Coming Soon To A REALTOR® Near You – Commission Transparency

The National Association of REALTORS® (NAR) has come under attack over the past few months as a defendant in two class-action lawsuits, Christopher Moehrl v The National Association of REALTORS® and Joshua A. Sitzer and Amy Winger v The National Association of REALTORS® filed in March and April of 2019 respectively, and, most recently, a complaint brought by the Department of Justice, United States v National Association of REALTORS® filed this month.  The latter came with a pre-arranged proposed settlement with NAR.  I should also mention the two class-action lawsuits have as additional defendants Realogy Holdings Corp (the own and operate several franchises, some of the local ones include Coldwell Banker-Gundaker, Better Homes & Gardens, ERA, Sotheby’s, and Century-21), HomeServices of America, Inc. (owner of Berkshire Hathway Home Services), Re/Max and Keller Williams.

While there are additional issues raised in the lawsuits and DOJ complaint, central to them are buyer’s agents’ commissions.  Issues raised include:

  • From the DOJ complaint:
    • Allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
    • 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;
  • From the lawsuits:
    • Sellers of residential property have been forced to pay inflated costs to sell their homes through forced payments of commissions to buyer brokers;
    • Home sellers have been forced to set buyer broker commissions to induce buyer brokers to show the sellers’ homes to prospective buyers;
    • Price competition has been restrained among brokers seeking to be retained by home buyers, and by brokers seeking to represent home sellers; and
    • Defendant Franchisors and their franchisees have inflated their profits by a significant margin by the increased total commissions and increased buyer broker commissions.

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