Commissions Come Under Fire In 2022

David Goldsmith

All Powerful Moderator
Staff member
NAR’s motion to dismiss broker fee lawsuit shut down
Country’s biggest brokerages accused of violating antitrust laws

A federal judge has denied a motion to dismiss a lawsuit over broker commissions on residential real estate deals.
A U.S. District Court judge threw out motions from the National Association of Realtors and some of the nation’s largest brokerages to dismiss the lawsuit, Inman reported. The judge ruled that the plaintiffs’ allegations show that they would have paid lower commissions if the current broker rules had not been in place, and that the rules established by NAR created an artificially high commission rate.

The lawsuit was originally filed in 2019 by a property seller, and is now seeking class action status. The complaint alleges that the sharing of commissions between the listing and buyer brokers leads to higher seller costs and violates the Sherman Antitrust Act.

NAR argued in its motion that the lawsuit misportrayed the rules for multiple listing services, and that the plaintiffs failed to show they suffered an “antitrust injury,” according to Inman.
But the judge who dismissed the motion disagreed, and wrote in his ruling that, “But-for Defendants’ conspiracy, each plaintiff would have paid substantially lower commissions.”
“As the case moves forward, we intend to demonstrate how the MLS system creates competitive, efficient markets that benefit home buyers and sellers as well as small business brokerages,” a NAR spokesperson told Inman.

The other defendants in the lawsuit are HomeServices of America, Keller Williams, RE/MAX, Realogy, Long & Foster Companies HSF Affiliates. Those firms backed NAR’s motion to dismiss the suit, and those requests were also dismissed by the judge.
 

David Goldsmith

All Powerful Moderator
Staff member
NAR hit with another antitrust lawsuit over commissions and MLS rules
Proposed settlement aims to bring more transparency and competition to the industry

The National Association of Realtors has once again had its competitive practices called into question — this time by the federal government.
The Department of Justice announced Thursday that it filed a lawsuit against the trade association, alongside a proposed settlement, that takes aim at NAR’s “anticompetitive rules, policies, and practices,” according to a DOJ release.

The proposed settlement from the Antitrust Division mandates that NAR change rules that currently allow brokers to withhold information from prospective homebuyers regarding fees and commissions. The proposed changes must also carry over to multiple listing services associated with NAR.
“If approved, the settlement will enhance competition in the real estate market, resulting in more choice and better service for consumers,” the DOJ release said.

In a statement to Inman, NAR said it disagreed with the DOJ’s characterization and admitted no wrongdoing, but had reached an agreement and “fully resolved” the issues raised. A spokesperson added that the organization remained “focused on supporting our members as they preserve, protect and advance the American dream of homeownership.”

The goal of the settlement is to allow for more transparency — and thus competition — in the real estate market, which could result in more choices and better service for homebuyers. The agreement still awaits approval from the court.

“Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees,” Makan Delrahim, assistant attorney general of the DOJ’s Antitrust Division, said in a statement. “This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”
With 1.4 million members, NAR has a wide scope of influence. It establishes and enforces policies for agents who belong to the organization, along with affiliated multiple listing services.

NAR has previously come under fire for its alleged anti-competitive practices, with several antitrust lawsuits filed against the organization in recent years.
 

David Goldsmith

All Powerful Moderator
Staff member

DOJ pulls out of NAR antitrust settlement to pursue further investigation​

Realtor trade group calls sudden reversal an “unprecedented breach”​

The Justice Department has abandoned its settlement with the National Association of Realtors, signaling that it intends to conduct a “broader investigation” into the trade group’s practices.
In an abrupt reversal Thursday, the DOJ withdrew its consent to a proposed settlement of an antitrust action brought against the NAR last year and instead filed to voluntarily dismiss its civil complaint without prejudice.

The complaint was filed last November, alongside a proposed settlement that would require NAR to repeal and modify certain “anti-competitive” practices, such as withholding information about broker fees or enabling buyers’ brokers to filter MLS listings based on commissions offered.

The proposed settlement would have prevented the DOJ from pursuing other antitrust claims regarding NAR policies, it said in a statement Thursday.
“Because the settlement resolved only some of the department’s concerns with NAR’s rules, this step ensures that the department can continue to enforce the antitrust laws in this important market,” the statement read.

But that explanation raises questions, because the proposed settlement, which is public, included a clause that specifically reserved the government’s rights to investigate and pursue further antitrust violations by NAR or its members.

When asked to identify what language limited the government’s ability to pursue future claims, a DOJ spokesperson said “we cannot get into the specifics of the modified language discussed.”
NAR called the DOJ’s decision an “unprecedented breach” in a statement to Bloomberg on Thursday.

