LOS ANGELES (AP) — A series of court challenges aim to overturn long-standing real estate industry practices that determine the commissions agents receive and who foots the bill when selling a home.
On Tuesday, a federal jury in one of those cases ruled against the National Association of Realtors and several of the nation's largest real estate brokerages for artificially inflating the commissions paid to real estate agents. ordered to pay $1 billion in damages.
The class action lawsuit was filed in 2019 on behalf of 500,000 home sellers in Missouri and some border towns. The verdict said the defendants “conspired to require home sellers to make payments to brokers representing home buyers, in violation of federal antitrust laws.”
If treble damages are awarded, where plaintiffs could receive up to three times their actual or compensatory damages, defendants could have to pay more than $5 billion.
“This matter is no closer to finality as we plan to appeal the jury's verdict,” NAR spokesperson Mantil Williams said in a statement. “In the meantime, we will ask the court to reduce the damages awarded by the jury.”
Williams said it will likely take several years before the case is solved.
But NAR and several real estate brokers are already facing new lawsuits over commission rules. Fresh off a verdict in a 2019 case, lawyers have filed a new class action lawsuit in the U.S. District Court for the Western District of Missouri, seeking class action status for anyone who has sold a home in the United States in the past five years. I asked for it. . It names the trade association and seven brokerage firms, including Redfin Corporation, Weichert Realtors and Compass.
“The problem across the country is that Americans are paying about $60 billion in additional real estate fees,” said Michael Ketchmark, one of the attorneys representing the plaintiffs in the lawsuit. Told.
The lawsuit focuses on home sellers paying agents who represent homebuyers to advertise their homes on local multiple listing services, where the majority of U.S. homes are for sale. This is a NAR rule that requires you to submit a request. In addition to this, you will also have to pay fees to listing agents and brokers.
According to the complaint, NAR's rules also prohibit buyer agents from making offers to purchase a home contingent on a reduced commission.
“Defendants' collusion forces home sellers to pay costs that buyers would have paid in a competitive market but for Defendants' anticompetitive restraints,” the plaintiffs wrote in their lawsuit filed Tuesday. “There is,” he claimed.
Plaintiffs also claim that the NAR requirement effectively keeps fees for homebuyer agents artificially high.
If NAR's Mandatory Compensation Provision had not been in place, homebuyers would be responsible for paying agent fees, leading to competition among agents vying to represent homebuyers, and reducing commissions. The plaintiffs allege that the amount will be lowered.
NAR maintains that the practice of listing brokers offering compensation to buyer brokers is in the best interest of consumers.
“This gives the most buyers the opportunity to purchase a home and professional representation, while also giving sellers access to the most buyers,” Williams said.
The NAR spokesperson also pointed out that the trade association's policy always requires that offers of compensation to agents be made without specifying the amount, with at least a dollar amount and sometimes a penny. He added that there is a possibility.
In July, independent Bright MLS, which covers some states in the eastern United States, changed its rules to allow homes listed on MLS in the region to not include any agent fee offers. did. This is still within NAR guidelines.
“Additionally, regardless of the offer, those offers are always negotiable,” Williams said.
As for housing prices It has been rising in recent yearspushing the national median sales price to $394,300 as of September, and agent commissions rising as well.
“What's happening now is that the purchasing agent's commission is effectively being added to the sales price of the home, inflating the sales price,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America. “If sellers no longer had to pay buyer agents, there would be no inflation and buyers would be able to negotiate lower commissions and end up paying less.”
Typically, a home seller pays a listing agent, who splits the commission 50-50 with the buyer's agent according to NAR rules. Traditionally, this would result in his 5% to 6% commission being split roughly evenly between the buyer's and seller's agents.
Kansas City resident Matthew Shelton said agents provide professionalism to their clients and that preparing a home for sale can be costly, including costs such as staging, marketing, photography, lockboxes and even cleaning. He said such a fee was justified considering the above. Real estate agent.
“I never looked at the seller or questioned the commission,” he said. “If someone were to take the initiative and limit the fees they could charge, that would be more of a concern, if they put a cap on anything. I don't think that's accurate or right. ”
The 2019 lawsuit originally also included Anywhere Real Estate Inc. and Re/Max, but the companies reached a settlement agreement in which Anywhere paid $83.5 million and Re/Max paid $55 million. We have agreed to terminate our relationship with Real Estate Inc. N.A.R.
With NAR vowing to appeal Tuesday's ruling, homebuyers and sellers are unlikely to see any immediate changes in how brokerage fees are typically handled for homes listed on the MLS.
But the industry will be watching to see what the court does next following the jury's remarks.
“The key question is to what extent the courts will order the industry to restructure its compensation and offers,” Brobeck said. “The real solution is to allow buyers to cover buyer agent fees as part of their mortgage. …But there are now regulatory barriers to that, strongly supported by the industry. There are regulatory barriers.”
Redfin CEO Glenn Kelman said in a blog post Tuesday that it could take days or weeks for judges to determine what structural changes the jury's verdict entails. He said that in some cases, several years of appeals may be necessary.
“At this point, the initial damage alone is certain to make a big difference,” he wrote.
Last month, Redfin announced it would require brokers and agents to withdraw from NAR membership, citing in part that the industry group requires commissions from buyer agents on every listing.
The brokerage commission litigation is not the first time the residential real estate industry has come under intense scrutiny over the impact of its rules on competition.
In 2020, the Department of Justice filed a complaint against NAR, alleging that NAR established and enforced rules and policies that unlawfully restricted competition in residential real estate services. The government withdrew its proposed 2021 settlement agreement, saying it would have allowed for a broader investigation into NAR's rules and conduct.
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Associated Press writers Michelle Chapman in New York and Heather Hollingsworth in Kansas City contributed to this report.
