Real Estate

NAR slapped with second class-action lawsuit to end buyer broker compensation

Suit alleges mandatory fees for buyer's brokers violate anti-trust laws

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.” 

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