“NAR has fulfilled all of our obligations under the settlement agreement, and now DOJ is inexplicably backing out,” the association told the publication. NAR did not respond to a request for comment on Friday.
An antitrust practitioner who has served in the government in the past said the DOJ’s “stated motivation is questionable.”

“The Justice Department should explain this further given the clear carve out,” said the person, who agreed to speak on condition of anonymity.
The DOJ spokesperson declined to comment on whether the antitrust division is pursuing any other cases against NAR at this time.
 

David Goldsmith

All Powerful Moderator
Staff member

NAR should play ball with regulators: antitrust experts​

Trade group embroiled in DOJ investigation after scuttled settlement​

Antitrust experts recently advised the National Association of Realtors and other industry members to work with federal authorities as the agencies ramp up their attention on the sector’s rules.

Panelists at last month’s Council of Multiple Listing Services conference warned federal authorities are paying more attention to consolidation and consumer issues across a wide spectrum of industries, including real estate, Inman reported.

The NAR last month moved to block an antitrust probe from the DOJ after a settlement between the parties collapsed.
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The DOJ withdrew from an agreement in July in favor of a “broader investigation” into the trade group’s alleged anti-competitive practices. The original settlement would have required the association to repeal and modify various practices, such as withholding information about broker fees.

President Joe Biden’s time in office has brought scrutiny over the real estate industry. The Justice Department has been looking into practices that could create a closed market for buying and selling homes, which can lead to higher fees and suppress competition. Additionally, the FTC is pursuing a probe into Zillow’s $500 million acquisition of ShowingTime.

“This is not a blip,” Alicia Batts, an antitrust partner at Faegre Drinker Biddle & Reath LLP, said of recent activity. “I think the FTC is likely to make rules. The chair will want her control of the FTC to be successful and she’s got to report into the White House. So they’re going to do something.”

Inman reported that Batt’s fellow antitrust partner Dylan Carson said “the cavalry is coming” for enforcement on antitrust issues.

“There’s bipartisan consensus that the budgets of both enforcement agencies should be significantly increased and there’s bills to essentially double the FTC budget and significantly increase the DOJ’s budget,” Carson said.

When it comes to responding to increasing pressure for federal regulation, Batts said she recommends members of the real estate industry band together to form a voice in the conversation.

“So you should prepare to do something, or to be active participants, whether it’s through an association, but you should work jointly,” Batts said, according to Inman. “It’s more effective to come in and work jointly than to have MLSs doing different things and going in different directions.”
 

David Goldsmith

All Powerful Moderator
Staff member
Consumer groups are continuing to put pressure on MLS and NAR claiming the current arrangement where sellers pay both their own and buyer's brokers commissions is unfair.
Judge denies motion to dismiss broker commissions lawsuit

A group of Massachusetts sellers claim the brokerages are conspiring to inflate broker commissions​

In the quest to explain why home sale commissions are consistently high, it turns out conspiracy theorists could be on to something.
A judge denied a motion from Realogy Holdings to dismiss a lawsuit by a group of home sellers that argues brokerages conspire to inflate commissions.

A group of Massachusetts home sellers filed the suit, Bauman v. MLS, in December 2020. It alleges that brokerages including Realogy, Keller Williams, HomeServices of America and RE/MAX, along with the owner of multiple listing service Pinergy, violated antitrust laws with a “buyer-broker commission rule.”

Sellers that use Pinergy are required to offer a set commission to any broker that found a buyer for their home, according to the complaint. It is typically a percentage of the sales price.
The sellers argue in the suit that such a practice is anticompetitive and causes sellers to pay “artificially inflated, supra-competitive commission rates.”

The system promotes steering, the suit argues, which “prevents rates from falling to competitive levels and enables brokers to avoid doing business with or otherwise retaliate against brokers who attempt to offer materially lower rates.”
Realogy and the suit’s other defendants filed a motion to dismiss the complaint in March 2021. A judge denied the motion Dec. 10, according to a Jan. 5 SEC filing.

MLS Property Information Network, which owns Pinergy, did not immediately respond to a request for comment. Keller Williams, HomeServices and RE/MAX declined to comment. The SEC filing noted that the defendants dispute the allegations and will “vigorously defend” themselves.

With 41,000 members, MLS PIN is the seventh-largest multiple listing service in the U.S., serving brokers and salespeople across New York and New England. Eight of its 15 board members are realtors for franchises owned by Berkshire Hathaway HomeServices, which owns HomeServices of America, RE/MAX and Realogy.

