This week we will dive into the two Federal Class-Action lawsuits that have been filed alleging that the longstanding process by which residences are sold is anti-competitive because of the requirement of sellers to list their properties on an MLS and to agree ahead of time to provide a predetermined commission rate. We will follow this up with 3 news articles where you can learn more before the first of these two lawsuits begins next Monday, October 16th in the U.S. District Court in Kansas City, Missouri.
The Two Lawsuits
Moehrl v. NAR, a punitive antitrust class action suit in the U.S. District Court in Illinois, was originally filed in March 2019 against NAR and four corporate defendants: HomeServices of America (a Berkshire Hathaway affiliate), RE/MAX, Keller Williams Realty, and Anywhere Real Estate (the parent company of several residential brokerage brands, including Coldwell Banker, century 21 and Better Homes and Gardens). A second class action lawsuit was then filed in Missouri, Sitzer/Burnett v. NAR, set to begin on Monday, October 16th in U.S. District Court in Kansas City, Missouri. These two lawsuits allege that home sellers are damaged when their listing broker offers to compensate the buyers’ representative. The plaintiffs, home sellers who listed their homes on one of twenty MLSs covering several major metropolitan areas in the Mid-Atlantic, Mid-West, South-West, Mountain-West, and Southeast regions, filed against NAR and four corporate defendants who they allege forced home sellers to pay inflated broker fees via the Buyer Broker Commission Rule. The lawsuits seek to disentangle commissions paid to buyer and seller brokers, arguing that each side of a transaction should be allowed to negotiate its own fee structure. (Sources: Moehrl v. National Association of Realtors, via Cohen Milstein and Your Next Home Purchase Could Look a Whole Lot Different Because of These Lawsuits, via CoStar)
The National Association of REALTORS (NAR) has held firm in its defense against these two class-action lawsuits challenging real estate compensation structures. Has continually advocated that the MLS model best serves consumers because it brings together motivated buyers and sellers in a streamlined process. The arrangement, in which sellers pay the commission, also prevents buyers from needing to come up with big out-of-pocket payments to their brokers. NAR’s position is best articulated by NAR’s Vice-President of Public Relations and Communication Strategy, Mantill Williams, “Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers. The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and, thus, creating a larger pool of buyers for sellers. For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation, and make homeownership possible for more people.” (Source: NAR: Real Estate Compensation Lawsuits Far From Over).
Where Things Stand Today
As of this writing, Anywhere Real Estate and RE/MAX have settled these cases for reportedly $83.5 million and $55 million, respectively. Both settlements are pending court approval (US Justice Dept Steps Into Real Estate Commission Case to Question Merits of Antitrust Deal, Reuters). The National Association of REALTORS has said it will continue fighting against these two class-action lawsuits and “are confident they will prevail in proving the lawfulness of the rules under attack.” (NAR: Real Estate Compensation Lawsuits Far From Over) along with the remaining major real estate companies and MLSs named in the lawsuits.
Including likely appeals, the lawsuits could take years to fully play out without major settlements. However, the recent settlements by Anywhere Real Estate and RE/MAX demonstrate that change could occur faster than is currently assumed. It is best to keep up on what’s happening with these lawsuits, know the value you bring as a real estate agent to transactions, and be prepared for potential industry changes. Below are links to three resources to help you do just that in the short term.
Resources to Learn More
- Additional information on the Moehrl v. NAR and Sitzer/Burnett v. NAR lawsuits. Your Next Home Purchase Could Look a Whole Lot Different Because of These Lawsuits, by CoStar
- Be Informed and Equipped to Explain Your Value to Buyers and Sellers with Resources on Competition.REALTOR. Resources include:
- In order to formalize a working relationship with buyer clients and detail what services consumers are entitled to and what the buyer broker expects from their client in return, we would highly encourage the continued use of the NGLRMLS Buyer-Broker Agreement which can be found in the Aspire North REALTORS Standard Forms through the Member Info Hub.