Analyzing the Lawsuit Against NAR: What Does it Mean for Homeowners?
Homeowners nationwide are watching a new lawsuit filed against the National Association of Realtors (NAR) and some of the most significant real estate broker associations. The lawsuit claims that NAR and its members violated the Sherman Act through their practices for multiple listing services. The case alleges a conspiracy to break the law and institute anti-competitive rules that stifle competition in the real estate industry.
What is the Lawsuit About?
Home sellers are currently suing NAR for allegedly conspiring to charge buyers and their brokers more than 3% of the price of homes listed in realtor-affiliated MLSs. The plaintiffs allege that the commission-sharing rules between listing and buyer agents violate the Sherman Antitrust Act by artificially inflating the costs of buying a home, leading to higher prices. If NAR loses, the group could face billions in damages. NAR is the largest real estate industry trade association and a political powerhouse. Tax records show the association made over $338 million in 2019 and spent over $84 million on lobbying in 2020.
How Will It Impact Homeowners?
A recent NAR Lawsuit filed by home sellers against the National Association of Realtors and four large national real estate broker franchisors charges that they violated federal antitrust laws by conspiring to require homeowners to pay inflated buyer broker commissions. NAR is a powerful trade group representing 1.5 million real estate brokers nationwide. It has a set of rules it enforces through its network of Multiple Listing Services, which list houses for sale. It also promotes and supports various advocacy initiatives affecting real estate, such as advocating for reduced mortgage premiums and encouraging efforts to approve remote online notarization of real estate documents. One of the rules NAR enforces is that all real estate brokers must make a blanket, non-negotiable offer of buyer-broker compensation (the “Buyer Broker Commission Rule”) when listing a property on an MLS.
A new lawsuit filed by a non-MLS/NAR real estate brokerage (Realty Executive Exchange or REX) and an MLS (Multiple Listing Service) entities (NAR) has prompted some to ask what it all means for homeowners. REX argues that by separating MLS and non-MLS listings, NAR has prevented its competitors from offering their consumers the pro-consumer, pro-competitive benefits of an excellent old-fashioned local multiple-listing services marketplace. The case focuses on one of NAR’s newest policies, the Clear Cooperation Policy or CCP. The CCP allows listing brokers to submit their listings to the MLS in as little as one business day. The CCP is a big deal in the real estate community, especially for home sellers. It is one of several ways a local realtor association can keep competition and transparency in check. As such, the CCP has generated a lot of attention from several parties, including The PLS (property listing services) and the U.S. Department of Justice, which is currently investigating NAR over its rules governing MLS cooperation.
How Will It Impact the Real Estate Industry?
This will lead us to the question, will realtors become extinct? The National Association of Realtors and some major brokerage firms have been cited as defendants in an unprecedented class action lawsuit that could have multibillion-dollar implications for homeowners nationwide. The suit is based on a claim that NAR rules requiring home sellers’ brokers to offer home buyers’ brokers compensation when listing a property on a local database of properties for sale called the Multiple Listing Service (“MLS”) violate the Sherman Antitrust Act. NAR’s MLS policy requires that home sellers’ brokers offer buyer brokers compensation when a seller lists their property on a NAR-affiliated MLS, even if the listing agent does not have direct or indirect sales commissions. NAR’s MLS policy also requires that broker compensation be offered in a manner that is transparent to home buyers and their agents. The plaintiffs, led by Cohen Milstein and co-counsel, allege that the NAR requirement to compensate buyer brokers consists of a conspiracy that forces sellers to pay what they describe as excessive compensation.