In a letter to agents and affiliates with Keller Williams, Gary Keller announced that the brand had negotiated a $70 million settlement in the class action suits that have rocked the industry and spawned a legion of copycat suits that could change the way residential real estate is bought and sold.
The suits, referred to by industry insiders as Sitzer/Burnett and Moerhl, target the commission structure in the industry and rules created by NAR that dictate how a buyer’s agent gets paid.
The settlement from Keller Williams also includes stipulations that the national real estate franchise with more than 180,000 agents under its brand will change its business practices. According to reports from Inman, the settlement is “substantially similar” to the agreements reached with plaintiffs by Anywhere and RE/MAX, which were made before Sitzer/Burnett went to trial. Those settlements netted plaintiffs $83.5 million and $55 million, respectively.
The Sitzer/Burnett verdict back on Halloween of 2023 was a true fright for defendants, resulting in $1.78 billion in damages awarded to plaintiffs. While that winds its way through appeals (that is, if NAR can afford it), the class-action judgment leaves defendants in a vulnerable position.
If the court approves the settlement, it will be a huge cost savings for Keller Williams, but it leaves NAR, HomeServices of America, and two HomeServices affiliates holding the bag. According to Keller’s letter to agents and franchisees, the settlement releases individual agents and franchisees from copycat litigation filed in the wake of Sitzer/Burnett.
Matt Hilton, a Collin County Keller Williams agent and host of The Matt Hilton Show, offered his perspective on the settlement.
“I trust leadership, particularly Gary’s, and if he feels like settling this case is in the company’s best interest, then we should be supportive and move on,” Hilton told daltxrealestate.com Publisher Candy Evans. “I think this was a great wake-up call to our industry, particularly the National Association of Realtors and our local associations, that we as agents absolutely need to show our value to consumers.”
That was the crux of the suit — that sellers, through a standard contract mandated by the National Association of Realtors and its local associations, must pay the buyer’s agent’s portion of commission from the proceeds of a sale.
“Keller Williams has always been focused on building a place where entrepreneurs can thrive,” Keller said in a statement. “As part of this, agents have always been free to run their businesses, including deciding what to charge for their services and negotiating compensation with their clients.”
Keller added that the settlement is intended to provide agents and franchises with “much-needed relief, stability, and freedom from distraction,” while allowing them to continue running their businesses.
That relief is keenly felt, according to Hilton, especially in the Lone Star State.
“Texas agents need to remember that Keller was thinking on a larger scale,” Hilton added. “Keller Williams is the largest real estate franchise in the United States by sales volume as of 2022, with many brokerages in states that do not have the same laws and structures in place that Texas has.”
But the big question remains: Where will the settlement funds come from?
“The settlement agreement includes a payment of $70 million,” said Darryl Frost, public relations officer at the Keller Williams national headquarters. “This will not impact our ability to support our franchisees and agents.”
The full letter from Gary Keller is below:
Keller Williams Family,
I’m relieved to share that we have negotiated a nationwide settlement of the Sitzer/Burnett case – on terms that protect our agents, our franchisees, and our industry. Crucially, the settlement releases individual agents and franchisees from copycat litigation filed in the wake of Sitzer/Burnett.
This is a significant moment for our entire Keller Williams family. As you all know, we fought hard for our agents and franchisees and their ability to manage their own businesses according to accepted, ethical industry practices. However, over the past few months, the Sitzer/Burnett verdict drove speculation and uncertainty across the industry.
We had full confidence in the strength of our appeal. But we also knew the appellate process could be long and unpredictable – and that our franchisees and agents would have no protection and complete uncertainty while that process played out over time. Our Keller Williams family needs and deserves protection now, not later.
We came to the decision to settle with careful consideration for the immediate and long-term well-being of our agents, our franchisees, and the business models they depend on. It was a decision to bring stability, relief, and the freedom for us all to focus on our mission without distractions. It allows us all to turn our attention back to what we do best: delivering unparalleled value in an ever-evolving real estate market.
Evolution is certain. I hope and believe that all of us at Keller Williams will be leading that evolution for many years to come. We will continue to play by the rules, act ethically, advocate for the integrity of the industry, and – of course – deliver value.
Keller Williams was built for entrepreneurs. This ethos is at the core of our business, allowing agents the freedom to manage their businesses, set their service fees, and negotiate compensation with clients independently. That was true before these lawsuits, it was true at trial, and it remains true as we put this settlement behind us.
I want to thank you for your unwavering support during these challenging times. Your resilience, dedication, and trust in Keller Williams have been pivotal to our ability to navigate this period.
As we move forward, we will continue to pivot, adapt, and thrive – just as we always have. This settlement is not just a resolution; it’s a launchpad. We will remain focused on what we do best: building our businesses and transforming the real estate industry together.
Thank you for your continued commitment to excellence and for being an invaluable part of the KW family.
Thank you for all you do to help others live their best lives possible.
Onward with gratitude …
