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 adopt and implement 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.
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 restrainign competition, costing home sellers thousands in excessive commissions paid on each sale.”
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.
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 fom negotiating commissions.
In particular, 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.
“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.
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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.
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