Real Estate Class Action Lawsuit

Case Background

On March 6, 2019, Cohen Milstein and co-counsel filed a putative antitrust class action in the U.S. District Court, Northern District of Illinois on behalf of home sellers who paid a broker commission in the last four years in connection with the sale of residential real estate listed on one of twenty Multiple Listing Services (“MLSs”), covering several major metropolitan areas in the Mid-Atlantic, Mid-West, South-West, Mountain-West, and Southeast regions.

Plaintiffs, home sellers who listed their homes on one of twenty MLSs bring this action against the National Association of Realtors (NAR) and the four largest national real estate broker franchisors, Realogy Holdings Corp., HomeServices of America, Inc., RE/MAX Holdings, Inc., and Keller Williams Realty, Inc., for conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.

Plaintiffs allege that Defendants’ conspiracy has centered around NAR’s adoption and implementation of a mandatory rule that requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation (the “Buyer Broker Commission Rule”) when listing a property on a MLS.

Most MLSs (including all MLSs at issue in this case) are controlled by local NAR associations, and access to such MLSs is conditioned on brokers following all mandatory rules set forth in NAR’s Handbook on Multiple Listing Policy, including the Buyer Broker Commission Rule.

The conspiracy, plaintiffs allege, has saddled home sellers with a cost that would be borne by the buyer in a competitive market. Moreover, because most buyer brokers will not show homes to their clients where the seller is offering a lower buyer broker commission, or will show homes with higher commission offers first, sellers are incentivized when making the required blanket, non-negotiable offer to procure the buyer brokers’ cooperation by offering a high commission.

The mandatory Buyer Broker Commission Rule ensures that price competition among buyer brokers is restrained because the person retaining the buyer broker, the buyer, does not negotiate or pay his or her broker’s commission. In addition, the seller’s inflated commission offer cannot be reduced by buyers or their brokers, as Defendants also prohibit buyer brokers from making home purchase offers contingent on the reduction of the buyer broker commission. Absent this rule, buyer brokers would be paid by their clients and would compete to be retained by offering a lower commission.

Currently, total broker compensation in the United States is typically five to six percent of the home sales price, with approximately half of that amount—and increasingly more than half—paid to the buyer broker. Defendants’ conspiracy has kept buyer broker commissions in the 2.5 to 3.0 percent range for many years despite the diminishing role of buyer brokers due to buyers independently identifying homes through online services and retaining buyer brokers only after they have found the home they wish to buy.

The conspiracy has inflated buyer broker commissions, which, in turn, have inflated the total commissions paid by home sellers, who have incurred, on average, thousands of dollars in damages as a result of Defendants’ conspiracy.

MLSs covered in this action:
– The Bright MLS (including the metropolitan areas of Baltimore, Maryland; Philadelphia, Pennsylvania; Richmond, Virginia; Washington, D.C.);
– My Florida Regional MLS (including the metropolitan areas of Tampa, Orlando, and Sarasota);
– The five MLSs in the Mid-West that cover the following metropolitan areas: Cleveland, Ohio; Columbus, Ohio; Detroit, Michigan; Milwaukee, Wisconsin; Minneapolis, Minnesota;
– The six MLSs in the Southwest that cover the following metropolitan areas: Austin, Texas; Dallas, Texas; Houston, Texas; Las Vegas, Nevada; Phoenix, Arizona; San Antonio Texas;
– The three MLSs in the Mountain West that cover the following metropolitan areas: Colorado Springs, Colorado; Denver, Colorado; Salt Lake City, Utah;
– The four MLSs in the Southeast that cover the following metropolitan areas: Fort Myers, Florida; Miami, Florida; Charlotte, North Carolina; and Raleigh, North Carolina.

Case Documents – Source:
https://www.cohenmilstein.com/case-study/moehrl-v-national-association-realtors-et-al

NAR slapped with second class-action lawsuit to end buyer broker compensation
Suit alleges mandatory fees for buyer’s brokers violate anti-trust laws
April 18, 2019, 3:36 pm By Jessica Guerin

A second class-action lawsuit has been filed in protest of the buyer broker compensation rules set forth by the National Association of Realtors.

The suit, filed in the Northern District of Illinois on Monday by Minnesota-based corporation Sawbill Strategic, alleges that NAR, Realogy, HomeServices of America, RE/MAX and Keller Williams violated federal antitrust laws by requiring property sellers to pay the buyer’s broker an inflated fee.

The suit is nearly identical to one filed last month by a Minnesota home seller, which NAR called “baseless” and filled with “an abundance of false claims.”

