If you are curious how attorney Mike Ketchmark and his team were able to win a landmark $1.8 billion class-action lawsuit on price fixing against the National Association of Realtors, Keller Williams, and HomeServices of America, you're going to love this podcast episode.
This was truly a David vs. Goliath moment that will change the real estate industry forever. Both home buyers and home sellers should benefit from lower commissions thanks to this verdict.
As I wrote in my real estate collusion post, back in 2017, I couldn't believe I was paying a buyer's agent 2.5% while he was trying to hammer me down on my asking price. The commission incentive structure was misaligned.
But my selling agent argued we'd have a tougher time getting buyers if we didn't pay their agents 2.5%. Sounded sketchy to me! But I went with paying an overall 4.5% commission rate because my son was born in 2017 and I wanted to simplify life.
After the sale, I promised to not sell another property until commission rates dropped further. In addition, I ended up buying the next three properties via dual agency. Paying the buyers agent a 2.5% commission left such a bad taste in my mouth that I decided to basically represent myself and earn the 2.5% commission instead.
Mike Ketchmark's Previous Cases
I have a newfound respect for lawyers who work on a contingency fee. Ketchmark and his team don't charge a thing unless their clients win. Can you imagine working on a case for years and spending millions of dollars only to lose? Talk about taking big risks for what you believe in!
Prior to the brokerage litigation, Ketchmark was best known for a 2002 case involving pharmacist Robert Courtney. Courtney diluted 98,000 chemotherapy prescriptions for over 4,200 cancer patients in the Kansas City area. Representing the victims, Ketchmark sued drugmakers Eli Lilly and others. He claimed they were negligent in not uncovering Courtney's scheme.
Ketchmark won a $2.2 billion civil judgment against the companies. However, they ultimately settled for just $72.1 million.
More recently, Ketchmark represented a Kansas City doctor who was awarded $26 million in 2021. The doctor claimed an ER staffing company had fired him after he raised concerns about patient safety. Specifically, he took issue with having just one doctor covering both the regular and pediatric ER departments at the hospital where he worked.
My Conversation With Attorney Mike Ketchmark
You can subscribe and listen to the episode on Apple, Spotify, Google or wherever you listen to podcasts. Or you can also click the embedded player and leave a comment in this post about your thoughts.
Share The Episode If You Want To Help Put Downward Pressure On Real Estate Commissions
If you own a home and/or rental properties, I encourage you to share this episode with everyone you know. The more we can spread the word, the more pressure we will put on the real estate industry to properly align the commission structure.
If you plan to sell a house, simply ask for a lower commission rate after this landmark case. If the potential listing agent puts up a fight, which they will, have them listen to my episode with Mike Ketchmark.
If you plan to buy a house, ask your buyers agent for a rebate on their commission, especially if you found the place. If they push back on a rebate, make them listen to this episode! I got a rebate in 2005 when I closed on my house purchase.
At 28, I didn't know better and let my real estate represent me and earn a 2.5% commission when I was the one who found the property and negotiated the price. My agent was out of town for a month. I probably could have saved at least $10,000 if I went the dual agency route. But at least I got a $3,000 rebate at closing.
Let's let market forces decide real estate commission pricing.
Finally, if you enjoyed the episode, I'd appreciate a review! It takes hours to interview and edit each episode for you. Subscribe so you never miss a new episode.
Show Notes On Busting The Real Estate Cartel With Mike Ketchmark
- The NAR made itself a 501(c)(6) not-for-profit corporation to avoid paying taxes (4:30)
- Steering is a process where real estate agents steer their clients away from homes where commissions aren’t high enough (13:39)
- The real estate industry uses scare tactics to get home sellers to pay the commission fee. Unlike buying and selling cars, the typical homeowner might only sell twice in their lifetimes (15:00)
- Real estate commission takes a massive amount of equity built up by homeowners (19:00)
- Agents train buyers to say their services are “free”
- Real estate brokerages and agents are earning both sides of the transaction
- The NAR and other real estate brokers are afraid buyers will pay buyers agents what it’s worth (22:20)
- Google “your state + housing development commission” to see what type of free money there is for first-time homebuyers in your state
- When Mike thinks real estate commissions will begin to materially come down (28:10)
- The power of the 7th Amendment in forming a jury of private citizens to stand up to the most powerful people in real estate (37:30)
- Where was the Department of Justice and the Anti-Trust department given this ruling? Did they fail us? (38:40)
- The economics of being a trial lawyer on a contingency fee (41:46)
- First bill from expert witnesses for $1.7 million (44:10), then you're pot committed
- The process of the law firm actually getting paid after a win (46:45)
- Working together as a family to keep each other going (48:57)
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Sam,
Thank you for posting this incredible interview! The real estate industry has had a stranglehold over the MLS and the home selling/buying process for way too long. It’s a monopoly, and it’s illegal.