Rather than have sellers pay buyer-broker commission rates, the suit claims that if buyers and sellers each paid their own brokers, the total commission would be less than in the current system, in which sellers pay both.
The sellers involved in the suit did not respond to requests for comment.

Bauman v. MLS isn’t the only suit alleging anticompetitive behavior by brokerages. Other legal battles include Moehrl v. NAR in Missouri and Sitzer v. NAR in Illinois.
Instead of going after the National Association of Realtors, Bauman v. MLS took a different route by targeting a multiple listing service.
Conversations have been brewing regarding who should be responsible for paying brokerage commissions fees. A consumer watchdog organization pushing for the uncoupling of buyer and seller commissions found the broker fees were suspiciously uniform in markets up and down the East Coast.

The group argued that such a move would make homes more affordable. But NAR said it would do the opposite.
“Forcing buyers to take on the additional out-of-pocket expense would cause added financial hardship and could freeze out many from the market entirely, particularly first-time and low- and middle-income homebuyers,” the NAR spokesperson told The Real Deal last month.
 

David Goldsmith

All Powerful Moderator
Staff member

This agent commissions suit could rock the resi industry

A federal court ruling paved the way for homesellers to seek reimbursement on commissions paid to buyer agents, threatening to rock the residential real estate industry.

Judge Stephen Bough ruled on Friday that one of two federal commission lawsuits could receive class-action certification, Inman reported. The lawsuit started three years ago, when two homeseller plaintiffs Joshua Sitzer and Amy Winger filed a lawsuit against the National Association of Realtors, Realogy and others, claiming the sharing of commissions between listing and buyer brokers violated the Sherman Antitrust Act.

The lawsuit hoped to have homebuyers pay their brokers directly instead of having listing brokers pay buyer brokers from what the seller pays listing brokers. The lawsuit alleges the model inflates the costs to sellers.

The judge ruled that class-action certification is the “superior method for fairly and efficiently adjudicating the controversy.” With the decision, the Sitzer/Winger lawsuit can now represent any seller who paid a broker commission for a residential real estate deal across four Missouri MLSs, going back to April 2014.

The legal fallout could be massive. Hundreds of thousands of homesellers can now seek reimbursement on commissions paid to buyer agents in the last eight years, totaling more than $1 billion.

NAR and Realogy both said that they plan to appeal the decision. Keller Williams also said it was aware of the ruling without declaring whether or not it would appeal, but did note the court decision didn’t make mention of the merits of the plaintiffs’ case.

An even bigger federal case along the same lines is unfolding in Illinois. Should NAR and Realogy lose their appeals, it could set a precedent for other homesellers to challenge the broker commissions model across the country.
 

David Goldsmith

All Powerful Moderator
Staff member

NAR catches break in one antitrust lawsuit​

Lawsuit alleging buyer cost inflation dismissed​

As one agent commissions lawsuit against the National Association of Realtors trudges along, the group can breathe a sigh of relief over a similar suit.
A federal judge this week dismissed a lawsuit filed last year by New Jersey homebuyer Judah Leeder against NAR, Realogy, Keller Williams, RE/MAX and HomeServices of America, Inman reported. The suit was seeking class-action status.

The lawsuit alleged commission sharing between listing and buyer brokers violates the Sherman Antitrust Act, inflating buyer costs in the form of higher home prices. Judge Andrea R. Wood of U.S. District Court for the Northern District of Illinois Eastern Division sided with the defendants, claiming buyers aren’t eligible for damages from antitrust violations because they are indirect purchasers of buyer broker services.
Wood did dismiss the case without prejudice, meaning Leeder could refile the lawsuit if he is able to argue that he’s a direct purchaser of buyer-broker services.

NAR’s senior counsel and director of legal affairs, Charlie Lee, celebrated the judge’s ruling on Tuesday, telling the outlet the decision was “good news.”
The dismissal of the lawsuit is far from the end of NAR’s potential antitrust problems, though.

In the decision, Wood referenced another case she is overseeing, Moehrl v. The National Association of Realtors.
The federal case, which puts forth a similar argument, alleges commission sharing inflates the costs of sellers. A ruling against NAR and Realogy in that case could disrupt the broker commissions model across the country.

Part of Wood’s decision noted the Moehrl lawsuit is “vindicating the public interest in antitrust enforcement as they are actively challenging the same NAR rules.”
In a similar case, a federal judge ruled last month a lawsuit started three years ago by plaintiffs Joshua Sitzer and Amy Winger could receive class-action certification. With the decision, the lawsuit can represent any seller who paid a broker commission for a residential real estate deal across four Missouri MLSs going back eight years ago.
NAR and Realogy both plan to appeal the decision in that case.
 
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