How Keller Williams trains its agents to respond to seller requests to lower buyer broker commissions has come under fire in a lawsuit that’s caught the attention of the real estate industry.
In an amended complaint filed Friday, a lawsuit first filed by homeseller Christopher Moehrl took a new turn, highlighting the role commissions play in steering buyers and the limits placed on sellers who might otherwise negotiate down buyer broker commissions.
The lawsuit alleges that the National Association of Realtors (NAR), Realogy Holdings Corp., Keller Williams Realty, RE/MAX LLC, HomeServices of America Inc. and HomeServices subsidiaries BHH Affiliates LLC, HSF Affiliates LLC, and The Long & Foster Companies Inc. have violated the Sherman Antitrust Act by “agreeing, combining and conspiring to impose, implement and enforce anticompetitive restraints that cause home sellers to pay inflated commissions on the sale of their homes.”
In motions to dismiss, NAR and the real estate companies have said the suit misrepresents their rules.
But it’s not just rules that the plaintiffs use to back up their claims. The suit also points to statements made by Keller Williams’ CEO and Keller Williams training scripts as evidence that the Austin-based brokerage and franchisor steers buyers away from listings offering low commissions and discourages sellers from offering lower buyer broker commissions because of steering, thereby keeping buyer broker commissions at a standard level of around 3 percent.
Gary Keller at Keller Williams KW Family Reunion 2019. Credit: Keller Williams
The suit doesn’t mention the Keller Williams CEO by name, but video from Gary Keller’s 2016 vision speech at KW’s Family Reunion event shows it was Gary Keller. Keller Williams spokesperson Darryl Frost told Inman it was former CEO Chris Heller, but Heller disputed this and the video backs him up. When asked why Keller Williams had said it was Heller, Frost said, “We made a mistake.”
Keller Williams, the complaint alleges, “instructs seller-brokers to tell homesellers that ‘[t]he standard real estate commission has stabilized, over the years, at right around 6 percent’ and that ‘[y]ou’re putting yourself at a disadvantage competitively when you reduce your commission.’ This is a message that Keller Williams has also broadcast to the entire industry, including its purported competitor brokerages.”
Keller Williams, through its professional education arm Keller Williams University, trains its listing brokers to “dissuade” sellers from reducing the buyer-broker commission, according to plaintiffs’ attorneys.
The complaint pointed to a KWU “Scripts Catalog” for “Working with Sellers” that includes this recommended script:
“[T]he Keller Williams training manual, which provides sample broker scenarios for Realtors, shows that listing brokers are taught to tell home sellers that the sellers have to pay the buyer-broker’s fee and that fee is non-negotiable,” the complaint said.
The complaint argued that a NAR MLS rule requiring listing brokers — and their agents who represent homesellers — to make a “blanket unilateral offer of compensation” to buyer brokers when listing a property puts “tremendous pressure” on sellers to offer the high, standard industry commission — or risk that buyers will be steered away from their listing.
“Indeed, according to course materials provided at Keller Williams University, offering less than three percent in buyer-broker commission on an MLS ‘will reduce the number of willing and qualified buyers that will see your home,'” the complaint said.
Plaintiffs’ attorneys argued that the defendants’ “conspiracy” has kept commissions at a high, standard rate over the last couple of decades. Between 2000 and 2017, the average commission nationally has been stable at between 5 and 5.4 percent, with about half or more of that amount going to the buyer broker, regardless of changing market conditions, according to the complaint.
“At an industry event in 2016, the Chief Executive Officer of Defendant Keller Williams reported to other industry participants that Keller Williams’ buyer-brokers were charging an average commission of 2.71% in 2015, an amount virtually unchanged from the 2.8% it reported that it had charged in 2002,” the complaint said.
In an emailed statement, KW’s Frost told Inman, “Our policy is not to comment on pending litigation. We have nothing further to add at this point in time.”
Keller Williams had a combined 157,377 agents in the U.S. and Canada, as of March 31.
CORRECTION: This story has been updated with a statement from KW’s spokesperson and new information showing Gary Keller, not Chris Heller, made the statements referred to in the amended complaint. This story originally correctly identified Keller as the CEO who made the statements before being contacted by KW’s spokesperson.
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