The suit alleges that the defendants conspired to drive up seller costs and reduce competition by requiring a home seller to pay compensation to the buyer’s broker, even though their involvement in the transaction is minimal.

According to the suit, NAR’s Commission Rule maintains a commission requirement for buyer’s brokers of 2.5-3% of the home’s sale price. This has not changed in recent years, even as buyers increasingly turn to online listing sites to find their homes and often only retain a broker once a property has been selected.

The suit alleges that buyer broker compensation rules have remained intact despite their changing role in the home purchase transaction because of a conspiracy among the defendants.

It also notes that in markets abroad – like the U.K., Germany, Israel, Australia, and New Zealand – buyer broker fees are paid by the buyer rather than the seller and that buyers pay brokers less than half the rate paid in the U.S.

“Defendants and their co-conspirators possess market power through control local MLSs, which are databases of properties listed for sale in a particular geographic region,” the complaint states. “A majority of homes in the United States are sold on such MLSs. Through their control of the MLSs, Defendants and their co-conspirators have market power in the local markets for real estate broker services.”

NAR also said this complaint was baseless and contains false claims.

“The U.S. courts have routinely found that Multiple Listing Services are pro-competitive and benefit consumers by creating great efficiencies in the home-buying and selling process,” said NAR’s VP of Communications, Mantill Williams. “The market for the brokerage of real estate is extremely competitive – to the benefit of buyers and sellers alike.”

“As courts have long recognized, the MLS system in our country promotes efficiency and helps to advance the best interests of all the clients served by the Realtor members of NAR,” Williams continued. “We believe that the lawsuit fomented by several plaintiffs’ class action law firms is completely without merit. We will defend the challenged policies, and we are confident that we will prevail.”

Source: https://www.housingwire.com/articles/48832-nar-slapped-with-second-class-action-lawsuit-to-end-buyer-broker-compensation/

NAR’s Response to Class Action Lawsuit | POSTED BY SANDY CARROLL, CEO ON MARCH 11, 2019 IN RE BUSINESS NEWS

……….. If you receive any inquiry about this filing, please feel free to direct them to Mantill Williams ([email protected]) or provide the official NAR response above. If you come across chatter and discussion about the filing, be very cautious on social media and your interactions with other local media outlets. It is important that your actions do not contribute to making this story grow.

Katie Johnson
General Counsel & Chief Member Experience Officer | Legal Affairs & Member Experience

Read the full article: https://berkshirerealtors.net/nars-response-to-class-action-lawsuit/

Realtor Group Moves To Dismiss Class Action Lawsuit Alleging Collusion
https://www.forbes.com/sites/alyyale/2019/05/21/realtor-group-moves-to-dismiss-class-action-lawsuit-alleging-collusion/?sh=6ed68df52d75

Statement of Interest on Behalf of the United States of America: Christopher Moehrl, et al. v. The National Association of Realtors, et al.
https://www.justice.gov/atr/case-document/file/1209891/download (PDF File)

Department of Justice |Office of Public Affairs |FOR IMMEDIATE RELEASE | Thursday, July 1, 2021

Justice Department Withdraws from Settlement with the National Association of Realtors
Today the Justice Department’s Antitrust Division filed a notice of withdrawal of consent to a proposed settlement with the National Association of Realtors (NAR). The department has also filed to voluntarily dismiss its complaint without prejudice. The department determined that the settlement will not adequately protect the department’s rights to investigate other conduct by NAR that could impact competition in the real estate market and may harm home sellers and home buyers. The department is taking this action to permit a broader investigation of NAR’s rules and conduct to proceed without restriction.

“The proposed settlement will not sufficiently protect the Antitrust Division’s ability to pursue future claims against NAR,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “Real estate is central to the American economy and consumers pay billions of dollars in real estate commissions every year. We cannot be bound by a settlement that prevents our ability to protect competition in a market that profoundly affects Americans’ financial well-being.”

As the real estate industry’s leading trade association, NAR has rules and policies that affect millions of real estate brokers and agents and, in turn, impact millions of American home buyers and sellers, who, according to reported industry data, paid over $85 billion in residential real estate commissions last year. The department filed a complaint and proposed settlement on Nov. 19, 2020. The complaint alleged that NAR established and enforced certain rules and policies that illegally restrained competition in residential real estate services. The proposed settlement sought to remedy those illegal practices and encourage greater competition among realtors, but it also prevented the department from pursuing other antitrust claims relating to NAR’s rules.

Under a stipulation signed by the parties and entered by the court, the department has sole discretion to withdraw its consent to the proposed settlement. The proposed settlement may also be modified with consent from the department and from NAR. The department sought NAR’s agreement to modify the settlement to adequately protect and preserve the department’s rights to investigate and challenge additional conduct by NAR, but the department and NAR could not reach an agreement. 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.