What can homeowners do now to help change the current system? I plan on selling my home in the next several years. Listing a home in the local MLS is the #1 marketing tool. A listing agreement with a Realtor is required for our home to be listed in our local MLS, with compensation given to both the listing agent and buyer’s agent. When selling my home, I can negotiate down the listing side but must keep the buyer’s side at 2.5% – 3% or real estate agents will steer buyers away from my property. Hopefully, decoupling of commissions will happen, but there is no guarantee that this will happen anytime soon. Any thoughts?
Great interview – hope he goes after the medical industry next
The NAR says this lawsuit will have little to no effect. While they can drag the (initial) lawsuit out, eventually there will be a power shift from the realtors to the American people, which is exactly what the realtor companies don’t want. Normal market forces being exempted is no longer.
I wouldn’t expect the NAR to say anything less. They have to, to protect their position.
Love it. Can’t believe it has taken this long. Look hiring a person to help sell your house is a short term limited contract similar to having someone do a landscaping job or installing a pool. It is a fixed rate per hour work or per job for a set dollar amount. If you install a pool do you sign a contract for 1% of your home price??! Forget about percentages, just go with a flat fee for a set dollar amount.
I agree. Competitive market rate flat fees make sense for both the buyer and the seller, as offered for almost every other service out there. Percentages just don’t make sense, especially if they are being bullied as a need to seem or keep to a standard. If someone say lives in a luxury neighborhood, and feel they want special add-ons to that flat fee (such as a particular tier of various flat fee options), then they can pay for those add-ons or desired tier. Or anyone else for that matter. Buyers can pay also pay for whatever add-ons or tier package they need based on their comfort, or not pay for by relying on technology available today. Pay for only what for you want, don’t use percentages, and make it more of a competitive market by letting normal market forces play out as is life.
Full disclosure – my wife and I own a real estate brokerage in FL.
That being said, there’s an absolutely ridiculous amount of real estate agents in FL as you’d imagine. A large percentage of them never actually have a sale except maybe a one off for a family member/friend/etc. Most have no idea how to do their actual job much less run a business due to inadequate training…. usually from the big players in the industry.
I could care less where commissions end up because there will always be a way, in my opinion, in which value will he compensated. IE. Mike, i’m sure despite not guarantees, he’s over 2.5%
Point is, if you want to last and do your job as a professional, you can spend potentially thousands on marketing, staging, open houses etc. especially if it’s in tough shape or a tough sell to begin with. You are also able to maximize value for your buyer/seller by negotiating the right elements of the deal not necessarily just price.
I would like to think the majority of folks buying/selling would prefer to have someone working on their behalf that is competent correct? Not simply the discount, uneducated, unexperienced agent taking 1%?
Anyway, a lot more complex imo than is being eluded to. I’m sure selling sunset has done a lot of good for our industry…
True. No doubt a lot of work can be involved in selling or buying a home. Some agents take years to find a property for a buyer and close.
The hope is that we let normal market forces determine real estate commission prices, not an oligopoly or monopoly. That’s what’s happen with the entire private sector.
Also, as you will hear in the podcast, Mike and team didn’t go after local brokerages. It went after the larger, national brokerages like HomeServices of America which has been methodically acquiring local brokerages to better control real estate commission prices.
Absolutely love that point and couldn’t agree more! Normal market forces will absolutely help, hopefully it’s negotiated more transparently. I suspect lending will have a role to play especially w/ VA & FHA but excited for change and being a smaller boutique we like to think we’re pretty nimble.
I think I caught some of our agents off guard suggesting this would thin the ranks more and welcomed it lol, but it’s the truth. I’ve followed your blog for years and there’s no question you’d handle transactions / negotiations better than most. There definitely needs to be considerably more training and education imo.
Totally agree, they were quite literally teaching/suggesting those talking points regarding “free buyers agent” – but I still think it’s funny how much the attorneys make so I had to throw it in there lol.
We get hounded by all those guys constantly to sell, never gonna happen… There’s no value there, we’re plugged in locally and our agents are educated and professional. Not to mention the revolving door of agents they capitalize on for their first and potentially only deal etc.
Absolutely fascinating interview and wow what a win! It’s so true that because people may only sell one or two homes their entire lives that this price fixing commission debacle has been able to go on for so long.
Technology has changed every other industry. And the US is the only country still doing things in such an archaic way?! It’s time for change in real estate and to lower costs!