New Class-Action Lawsuit Accuses Nation’s Biggest Real Estate Broker Franchisors of Massive Commission Racket, Costing Home Sellers
Suit alleges National Association of Realtors and Big Four franchisors colluded to suppress competition among real estate brokers
CHICAGO – The National Association of Realtors (NAR) and the nation’s four largest real-estate broker franchisors – Realogy, HomeServices of America, RE/MAX and Keller Williams – have been accused in a nationwide class-action lawsuit of cheating home sellers out of thousands of dollars each sale through an anticompetitive scheme to lock commission rates, according to attorneys at Hagens Berman and Cohen Milstein.
The antitrust lawsuit aimed at the real-estate kingpins states that NAR and the Big Four have worked in unison to eliminate competition over business, and have implemented rules that prevent home sellers, home purchasers, and real estate brokers from negotiating over the commissions that home sellers pay. These anticompetitive rules served no other purpose for home sellers.
According to the lawsuit filed Mar. 6, 2019 in the U.S. District Court for the Northern District of Illinois, total broker commissions in affected housing markets average between 5 and 6 percent, a substantially higher figure than in countries with competitive markets for real estate brokers. Plaintiffs in the case are also represented by attorneys at Handley Farah & Anderson, Justice Catalyst Law, Wright Marsh & Levy and Teske Katz Kitzer & Rochel.
“When you compare commission rates in these affected housing markets to those in countries with competitive real-estate broker markets, the numbers tell a very clear story,” said Steve Berman, managing partner of Hagens Berman and attorney representing home sellers in the class action. “We believe that NAR and the Big Four have devised a series of checks on broker commission rates to all but guarantee their goal of price-fixing, costing home sellers thousands in excessive commissions paid on each sale.”
A class member who sold a house for $500,000 likely paid in the range of $12,500 to $15,000 in additional commissions due to the conspiracy, according to the lawsuit.
Are You Affected?
Attorneys say the following markets are affected: Austin, TX; Baltimore, MD; Charlotte, NC; Cleveland, OH; Colorado Springs, CO; Columbus, OH; Dallas, TX; Denver, CO; Detroit, MI; Fort Myers, FL; Houston, TX; Las Vegas, NV; Miami, FL; Milwaukee, WI; Minneapolis, MN; Orlando, FL; Philadelphia, PA; Phoenix, AZ; Raleigh, NC; Richmond, VA; Salt Lake City, UT; San Antonio, TX; Sarasota, FL; Tampa, FL and Washington, DC.
The following real-estate broker franchisors are involved in the anticompetitive practices: Keller Williams Realty; RE/MAX Holdings Inc.; Realogy Holdings Corp.: Better Homes and Gardens Real Estate LLC, CENTURY 21, Coldwell Banker, ERA, Sotheby’s; HomeServices of America Inc.: Berkshire Hathaway, RealtySouth, Long & Foster, Edina Realty & others.
The lawsuit alleges NAR and the Big Four have enacted a set of anticompetitive policies intended to prevent competition among real estate brokers, as well as stopping buyers and sellers form negotiating commissions, including:
- Only allowing listing brokers to list a property on an MLS if the listing broker makes a unilateral, non-negotiable offer of compensation on the MLS to buyer brokers.
- Prohibiting buyers and sellers from negotiating buyer broker commission.
- Prohibiting brokers from disclosing commissions offered on MLS.
- Allowing brokers to take both buyer and seller commissions, if the buyer is not represented by a broker.
- This anticompetitive activity has been devised at the national level and enforced at the local levels.
“Under these policies straight out of NAR’s handbook, sellers suffer, and brokers reap the spoils,” Berman said. “NAR and the Big Four are doing absolutely everything in their power to restrict and control real-estate broker commissions, and our antitrust team intends to put an end it.”
Attorneys say these policies violate federal antitrust law, the Sherman Act.
Many commission-based industries have seen significant disruption through the rise of online competition. Auto insurance brokers who have lost $4 billion in underwriting profits in each of the last five years, financial service brokers who have seen commissions drop from $250 to $10 during that period, and travel agencies which have lost more than 40 percent of its workforce in the last 20 years.
Meanwhile, bewildering economists, real-estate broker commission rates have stayed the same, despite the fact that a substantial majority of buyers find their home via their own online searches. The complaint cites economists’ conclusions that, “based on global data, the [total] US residential brokerage fees should run closer to 3.0%.”
Attorneys at Hagens Berman believe that in a competitive market, real-estate commissions would fluctuate with changes in technology and natural competition, ending in lower total commission rates for home sellers; brokers would compete by offering lower commissions, buyers and sellers would negotiate with brokers regarding commissions, and buyers would bypass brokers using independent online platforms.
# # #
About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with nine offices across the country. The firm’s tenacious drive for plaintiffs’ rights has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” and MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.
Hagens Berman purchases advertisements on search engines, social media sites and other websites. Transmission of the information contained or available through this website is not intended to create, and receipt does not constitute, an attorney-client relationship. If you seek legal advice or representation by Hagens Berman, you must first enter a formal agreement. All information contained in any transmission is confidential and Hagens Berman agrees to protect information against unauthorized use, publication or disclosure. This site is regulated by the Washington Rules of Professional Conduct.