Discount Real Estate Agent Sues, Alleging She’s Been Blacklisted
For years, real estate broker Jeannette Sharar was a team player and model member of her industry. The Santa Clarita Valley businesswoman was, and still is, a hospital fund-raiser, city planning commissioner and vice president of the valley’s Chamber of Commerce. She even served on the local Board of Realtors.
But today, this broker’s broker finds herself in the unlikely role of consumer advocate.
Sharar claims in an antitrust case pending in Los Angeles Superior Court that she and her agents are being blacklisted by two Realty World franchises for charging 2% commissions instead of the 6% rate considered customary.
Her lawsuit, scheduled for trial March 5, focuses on the franchises’ offers to pay her what the industry calls “punitive splits,” or a lower commission than that which is offered to other brokers who might participate in a sale.
By offering her only 1% of the total commission instead of the standard 3%, Sharar argues, her competitors are not only discriminating against her for her low rates but trying to discourage other brokers from following her example. Another effect of the lower commissions she is offered, Sharar said, is to discourage her agents from trying to sell her competitors’ properties, lessening their opportunities to make sales.
“I am not a multimillionaire, not by a long shot,” Sharar said recently as she gestured toward the comfortable but modest home in Newhall she shares with four daughters. “I’m doing this because I believe in the principle.”
Sharar said her practice has been to charge market-rate commissions when a client chooses to use the conventional, multiple-listing service and its broad exposure, and to charge the lower 2% rate to customers willing to rely on the work of her staff alone.
She said that since employing “the 2% solution,” as she advertises the lower commission, her 17-agent firm has been the victim of harassing phone calls, a campaign of false and discrediting rumors and stolen signs.
The lawsuit has already cost her $24,000 and could rack up another $30,000 in lawyer’s fees if the case goes to an appeal, Sharar said. Complicating the legal fight has been a battle against inoperable cancer. Doctors have told her the prognosis is grim.
Industry representatives dismiss Sharar’s case as an isolated example of friction between two competitors. In today’s high-priced real estate market, they contend, discount brokers are well accepted and fees are readily negotiable. Even if Sharar proves her allegations, they said, she will only affirm existing laws that prohibit group boycotts and price-fixing.
“A 6% commission rate is no longer that prevalent. All kinds of rates are in effect, and the market dictates what they will be,” said William M. Pfeiffer, vice president and general counsel for the California Assn. of Realtors.
“If her case can be proven, we are on record as condemning such behavior. I think it would be an aberrational case. I don’t think it’s something that would happen with any frequency,” he said.
But consumer advocates said Sharar’s case is important because--despite what Pfeiffer and other industry spokesmen said--discount brokers remain industry pariahs. Even if the case breaks no new legal ground, they said, a victory would encourage other brokers to lower rates and would ultimately help consumers.
“The real estate community will do anything it can to prevent that sort of break-away-from-the-pack kind of behavior,” said Carlyle Hall, an attorney for the Center for Law in the Public Interest in West Los Angeles. “You have to have a great deal of courage to be a discount broker and offer substantial discounts.”
Gail Hillebrand, an attorney for the San Francisco-based Consumers Union, the publisher of Consumer Reports, agreed.
“If you talk to homeowners and ask them how much they paid, 99.5% paid 6%,” Hillebrand said. “Discount brokerage has been legal a long time in California, but it hasn’t really taken off. . . . There has been continued resistance in the industry to negotiated fees.”
Sharar said she began charging her controversial commission in 1986 when she was hired to help relocate 150 managers of a pharmaceutical company and found few homes available. She thought potential sellers might be prodded to put their homes on the market if assured that less of their profit would end up in agents’ pockets.
Sharar and her family said the “2% solution” was not just a clever gimmick. They said it is an understandable outgrowth of the family’s strict, privileged upbringing by a father they described as a nonconformist, highly ethical oil driller.
“My father was a great man, a man of principle,” said Sharar, who said she thinks it is immoral to charge 6% commissions on homes that often cost more than $200,000.
The M’Closkeys lived in a Beverly Hills mansion, and Sharar and her sisters attended exclusive, Catholic girls schools. But Sharar’s rebelliousness was demonstrated early when she managed to get herself expelled from two academies picked by her parents so she could attend a more progressive school of her own choice. She later scandalized her family by holding a variety of jobs until she married at the then-late age of 27.
Today, Sharar’s struggle against convention is competing with her struggle against cancer. Although she recently sold her real estate company, Sharar Associates, she remains its director and head broker and works out of her home.
News of Sharar’s illness drew nearly 400 people to a dinner in her honor earlier this month, and a series of tributes fleshed out a portrait of a moral maverick. Ruth Newhall, the well-known former local newspaper editor, recalled that when Sharar won $10,000 in a charity raffle, she gave half back to the charity and half to Henry Mayo Newhall Memorial Hospital, where she is a board member.
Newhall said Sharar’s antitrust case has caused a stir in the rapidly growing community, where land development and real estate are the chief industry, but that many are privately rooting for her.
“In this time when so many real estate people are making, if not million-dollar commissions then million-dollar incomes, it naturally did win a few hearts to see someone who was going to say, ‘In this great boom time, let us not be so greedy. Let us . . . make it easier for the buyer.’ That was the message she communicated,” Newhall said.
Under state and federal laws, real estate commissions are supposed to be negotiated deal by deal and local boards of realtors--the groups that publish and control multiple-listing services--are prohibited from telling brokers what to charge.
Yet, said Hillebrand and Hall, those laws remain academic when a majority of brokers won’t substantially lower their fees.
The chief defendant in Sharar’s lawsuit--broker Marcia Gaskill and two Realty World franchises she owns in the Santa Clarita Valley--indicated within the multiple-listing service that Sharar Associates, Help-U-Sell and another discount firm would receive split commissions of 1% if they helped sell homes she listed. Higher splits were offered to “all others.” Gaskill also wrote Sharar a letter in September, 1988, with a blanket offer of 1% splits on all sales.
Although brokers are permitted to negotiate how commissions will be split and to deal with individual competitors as they please, industry rules prohibit blanket punitive splits or the publishing of punitive splits in the multiple-listing service.
After Sharar sued Gaskill and the Santa Clarita Valley Board of Realtors for publishing Gaskill’s footnotes, the board quickly agreed to correct the practice and was dropped from the case.
Sharar claims Gaskill has continued to send her letters informing her that she would be offered split commissions of only 1% on specified properties. That practice is permitted under industry rules--unless Sharar can prove it is being done to discriminate against her.
Gaskill referred questions to her attorney, David L. Candaux of Encino, and Candaux declined to discuss the case.
In documents filed with the court, Candaux wrote: “This is, in essence, the story of how a predatory pricer . . . got ‘hoisted on her own petard.’ ”
He wrote that Sharar expected to “enjoy the best of both worlds” by charging only 2% commissions on sales made exclusively by her office, while also participating in the multiple-listing service and benefiting from market-rate fees.
Hall said Sharar deserves credit for her effort, regardless of its outcome.
“This industry is the same old dinosaur trying to protect its turf and its high commissions,” he said. “Here’s one more person who was trying to buck the system and had to go to court. It’s ridiculous.”
