Homesellers have filed another lawsuit against real estate brokerage giants Realogy, RE/MAX, Keller Williams and HomeServices of America challenging the industry practice of having sellers pay buyer brokers. But this suit also adds a new defendant: multiple listing service MLS Property Information Network.
While two suits filed last year — known as Moehrl and Sitzer after two lead plaintiffs — sued the above-named brokerage companies, they also sued the National Association of Realtors. The latest suit, filed on Dec. 17 by homesellers Gary Bauman, Mary Jane Bauman and Jennifer Nosalek in a federal court in Massachusetts, does not name NAR as a defendant and instead has named Shrewsbury, Massachusetts-based MLS PIN.
MLS PIN is the eighth largest MLS in the country with more than 42,000 subscribers in six New England states and New York, according to MLS rankings by T3 Sixty. According to the complaint, eight of MLS PIN’s 15 directors are Realtors for franchises owned by defendants RE/MAX, Realogy and BHH Affiliates, whose parent company is HomeServices of America. The suit also names HSF Affiliates, another HomeServices company, as a defendant.
The suit, like its two predecessors, seeks class-action status and alleges that the sharing of commissions between listing and buyer brokers inflates seller costs and is a conspiracy in restraint of trade in violation of the Sherman Antitrust Act, as well as state antitrust laws.
The plaintiffs in all three suits want to have homebuyers pay their broker directly, rather than have listing brokers pay buyer brokers from what the seller pays the listing broker — a move that could upend the U.S. real estate industry by effectively forcing changes in how buyer’s agents are traditionally compensated.
According to the complaint, the seller plaintiffs sold their home in Massachusetts using MLS PIN’s platform, Pinergy, and had to include a “a single, set offer of compensation to any broker who found a buyer for their home” as a condition of listing the home, which the suit dubs the “Buyer-Broker Commission Rule.”
“This requirement that a seller must offer a set commission to the successful buyer-broker in order for their property to be listed on Pinergy is anticompetitive and causes sellers to pay artificially inflated, supra-competitive commission rates,” the complaint states.
In October, U.S. District Judge Andrea Wood denied a motion to dismiss the Moehrl suit, finding if it were not for NAR’s rules requiring homesellers to make a blanket, unilateral offer of compensation to any broker who finds a buyer for a home — regardless of that broker’s experience or the value of services that broker provides to the buyer — and for the corporate defendants’ requirements that their franchisees follow NAR’s rules, that “each plaintiff would have paid substantially lower commissions.”
The Bauman complaint alleges multiple state and local Realtor associations and multiple franchisees and brokers of the broker defendants are co-conspirators because they complied with and implemented the Buyer Broker Commission Rule in the geographic areas in which MLS PIN operates.
“If there were no Buyer-Broker Commission Rule, (1) buyers would pay their own brokers, (2) sellers would only pay a commission to compensate the seller-brokers as they have no incentive to compensate the buyers’ agents negotiating against their interests; and (3) the amount paid by sellers to compensate the seller-brokers would be substantially less than the amount that sellers have to pay to compensate both the buyer-broker and the seller-broker,” the complaint said.
The complaint alleges that there is no “pro-competitive justification” for overcharging homesellers.
“The setting of the fees by sellers-brokers is, at least, an attempt to fix market prices,” the complaint said. “If inter-broker compensation were eliminated, it would diminish the ability of traditional
brokers to obstruct vigorous price competition, and thus lead to a dramatic decrease in broker revenues.”
According to the complaint, MLS PIN’s rules only allow a buyer broker to negotiate a listed commission amount before they submit an offer from a potential buyer and thereby “prevent effective negotiation over commission rates.” Moreover, the plaintiffs’ attorneys allege that the Buyer Broker Commission Rule “creates tremendous pressure on sellers to offer the ‘standard’ supracompetitive commission that has long been maintained in this industry.
“Seller-brokers know that if the published, blanket offer is less than the ‘standard’ commission, many buyer-brokers will ‘steer’ home buyers to the residential properties that provide the higher standard commission.”
Asked for comment on the suit, MLS PIN spokesperson Melissa Lindberg told Inman via email, “MLS PIN will review the matter in due course and respond at a later date.”
Although the complaint alleges that MLS PIN is owned by local Realtor associations, Lindberg told Inman that MLS PIN is not owned by associations but rather by brokers who are required to be Realtors.
Last month, the U.S. Department of Justice (DOJ) filed an antitrust suit against NAR alleging some of its rules are illegal restraints on Realtor competition, including some rules regarding commissions. The DOJ and NAR agreed on a settlement modifying those rules prior to the filing of the suit and the modifications are expected to go into effect in first-quarter 2021, including a change that would require that MLSs make commissions to buyer’s agents publicly available.
Inman has asked MLS PIN if it is subject to NAR’s MLS policies and if MLS PIN will change its rules accordingly in Q1. We will update this story if and when we hear back.
Keller Williams, RE/MAX and HomeServices of America (including BHH Affiliates and HSF Affiliates) declined to comment for this story. Realogy and the plaintiffs’ law firm, Izard, Kindall & Raabe, did not respond to requests for comment.
Read the Bauman complaint: