But despite the high stakes, and despite the political prominence of an industry dominated by women at the heart of the middle class, NAR's formidable lobbying efforts have made the organization's 115-year-old membership It turns out my hands are tied by one of the biggest problems I've faced. history.
“This is a problem that will not be solved by lobbyists or by any political process in Washington. It is already fully entrenched in the legal process,” said Dave Stevens, former CEO of the Mortgage Bankers Association. Told.
In the Justice Department matter, the real estate company reached a settlement with the Trump-era Justice Department in November 2020 that ended a wide-ranging investigation, but the Biden administration withdrew from the agreement less than a year later and subsequently filed a lawsuit in court. This motion was rejected by. The Justice Department will appeal the ruling, and an appeals court in Washington will decide whether the department can proceed with its investigation.
“The issue is that in addition to agreeing to close the investigation; [DOJ Antitrust] Justice Department attorney Fred Liu argued in Friday's appeals court. “The department repeatedly rejected such commitments throughout negotiations.”
NAR attorney Chris Michel said, “The entire Justice Department lawsuit… [Liu’s] Claiming that a binding promise to close the investigation gave them exactly the same discretionary powers. [to investigate the compensation system] After making that promise, it's the same as before making that promise. ”
“Under that interpretation, the Justice Department's promise essentially means nothing,” Michel added.
Judge Florence Pan, a Biden appointee, expressed skepticism about NAR's claims, pointing to a letter the Justice Department sent to NAR in November 2020 announcing the end of the investigation.
“I'm looking into the wording of this letter, but I don't know how to read it to make any promises about the future,” Pan said.
“The simple and common meaning of 'closed' does not mean 'never reopen,'” she added.
Ryan Tomasello, an analyst at Keefe, Bruyette & Woods, said in an interview before Friday's arguments that the Justice Department would likely prevail on appeal.
“As long as they do that, the Justice Department can go after the commission with absolutely no restrictions,” Tomasello said.
Between this investigation and legal challenges by private plaintiffs, more than a dozen lawsuits have been filed over how agents are compensated, the industry that supports 90% of U.S. home sales faces major liquidation. ing.
Tomasello estimated that if the lawsuit is successful, more than half of U.S. real estate agents could be forced out of the industry, and the $100 billion annual fee pool could shrink by 30%.
At issue is NAR's “Cooperation Compensation” policy, which requires a seller's agent to make a blanket offer of compensation to a buyer's broker in order to list a home on a real estate agent's multiple listing service. , 88% of sellers listed their homes for purchase last year. . Critics say that even though advances in technology have allowed consumers to find homes online, the system locks in high commissions and typically forces sellers and buyers' agents to They charge a 50-50 fee of 5% to 6%, which they claim is driving up home prices.
According to NAR statistics, the typical real estate agent is a 60-year-old white woman who attended college and owns a home. In 2022, real estate agents worked an average of 30 hours a week and had a median gross income of $56,400, according to the organization.
“Some companies are already exiting the market, and this could be the last straw,” Stevens said. “No real estate agent works for free without knowing if they will get paid or not.
Stevens testified as an expert witness for industry defendants in a lawsuit filed in Missouri. A jury in that case determined on October 31 that NAR and two corporate brokerage firms conspired to keep fees high and found them liable for $1.8 billion in damages. If damages were tripled, the total could reach $5.4 billion. Both Stevens and NAR are optimistic that the case will be appealed, saying they don't expect the matter to be resolved for two to three years.
“We had a jury of local Missourians dealing with a very complex and difficult subject,” Stevens said, predicting the panel would reach a different verdict. NAR President Tracy Kasper assured group members that “this matter is no closer to finality.”
in a statementHe was released on the day of his sentencing.
“NAR plans to appeal the ruling, and in the meantime, we continue to support homeownership and put consumers' best interests first,” NAR spokesperson Mantil Williams said in a statement.
Tomasello is skeptical of the multi-year timeline cited by industry allies.
“There's a lot of pressure to resolve this issue sooner or later with some sort of settlement,” he said.
Lawyers for the plaintiffs in the Missouri case are preparing a motion for an injunction to block fee sharing as a requirement for listing a home on the multiple listing service.
“The situation is quite fluid,” said Michael Ketchmark, lead attorney for the plaintiffs. Ketchmark's team is now deciding whether to seek a nationwide injunction and plans to file a motion “within the next month or two,” he said.
On the same day the Missouri ruling was announced, Mr. Ketchmark, who filed a new class action lawsuit seeking $100 billion in damages against NAR and seven securities companies nationwide, contacted the Department of Justice regarding the matter. He said that
“We support the Department of Justice's efforts, and the Department of Justice supports our efforts. There are open lines of communication between us,” he said. “Our goals are aligned.”
A representative for the Justice Department declined to comment.
If the injunction is granted and the class action lawsuit is successful, “the status of buyer brokers and buyer agents across the country could be significantly diminished,” Stevens said.
Purchasing a home is “the most complex transaction for Americans, and if the buyer doesn't have professional representation, the only professional representation is the seller. It's like throwing a small fry into a shark tank.” “It's a thing,” he said.
NAR and its allies also argue that requiring buyers to pay agent fees directly upfront could hurt first-time and minority homebuyers who are already struggling to scrape together a down payment. Warning that there is sex.
Stephen Brobeck, a senior fellow at the Consumer Federation of America and a longtime critic of compensation rules, said he was optimistic that “competition will erupt” in the industry after various legal issues. .
Given the sheer number of lawsuits and the Justice Department's involvement, Brobeck said, “I would be surprised if we don't see a settlement by next spring.”
“I think the industry will realize that the real solution to preserving both listing brokers and buyer brokers is to allow buyers to fund it, which they are effectively doing now. ” [the commission is] It will be added to the sale price,” he said.
Still, “They've been fighting for 90 years to preserve this compensation agreement, and they're not just going to give up,” Brobeck said. “The 1.6 million agents who cannot access MLS without joining NAR generate significant revenue for NAR.”
Asked about the possibility of a settlement, NAR's Williams said, “NAR maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates members' liability risk for asserted claims. I've always been open to solutions.” ”
