Let me begin by saying that I’m not a sensationalist, nor am I an advocate for everything I write about.  Additionally, I am not an attorney, so this not a legal opinion.  I am simply a real estate broker that has been very active in the profession and industry for over 40 years now.  I strive to stay on top of industry and market changes so that the agents in our firm, MORE, REALTORS®, and their clients can avoid surprises and be prepared.  Another reason I do this is to share what I have learned with consumers.  I believe that by sharing good, relevant and accurate information to consumers, they will be equipped to make better decisions when it comes to buying or selling real estate, including how to choose an agent to best represent them.

So, what is going to turn the real estate industry upside down?

Yes, I made a rather bold statement in my headline, but I believe it to be an accurate depiction of what is coming to the world of residential real estate, including right here in St Louis.  The source of this disruption is not a single entity, but rather many.  While there is a common theme to the multiple threats, they are coming from different sources.  Over the past few months, I have written about all the issues I’m referring to, so below is a summary of them and links to the original articles:

• Moerhl v NAR Lawsuit. 3/22/2019 – This suit was filed against The National Association of REALTORS® (NAR), Realogy Holdings Corp, HomeServices of America, Inc, Re/Max Holdings, Inc and Keller Williams Realty, Inc.  The suit alleges that the defendants were “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.”  At the heart of this claim is the NAR rule that requires sellers to offer compensation to the buyer’s agent in order to be eligible for listing in the MLS.
• Department of Justice (DOJ) Complaint against NAR. 12/01/2020.  The DOJ filed a complaint against NAR, as well as a settlement agreement, focused on two primary issues; 1. Allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; 2.Enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers;

• Transparency in the home buying process. 2/13/2021. – I included this article because it references the two class action suits mentioned earlier, as well as the DOJ complaint, and makes some predictions on changes I thought would happen.  Interestingly, some of the predictions are, or will soon be, coming true.
• PLS v NAR Lawsuit. 4/27/2022 –  This suit was filed against the National Association of REALTORS® (NAR) alleging their “clear cooperation” rules violated Sherman Anti-Trust laws.  The law suit was dismissed by a lower court but, on appeal by PLS, the higher court overturned the dismissal and sent the case back to be tried.
• Sitzer v NAR Lawsuit. 4/28/2022 – This provides an update on the suit filed in Missouri on 6/21/2019  against the National Association of REALTORS® (NAR) , and the parent companies of major real estate companies and franchises including Coldwell Banker, ReMax, Keller Williams and Berkshire Hathaway Homeservices.  This suit alleges the defendants have “have conspired to require home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount, in violation of federal antitrust laws and the Missouri Merchandising Practices Act.” At the heart of this is the same NAR rule referenced in the first suit above.  A few days before writing this article, the judge in the case certified this case as a class action suit.
• Moerhl vs NAR Lawsuit – Judges Order Certifies Class.  3/29/2023 – In what I believe is the final flow to NAR and other defendants, the judge in this case recently certified it as a class action and expanded the “class” to include “Current and future owners of residential real estate in the covered jurisdictions who are presently listing or will in the future list their home for sale on a Covered MLS.”  This decision is a double whammy for NAR and other defendants in the suit, as well as every real estate company and agent in the affected markets.  The MLS markets included in this lawsuit are generally:
  •  The Bright MLS (including the metropolitan areas of Baltimore, Maryland; Philadelphia, Pennsylvania; Richmond, Virginia; Washington, D.C.);
  • My Florida Regional MLS (including the metropolitan areas of Tampa, Orlando, and Sarasota);
  • The five MLSs in the Mid-West that cover the following metropolitan areas: Cleveland, Ohio; Columbus, Ohio; Detroit, Michigan; Milwaukee, Wisconsin; Minneapolis, Minnesota;
  • The six MLSs in the Southwest that cover the following metropolitan areas: Austin, Texas; Dallas, Texas; Houston, Texas; Las Vegas, Nevada; Phoenix, Arizona; San Antonio Texas;
  • The three MLSs in the Mountain West that cover the following metropolitan areas: Colorado Springs, Colorado; Denver, Colorado; Salt Lake City, Utah;
  • The four MLSs in the Southeast that cover the following metropolitan areas: Fort Myers, Florida; Miami, Florida; Charlotte, North Carolina; and Raleigh, North Carolina.

At this point, especially based upon the most recent decisions and orders from the courts, I have no doubt in my mind the plaintiff’s are going to prevail in all of the lawsuits listed above.  It is worth adding that I’m certainly not the only one that feels this way;  there are many people in the industry, who are smarter and better-credentialed than I am, that feel the same way.

But St Louis is not on the list above of MLS markets so how does this affect St Louis?

The regional REALTOR® MLS that serves the St Louis area, MARIS, is not one of the MLS’s or jurisdictions listed in the Moehrl lawsuit, so that lawsuit won’t directly impact the St Louis market.  Nonetheless, the other class action suit, the Sitzer suit does include this market.  Also, the reality is that since these two lawsuits are gaining traction and have both achieved class action status, there will no doubt be “copycat” suits, meaning attorneys will file similar lawsuits in markets not included in those two suits.  This trend will likely go on until all markets are included in one suit or another.  Furthermore, if the National Association of REALTORS® (NAR) is forced to change the targeted rules, the change will apply to REALTORS® everywhere, not just in specific markets.

NAR says this is just “procedural”…

Shortly after the judge issued the order in the Moehrl suit, Lesley M. Muchow, General Counsel & Vice President of Legal Affairs and Antitrust Compliance issued this statement:  “This is not a victory for the plaintiffs and does not change the facts of the case. The ruling was only procedural and now allows others who have allegedly been impacted to join the litigation as plaintiffs. It is expected that it will be a lengthy process before the case is fully resolved.”  What else could she say?  “This is bad, really bad.”?  I think not.  I don’t think there is anything NAR can do but maintain the posture they will prevail.

Here’s what I see changing, perhaps sooner than later, and why sellers may no longer be forced to pay commission to the buyer’s agent.

The two action lawsuits above and the DOJ have focused on the way buyer’s agents are compensated and specifically, NAR’s rule requiring seller’s to offer such compensation, or not have their listing in the MLS.  Therefore, I think it’s safe to say this is going to be the first thing to go.  Granted, the lawsuits have a long way to go and who knows how long things will be tied up with appeals, but as result of the Judge in the Moehrl suit expanding the class, it now makes it riskier for agents to wait. I say this because now current clients and future clients are all going to be part of the suit.  Sure, if NAR prevails, then it’s a non-issue, but do real estate brokers and agents really want to play Russian roulette here with all that potential liability out there?  I don’t think so.  I know I don’t want it.

We’ve been preparing for this for over a year and have answers…

At MORE, REALTORS®, we have been tracking these cases since the beginning and have been making plans for the changes coming to the industry.  We see this as an opportunity to be proactive and make changes that will allow us to protect our agents while, at the same time, serving our clients even better than we can today.  For this reason, we already have new ways of doing business, along with new processes, forms, etc to carry out these ideas.  Buyers and sellers have nothing to worry about and I think will find comfort in knowing that not only are we prepared for the changes, the changes we’ve made and are making are really adding more transparency to the home buying and selling process and quite frankly making it fairer as well.

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