Somewhere Between Heaven and Hell, Part 1: Insurance and the Gap
Getting somewhat real about the outcome of the commission lawsuits
In previous posts, I have laid out my back-of-the-envelope estimates for just how big some of the Commission Lawsuits could be. I can show you the assumptions and math used, but assuming liability starts in 2010, given the number of transactions and median sale price of homes, here’s the summary takeaway:
Moehrl v. NAR: $195 billion
Sitzer v. NAR: $20 billion
Nosalek v. MLS PIN: $19.5 billion
If we get a wave of copycat lawsuits, and eventually every MLS, brokerage, and REALTOR Association in the entire country is sued and held liable, then the national figure is $972 billion and counting.
It goes without saying that the defendants cannot pay even a fraction of these amounts. NAR, MLS PIN, Realogy, HomeServices of America, Re/Max and Keller Williams would all be instantly out of business. All co-conspirators would also be out of business. Literally every single company, organization and institution that makes up the residential real estate brokerage industry in the U.S. would declare bankruptcy. Most would simply liquidate what meager assets they have and move on.
The law firms bringing these lawsuits are not public interest activists looking to make social change. They’re not the NAACP or EarthJustice. They are for-profit plaintiff law firms who expect to make a ginormous payday. Bankrupt companies can’t make ginormous payments.
Ergo, there will be a settlement sooner or later… or so say the cooler heads in the industry.
I wanted to dig into this just a little bit.
The outcome of these lawsuits will not be total destruction of the real estate industry. On the other hand, victory on the merits by NAR and the corporate defendants given all that has transpired to date is quite unlikely. Please read my earlier dispatches on this topic if you’re interested, or let me know if you’d like a summary of why I am pessimistic about the defendant’s chances.
So what does that middle-ground, “likely outcome” scenario look like? And how would we get there?
Please keep in mind that I am relating what I am finding via research. Just like I’m not an antitrust expert, I am not an insurance expert nor am I an expert on settlement negotiations. Please consult your own competent attorney. This post is edutainment.
Because this topic is so heavy and so long, I’ve broken up into multiple parts. In this Part 1, we cover the topic of liability insurance.
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