John Pye Impacts USA Real Estate Practice

John Pye accepted the commission, as he had known for many years that the USA real estate profession acted in an unethical manner. Such practice would be illegal in Australia. In the USA, a brokerage (a.k.a. Real Estate Agency) would normally act for both the vendor and buyer on the same property transaction. The vendor would thus have to pay a fee for someone to negotiate against them. There were other matters raised as well relating to the 7% national fees and how the NAR (National Association of Realtors) controlled fees and practice standards.  In Australia, the state Governments have this role and not the Real Estate Institute in each state. Also, the local marketplace in Australia determines the fee for each transaction.

The class in the lawsuit was comprised of all sellers of property in every state of the USA from 2015 to 2020 – many thousands of people.

John Pye’s commission included the preparation of a 15-page Expert Witness Report for the plaintiff and a rebuttal of a defendant’s report. His expert witness report was written after many Zoom discussions with a partner in Hagens Berman, Law firm. The defendant’s witness report came from an Australian Real Estate trainer who was no longer involved in Real Estate agency practice. It was poorly written and was easy to discredit. John Pye was paid in US dollars on an hourly basis – around 120 hours in all.

At a one-day pre-court Deposition Zoom hearing in the Thornleigh office of John Pye Real Estate, John was sworn in by a US Court Clerk. He raised his right hand in the American way and agreed to tell the truth, and nothing but the truth. John Pye was cross examined by two lawyers who represented other lawyers for the defendants. A total of 28 lawyers were involved in this case. John was required to defend his Expert Witness testimony about Real Estate practice in Australia.  Jeannie Evans, the US lawyer from Hagens Berman (graduate from Harvard) came to Australia and sat beside John in his office and raised several objections to questions asked by the US lawyers representing the defendants. She also asked John several questions at the end, so that additional evidence would be included in the Deposition. The result was over 200 pages of transcript for the one-day hearing. In total, 429 questions were asked. A classic question from one lawyer for the defendant was to ask why John Pye was trying to change the way real estate had been practiced across the USA since the early 1890’s. In reflecting on the deposition, the questions asked at the end of the day and the evidence provided by John, showed that the defendant’s case was weak and there were signs that they would be the losers.

John was asked whether he was aware that should the matter not be settled out of court; he would be required to testify in the Federal Court of the United States in Chicago. John replied that he would be prepared to so testify.

The Outcome

In August 2024, John Pye was finally advised of the results of the out of court settlements. The US Solicitor who commissioned him and worked with him, made the comment that his testimony had a “great impact on the case”.  It is nothing short of amazing that Australian real estate practice had such an impact in the USA and broke the power of a national organisation and major franchise groups which had failed for 130 years in providing an honest service to the marketplace. Self-interest power was destroyed across the USA in real estate practice. This result will affect the lives of millions of Americans over the years to come as their standard 7% fee throughout the USA has now been broken as well as unethical practices in real estate transactions.

The settlement against the National Association of Realtors was US$418,000,000 and against the 6 national franchises another US$350,000,000 (approx.). At the time it was around AUD$1.3 Billion.

According to an Australian who consults to Real Estate Brokerages from California to Florida, real estate professionals were talking to him about “ the greatest change in real estate practice in US history”.

There are many articles about this US Federal class action lawsuit. For example, the following is about the case against the NAR. It doesn’t mention the cases against the franchise groups including REMAX, Keller Williams and several others.

https://www.nytimes.com/2024/11/26/realestate/nar-settlement-approval-commissions.html