In a complaint filed Monday, plaintiff Sawbill Strategic Inc. alleged the National Association of Realtors and real estate franchisors Realogy Holdings Corp., HomeServices of America, RE/MAX Holdings, and Keller Williams Realty are violating the Sherman Antitrust Act “by conspiring to require property sellers to pay the broker representing the buyer of their properties, and to pay an inflated amount.”
The suit is nearly identical to a lawsuit filed by six law firms in March on behalf of homeseller Christopher Moehrl, but two different law firms filed the Sawbill suit: Wexler Wallace LLP and Gustafson Gluek PLLC, which both specialize in class action litigation. Both firms declined to comment for this story.
Since the Moehrl lawsuit’s filing, opinions in the industry have varied with some saying the suit could wreak havoc on homebuyers and Realtors or turn out to be a dud. Benjamin Brown, a partner at Cohen Milstein (one of the plaintiff firms in the Moehrl suit) told Inman in an interview recently that the case would likely stretch on for years, include billions in damages, and if successful, its winners would be brokers “who are willing to innovate.” Brown declined to comment for this story.
Now another lawsuit has joined the fray, though it’s unclear at this point whether and how the two suits are related. Both suits were filed in the U.S. District Court for the Northern District of Illinois. What is clear is that both suits hope to change how the real estate industry works by having buyers pay buyer’s brokers directly, compelling buyer’s brokers to compete by offering lower commission rates.
According to the April 15 complaint, Stillwater, Minnesota firm Sawbill Strategic, Inc. sold a home on July 18, 2016 in Cottage Grove, Minnesota, that was listed in Twin Cities-based Northstar MLS, just as Moehrl’s home would later be. RE/MAX franchisee RE/MAX Results represented Sawbill while Edina Realty represented the buyer. Sawbill paid a total broker commission of 5 percent: 2.3 percent to the listing broker and 2.7 percent to the buyer’s broker. Sawbill is a real estate investment company founded in 2011 that deals in post-foreclosure properties.
“The foundation of Defendants’ conspiracy is NAR’s adoption and application of a rule requiring all brokers to make a non-negotiable offer of buyer broker compensation … when a broker lists a property on a Multiple Listing Service,” attorneys for Sawbill wrote in the April 15 complaint.
“Defendants and their co-conspirators possess market power through control [of] local MLSs, which are databases of properties listed for sale in a particular geographic region. A majority of homes in the United States are sold on such MLSs. Through their control of the MLSs, Defendants and their co-conspirators have market power in the local markets for real estate broker services.”
In an emailed statement, Mantill Williams, NAR vice president of communications, said, “Our position regarding this type of complaint remains consistent. The complaint is baseless and contains an abundance of false claims. The U.S. courts have routinely found that multiple listing services are pro-competitive and benefit consumers by creating great efficiencies in the home-buying and selling process.
“The market for the brokerage of real estate is extremely competitive — to the benefit of buyers and sellers alike. As courts have long recognized, the MLS system in our country promotes efficiency and helps to advance the best interests of all the clients served by the Realtors members of NAR. We believe that the lawsuit fomented by several plaintiffs’ class action law firms is completely without merit. We will defend the challenged policies, and we are confident that we will prevail.”
Both the Sawbill and Moehrl suits seek class-action status on behalf of “thousands” of homesellers who paid a broker commission in the last four years — since March 6, 2015 for the Moehrl suit and since April 15, 2015 for the Sawbill suit — in connection with the sale and listing of their home in one of 20 Realtor association-owned MLSs, many of which are among the largest in the country, including Bright MLS in the Mid-Atlantic region and My Florida Regional MLS. The other 18 MLSs cover these metro areas:
- Cleveland, Ohio
- Columbus, Ohio
- Detroit, Michigan
- Milwaukee, Wisconsin
- Minneapolis, Minnesota
- Austin, Texas
- Dallas, Texas
- Houston, Texas
- Las Vegas, Nevada
- Phoenix, Arizona
- San Antonio, Texas
- Colorado Springs, Colorado
- Denver, Colorado
- Salt Lake City, Utah
- Fort Myers, Florida
- Miami, Florida
- Charlotte, North Carolina
- Raleigh, North Carolina
Neither of the suits names these MLSs or the Realtor associations that own them as defendants, though they do allege that the MLSs and associations were co-conspirators because they adopted, complied with and implemented the “Buyer Broker Commission Rule.” They also allege franchisees of the defendant franchisors were co-conspirators because they complied with and implemented the rule in the geographic areas in which the 20 MLSs operate.
Both suits say the amount at issue is more than $5 million and allege class members have each incurred thousands of dollars in damages.
RE/MAX and Keller Williams declined to comment for this story. Realogy and HomeServices of America did not respond to a request for comment.