This is the fourth feature in a week-long series examining the high stakes and potential impact of two closely watched federal lawsuits that take direct aim at how homebuyers pay commissions. Check back later today for the conclusion to the series, and be sure to check out Part I, Part II and Part III.
An antitrust commission lawsuit lodged by homebuyers against the National Association of Realtors and major real estate franchisors is back from the dead — though how long it lives remains to be seen.
On Wednesday, eight homebuyers filed an amended complaint against NAR, Realogy, Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries alleging that NAR rules have inflated agent commissions and resulted in higher home prices paid by the buyers. Unlike similar cases currently coursing through federal courts, the revived lawsuit proposes that buyers, not sellers, are getting the short end of the stick.
NAR has 1.5 million members; the vast majority are residential real estate agents and brokers.
“These rules, which include a requirement that sellers set aside a portion of the purchase price for buyer-agent commissions, prohibitions on modifying the commission, and permission to filter listings by commission, all enable NAR, its co-defendants, and its members to maintain buyer-agent commissions at supracompetitive levels unrelated to brokers’ experience or the services provided, steer home buyers away from lower commission homes, and drive out discounters — among other harms,” attorneys for the plaintiffs wrote.
The suit, which seeks class-action status, alleges that NAR and the franchisor defendants have conspired to reduce price competition for buyer-agent services in violation of the federal Sherman Antitrust Act and to unjustly enrich themselves.
As in the original suit, the amended complaint notes that when a buyer pays a home purchase price, that money goes into an escrow account from which the listing broker, buyer broker, and the seller are paid at the same time.
“Buyer-agent fees are paid out of the funds from the purchase price of the house — a price the homebuyer pays,” the complaint said.
“But, because the buyer-agent commission is ostensibly paid by the seller, buyers do not necessarily realize that the broker commission is added to the purchase price of the home such that buyers are sharing the cost of the commission with the seller.”
The suit was originally filed by New Jersey homebuyer Judah Leeder in January 2021. In May 2022, Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois Eastern Division dismissed the suit, agreeing with the defendants that homebuyers are indirect purchasers of their buyer broker’s services because those services are purchased for them by homesellers, making those buyers ineligible for recovering damages from antitrust violators.
Wood also noted that homesellers, whom she said are the direct purchasers of buyer broker services, are pursuing a similar case in her jurisdiction, which worked against the homebuyer’s suit. That case is known as Moehrl and it alleges commission sharing inflates seller costs rather than buyer costs. Wood is the same judge overseeing the Moehrl case. Still, she gave the homebuyer plaintiff leave to amend his complaint.
The amended complaint terminates Leeder as its lead plaintiff and instead features eight new plaintiffs, lead by Mya Batton, who purchased homes in Tennessee, Florida, Kansas, North Carolina, Nevada, Massachusetts, and New Mexico. In addition to the Sherman antitrust claim and the unjust enrichment claim of the original suit, the amended suit accuses the defendants of violations of state antitrust statutes and consumer protection laws as well.
The amended complaint also adds another potential class. As in the original suit, the amended complaint proposes a nationwide class consisting of anyone who has purchased residential real estate that was listed on a Realtor-affiliated MLS from Dec. 1, 1996 to the present. The suit seeks to prevent the enforcement of NAR’s rules against this class. However, the amended complaint also seeks to certify a second, damages class consisting of anyone who has purchased residential real estate that was listed on a Realtor-affiliated MLS from Dec. 1, 1996 to the present in “Indirect Purchaser States.”
These are states whose antitrust or consumer protection statutes the plaintiffs allege the defendants violated, including Arizona, California, Connecticut, D.C., Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, Vermont, West Virginia, and Wisconsin.
Otherwise, the amended complaint’s allegations are virtually identical to those in the original suit.
“The court previously dismissed this lawsuit because it is unlikely plaintiffs will be able to prove their case,” NAR spokesperson Mantill Williams told Inman in an emailed statement.
“The new amended complaint does not further the plaintiff’s argument, and we will move to dismiss it. The pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers. Sellers making offers of compensation to buyer brokers gives first-time, low/middle-income and all homebuyers a better shot at affording a home and professional representation to navigate this critical purchase.
“We remain confident the court will dismiss this amended complaint.”
The defendants have until Sept. 7 to file a response to the amended complaint.
Keller Williams, RE/MAX, HomeServices of America, BHH Affiliates, HSF Affiliates and The Long & Foster Companies declined to comment. Realogy did not respond to a request for comment.
Read the amended complaint: