After appearing in a video deposition on Monday as part of the plaintiff’s testimony, Rosalie Warner, a corporate representative for HomeServices of America and its affiliates, was in the Kansas City courtroom in person on Wednesday.
In her testimony, Warner stated that, as a parent company, HomeServices is simply there to supplement the local franchisee with additional services. She said that HomeServices does not meddle in operations, give advice, or advise on commissions or how the brokerage approaches Realtor association membership.
When asked about the allegations that real estate companies and professionals conspired to raise or stabilize commissions, she replied: “It is absolutely untrue.” Warner added that HomeServices does not enforce possible infractions of the Cooperative Compensation Rule.
During plaintiff lead attorney Michael Ketchmark’s cross examination of Warner, he presented her with some statistics showing that HomeServices affiliated agents in four Missouri markets paid buyer broker commissions of roughly 3% in at least 88% of the transactions completed between 2015 and 2022. Ketchmark asked Warner if those statistics suggest that agents are practicing the messages they are receiving in their training.
“These companies are independent,” Warner replied. She added that she didn’t know why the commissions were all clustered together, however, she stated that if a franchise had a 2.7% commission target, as was the case with one HomeServices franchise, then that is entirely their decision.
Mike Frazier, the president and CEO of HomeServices wholly-owned subsidiary ReeceNichols, and the CEO of Berkshire Hathaway HomeServices Kansas City Realty and BHHS Alliance Realty, was next to take the stand.
In his testimony, Frazier said that while HomeServices owns 100% of ReeceNichols, it does not direct the firm in any way. He added that ReeceNichols, which has roughly 2,000 agents spread out over 21 offices in Kansas City, created its own policies and procedures, and that it was responsible for the training of the firm’s agents. According to Frazier, ReeceNichols provides HomeServices with financial information and budgets and the firm is part of a monthly call with all of the CEOs of the other wholly-owned subsidiaries.
Frazier also told the jury that ReeceNichols does not require agents to be members of the National Association of Realtors, but the local MLS does. He noted, however, that the firm does not enforce this rule. Despite not requiring NAR membership, Frazier said the brokerage does require agents to follow the NAR Code of Ethics.
“We think it’s appropriate for them to follow,” Frazier said.
During his time on the stand, Frazier told the jury that agents determine their own commissions, not HomeServices, but he did state that he believes the Cooperative Compensation Rule helps buyers. If the rule were to go away, Frazier said fewer people would use buyer brokers, as they would have to pay for their own agent and not everyone can afford to do that.
“It would hurt the low end of the market,” he said. “We don’t want people unrepresented.”
During his cross examination, Ketchmark returned to this point claiming that if the rule were to disappear, costs would go down benefiting the low end of the market.
To this, Frazier replied that those “who are well to do” would still employ the services of a buyer broker, but people on the lower end — who arguably need advisors the most — would not have access to an agent.
Frazier also testified that the average commission at ReeceNichols is 2.75% for both buyer and seller agents. According to Frazier, homebuyers working with ReeceNichols agents sign a buyer agreement that if the seller doesn’t pay the buyer agent’s fees, then the buyer will pay the fee themselves.
He also said that if only a small amount of money was offered to the buyer’s agent from the sell side, their incentive to show the property would drop.
“It is human nature,” Frazier said.
The third witness of the afternoon was Krista Wilson, the senior vice president of brokerage at ReeceNichols.
Wilson agreed with Frazier that commission-based steering doesn’t happen because buyers can see homes online sometimes even before their agents find them.
“I would say it’s impossible,” Wilson said, in reference to steering.
Wilson echoed Frazier’s sentiments on ReeceNichols’ commission guidelines. In her testimony she noted that the guidelines, which she specified did not come from HomeServices, had been in place long before she joined the firm in 2002, but they had been eliminated roughly five years ago.
“They were not set commissions,” Wilson said. “They were guidelines. They were a place to start.”
During Ketchmark’s cross examination, Wilson said the lowest commission he had charged a seller was 2% when she was working at a limited-services brokerage. Despite receiving a lower commission, she said she still “usually” offered a 3% commission to the buy-side agent. Wilson said she did this because buyers’ agents “work hard” and that the agents of either side of the transaction are equally important.
Prior to the adjourning for the day, Judge Stephen Bough denied HomeServices’ motion for judgment as a matter of law, which was filed Monday afternoon.
A judgment as a matter of law is permissible if there is no legally sufficient basis for a reasonable jury to find for the nonmoving party (in this instance, the plaintiffs) on the issue.
In his ruling Bough wrote: “The Court finds that Plaintiffs have presented sufficient evidence that a reasonable jury could find for Plaintiffs.”
Bough has yet to rule on HomeServices motion for a mistrial, which was filed Wednesday morning.