A class action claims the rules, procedures and policies set by the National Association of Realtors amount to anticompetitive restraints that reduce price competition in the markets for buyer agent services.
A proposed class action alleges homebuyers nationwide have effectively been duped by the National Association of Realtors (NAR) and some of the country’s largest brokers into believing certain services cost nothing, when in fact they command a hefty price that ultimately leads to higher home prices.
The 48-page antitrust lawsuit claims the rigid rules, policies and procedures the NAR sets for member brokers amount to anticompetitive restraints that reduce price competition in the markets for buyer agent services. According to the complaint, the NAR’s rules have enabled the trade association and its member brokers to maintain buyer agent commissions at “supracompetitive” levels unrelated to a broker’s experience or the services provided. The policies also serve to steer homebuyers away from lower-commission homes and drive out discounters, among other harms, the suit alleges.
Ultimately, the defendants’ conduct has caused American homebuyers to pay inflated commissions for broker services misrepresented as free and inflated prices for homes while receiving broker services of a reduced quality.
“Despite agent representations (which NAR permits and encourages) that such services do not cost home buyers anything, home buyers in fact pay a hefty cost for these services—namely, supracompetitive commissions at levels fixed by the Defendants, which in turn lead to higher home prices paid by buyers,” the lawsuit, filed in the Northern District of Illinois, claims.
Named as defendants alongside the National Association of Realtors are brokers Realogy Holdings Corp.; HomeServices of America, Inc.; BHH Affiliates, LLC; HSF Affiliates, LLC; the Long & Foster Companies, Inc.; RE/MAX LLC; and Keller Williams Realty, Inc. The lawsuit’s filing comes a little more than two months after the United States Department of Justice filed an antitrust complaint in the District of Columbia, alleging the NAR’s rules, policies and practices, in particular as they pertain to “the publication and marketing of real estate, real estate broker commissions, as well as real estate broker access to lockboxes” have served to lessen competition among brokers to the detriment of American homebuyers.
At the same time the DOJ filed its antitrust complaint against the NAR, the department announced a settlement with the trade group, under which the defendant agreed to commit to modifying its rules to provide greater transparency to homebuyers, the lawsuit says.
The National Association of Realtors is a trade group of real estate professionals with more than 1.4 million members, the suit says. According to the case, membership to the NAR comes with a number of benefits for brokers, including access to key listing services that contain information about homes on the market. As part of their membership, however, brokers must also agree to abide by the NAR’s rules, practices and guidelines, which include, the lawsuit states, a requirement that sellers set aside a portion of the purchase price for buyer agent commissions, prohibitions on modifying the commission and the understanding that listings can be filtered by commission.
According to the complaint, the plaintiff and proposed class members are homebuyers who bought homes through multiple listing services (MLSs) affiliated with and governed by the NAR. Per the case, the “vast majority” of homes in the U.S. are sold on an MLS. In order to effectively market properties to buyers, seller-brokers effectively have no choice but to list their clients’ properties on an MLS, the complaint relays.
The MLSs at issue in the lawsuit, i.e. those controlled by local NAR associations, are the dominant MLSs in the United States, and even some independent MLSs require brokers to be NAR members in order to access their data, the complaint says. Pursuant to the alleged conspiracy among the defendants, NAR members may access the trade group’s benefits, which include the right to list their properties on an NAR MLS, only if they agree to follow and implement NAR’s rules, policies and practices, the lawsuit alleges.
“NAR and Broker Defendants have adopted a series of rules, policies, and practices that significantly restrain competition,” the case summarizes.
According to the complaint, the anticompetitive rules, policies and practices the NAR imposes upon MLSs include:
Requiring every broker-seller, when listing a property, to make a “blanket unilateral offer of compensation” to any buyer agent who might find a buyer for the home;
Requiring that the offer of compensation to the buyer agent be a blanket offer, meaning the exact same compensation terms must be offered simultaneously to every buyer agent regardless of their “experience, the services they are providing to the buyer, or the financial arrangement” made with the buyer;
Prohibiting the disclosure of the total commission, i.e. the commission due to the seller-broker and the portion of the commission reserved for the buyer agent, for any listing on an NAR MLS;
Allowing buyer agents to misrepresent to buyers that a buyer agent’s services are free;
Permitting and enabling buyer agents to filter MLS listings based on the offered commissions and to exclude lower-commission homes from consideration by prospective homebuyers;
“Severely” restricting brokers’ ability to modify the buyer agent commission after the buyer agent conveys a purchase offer; and
Limiting access to the lockboxes that allow for physical access to homes to NAR members.
The lawsuit goes on to characterize the broker defendants’ alleged role in the conspiracy as “essential to its success.”
“The Broker Defendants have agreed to participate in, facilitate, and implement the conspiracy,” the suit claims. “Each of the Broker Defendants play an active role in NAR and has required franchisees, brokerages, and individual realtors to join in and implement NAR’s anticompetitive agreements as a condition to receiving the benefits of each Broker Defendant’s brand, brokerage infrastructure, and other support.”
In all, the lawsuit says the defendants’ conduct has enabled brokers to raise, fix and maintain buyer agent compensation at “artificially high levels” that would not exist in a competitive marketplace.
“Plaintiff and the other class members have each incurred at least thousands of dollars in overcharges as a result of Defendants’ conspiracy,” the case reads.
The lawsuit looks to cover all persons who, since December 1, 1996 through the present, bought residential real estate that was listed on a National Association of Realtors’ multiple listing service.
According to the complaint, a number of local realtor associations not named as defendants also participated in the alleged conspiracy.
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