold night.”
Since most Americans have hectic schedules, they are attracted to homes that allow them to escape the hustle and bustle. Use pictures and video to convey what the quiet (or bustling) lifestyle would be like if the buyers were to live there.