Topic(s):
Antitrust
Component(s):
Antitrust Division

Source: https://www.justice.gov/opa/pr/justice-department-withdraws-settlement-national-association-realtors

NAR Claps Back at DOJ Settlement Withdrawal
https://rismedia.com/2021/07/05/nar-claps-back-doj-settlement-withdrawal/#openModal

The commission that U.S. home sellers typically pay to real estate agents is under fire, with the real estate industry accused of antitrust violations and extracting exorbitant fees.

Why it matters: Some legal experts predict that an antitrust lawsuit over brokers’ fees will reach the Supreme Court — and say the many challenges to the current system could upend the market and make it cheaper to sell a home.

The big picture: One thing the challengers are seeking is “the uncoupling of commissions, so that both buyers and sellers negotiate and pay their own broker compensation,” per the Consumer Federation of America.
– Only that change “can foster the price competition that exists in most other consumer markets,” the group says.

How it works: The seller’s real estate agent typically charges a 5%–6% commission and shares it with the buyer’s agent.
– A Justice Department settlement with the National Association of Realtors (NAR) — which will be finalized as early as mid-February — will make it illegal for a buyer’s agent to characterize their services as free, as often happens.
– Real estate websites will have to disclose publicly what percentage of a sale the buyer’s agent will reap.
– “The settlement will discourage blatant discrimination against discount brokers and the steering of buyers to high-commission properties,” but doesn’t go far enough, Stephen Brobeck, a senior fellow at the Consumer Federation of America, said in a statement.

Driving the news: Several powerful forces are going up against NAR and the rules governing home sales in various states:
– The Justice Department settlement was filed simultaneously with an antitrust lawsuit against the association in November, demanding changes to rules it called anti-competitive.
– Two lawsuits seeking class-action status, in Illinois and Missouri, were filed by plaintiffs who say they were overcharged as a result of NAR’s system.
– REX Real Estate, a discount brokerage, is suing Oregon and other states that bar real estate agents from giving rebates to consumers.

Jack Ryan, founder and CEO of REX, is among those who argue that NAR’s commission system suppresses U.S. homeownership rates and reduces overall household wealth. “This is a great David vs. Goliath story, both in terms of the odds but also in terms of the moral implications,” he said.
– His company charges 2%–2.5% to sell a home, similar to the prevailing rates in other developed countries.

Of note: Real estate agent fees are a $100 billion-a-year business, per a 2019 Consumer Federation of America report. “These commissions — usually $15,000 to $18,000 on the sale of a $300,000 home — represent one of the most expensive products purchased by many consumers,” the report said.

Where it stands: The lawsuits in Missouri and Illinois — filed by prominent plaintiffs’ firms against NAR and an all-star cast of brokerages — are proceeding.
– In the Illinois case, Judge Andrea R. Wood “said the plaintiffs would have paid ‘substantially lower’ commissions if not for the rules established by the Realtors association and followed by the brokerages,” per the NYT.
– REX’s case in Oregon is also moving forward, and the company plans to replicate it in the 10 or so other states where brokers are not permitted to give fee rebates.

NAR — which has 1.4 million members — tells Axios it is confident it will prevail in the lawsuits and that the DOJ settlement largely just makes more transparent practices that were already in place.
– One change: “When you see listings online in the future, you will likely see the offer of compensation that brokers are offering to each other,” Katie Johnson, NAR’s general counsel, tells Axios.
– In an information page for brokers on the NAR website, Johnson says the class-action complaints “mischaracterize NAR rules and MLS policy.”
– Brokers are advised: “Discussions regarding these lawsuits should be grounded in the bigger picture of the value of REALTORS® and the MLS system to both buyers and sellers.”

What they’re saying: Traditional real estate agents say that people who use discount brokers can get burned by low levels of service and marketing.
– “You get what you pay for,” Andrea Paro, an agent at Compass Real Estate in Bethesda, Maryland, tells Axios.

Yes, but: People who support REX and its controversial CEO say that despite the crazy sellers’ market — with existing homes commanding record prices — Americans could extract more wealth from their homes and have greater mobility if the fees were lower and more competitive.
– “I think this is going to trial and the plaintiffs win,” said Rob Hahn, managing partner at the real estate consultancy 7DS Associates, who blogs about real estate under the name Notorious Rob. “You could be looking at $50, $70 billion in damages.”

Source: https://www.axios.com/real-estate-fee-showdown-lawsuits-5e88b18c-3baa-4cb0-8302-2a2a8fa16eda.html