A lawsuit filed by home sellers against the National Association of Realtors and four major real estate broker franchisors, alleging that their commission-concealment rules are anti-competitive, is heating up in the courts. It may lead to a shift in the way homebuyers pay their real estate brokers. NAR is the leading trade group for real estate agents and brokers in the United States, and it receives most of its funding from its member fees. However, the Justice Department recently threatened to take a stand against NAR by demanding information about its commission and marketing practices.
Increased Expenses
The NAR Lawsuit can change how home buyers and sellers pay their real estate agents. It could lead to a shift from commissions based on the sale price of a property to a flat fee model where agents are paid a fixed amount regardless of whether a home sells. This would significantly alter the real estate industry and have widespread repercussions for the entire industry. It will also affect home prices, as agents may need to charge a higher fee than they did in the past to cover their increased costs. The NAR Lawsuit is part of an escalating legal battle that pits home sellers against the National Association of Realtors and four large national real estate brokers. The suit claims that NAR and its affiliates have violated federal antitrust laws by requiring property sellers to pay buyer brokers compensation fees even though the buyers’ broker does little or nothing for them.
Increased Competition
If NAR loses the lawsuit, it could impact the real estate industry. Fewer homes are on the market now than ever, so agents will face more competition. The question is, will realtors become extinct? The Antitrust Division has alleged that NAR’s Commission-Filter Rules and Practices are illegal because they are anti-competitive. These rules, policies, and practices reflect concerted action among NAR members that reduce price competition for listing and buyer broker services by NAR-affiliated MLSs. NAR’s Commission-Filter Rule prohibits MLSs affiliated with NAR from disclosing to buyers the commission that brokers representing home buyers (buyer brokers) will earn. It also permits buyer brokers to misrepresent to buyers that their services are free, and it allows them to filter MLS listings based on the level of buyer broker commissions offered. It also limits access to lockboxes that will enable licensed brokers to access homes for sale to brokers who work for a NAR-affiliated MLS.
Increased Home Prices
NAR, the largest trade association for real estate agents, faces an onslaught of antitrust lawsuits. But some of its 1.5 million members need clarification about how these cases affect them and what concerns they should have. NAR is facing a proverbial knockout punch in a lawsuit alleging that some of its rules violate the Sherman Antitrust Act by inflating seller costs. Initially filed in 2019, the case was certified as a class action in April. During the class certification process, a court must determine whether the plaintiff’s claims can be proven with common questions of fact and law. The plaintiffs allege that NAR violated antitrust laws by inflating commission rates for home buyers through an agreement with listing brokers to share commissions. Those commissions were used to pay buyer brokers, and the plaintiffs allege that this practice has led to higher consumer prices.
Increased Disputes
In addition to the potential impacts on competition and home prices, this lawsuit could directly affect real estate brokers. If the court rules against NAR, it could result in a shift to a flat commission structure that would drastically alter how agents are paid. The lawsuit alleges that NAR and four national real estate broker franchisors have conspired to inflate seller costs. These defendants allegedly require home sellers to pay the broker representing the buyer of their homes and to pay an inflated amount. One of the critical issues is why this practice has become so common. It is a practice that underpins local broker marketplaces where brokers compile centralized listings of all properties for sale and invite other brokers to cooperate in finding a buyer.