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Court Grants Class Certification in Case Challenging Buyer Broker Commissions

The U.S. District Court for Northern Illinois has granted plaintiffs class certification in their antitrust lawsuit against the National Association of Realtors (NAR), and major companies in the residential real estate industry, for anti-competitive practices. The case of Moehrl v. NAR et al., challenges the industry practice of requiring home sellers to pay the commissions of real estate agents representing homebuyers.

In her decision, Judge Andrea Wood recognized that more than $10 billion in actual damages related to home sales between 2015 and 2020 is at stake.

For background, back 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 20 Multiple Listing Services (MLSs), covering several major metropolitan areas in the Mid-Atlantic, Mid-West, South-West, Mountain-West, and Southeast regions.

Plaintiffs, including home sellers who listed their homes on one of 20 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.

The 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 an MLS.

The plaintiffs allege that home sellers have been burdened 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 lock in the buyer brokers’ cooperation by offering a high commission.

Currently, total broker compensation in the United States is typically 5% to 6% 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% 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.

“This case, which involves widespread industry collusion to set broker commissions, does not pit liberals against conservatives,” said Stephen Brobeck, a Senior Fellow and real estate expert for the Consumer Federation of America. “Both have criticized the industry practice. If the court grants plaintiffs injunctive relief, we estimate that consumers should save $20-$30 billion annually in lower commissions, which are likely to decline from the current 5%-6% level to 3%-4%. This prediction is based on commission levels in countries used by plaintiffs as yardsticks–United Kingdom, Australia, and the Netherlands–and, as our research as shown, in the New York City area outside of Manhattan.”

Plaintiffs are asking not only for class damages, but also for injunctive relief from the “blanket unilateral offer of compensation” from home sellers and their listing agents to buyer agents that is required by MLSs.

While Moehrl v. NAR is the largest class action litigation challenging mandatory buyer broker commission offers on MLS listings, it is not the only one. In 2022, Sitzer v. NAR et al. was filed against the industry in a federal district court in Western Missouri, and was granted class certification.

“Our view is that the industry will fight hard to retain mandatory offers but is slowly realizing that the practice is unsustainable in a competitive, capitalist economy,” added Brobeck. “We believe that embracing price competition will only help the most competent and dedicated real estate agents and brokers. Today, real estate agents are usually paid the same  regardless of their experience and competence.”

Click here to read more on the case of Moehrl v. National Association of Realtors, et al.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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