DOJ takes onRealtors’ commission rules

Government’s antitrust lawsuit focuses on four of the national association’s policies

An antitrust suit filed Thursday by the Department of Justice alleges the National Association of Realtors’ rules on commissions artificially inflated fees paid to real estate agents by homeowners.

“NAR has coordinated and enforced anticompetitive agreements, which have likely contributed to reduced price competition among buyer brokers and a lower quality of buyer broker services for home buyers,” the Department of Justice’s suit said.

The NAR denied any wrongdoing, but said Thursday evening it had reached an agreement that fully resolved the questions raised by the Justice Department. It declined to detail what the agreement entailed.

“While NAR disagrees with the DOJ’s characterization of our rules and policies, and NAR admits no liability, wrongdoing or truth of any allegations by the DOJ, we have agreed to make certain changes to the Code of Ethics and MLS Policies …,” Mantill Williams, NAR’s vice president of communications, said in an email.

At the heart of the lawsuit was how buyers’ agents are compensated. If the agreement succeeds in lowering fees, it could potentially save individual home sellers thousands of dollars in commissions, but it would also cut the earnings of real estate agents across the country — including some 37,000 in the Houston area — and put more pressure on traditional brokerages, already contending with a host of discount and online competitors.

In particular, the Department of Justice found fault with four NAR policies that:

• Allow real estate agents to characterize their services as “free” to homebuyers (in fact, the real estate agent fees will be paid out of the sumthe buyer provides at closing).

• Recommend concealing how large of a commission a buyer’s agent willmake upon the sale of a home.

Allow buyers’ agents to filter listings by the size of the commission they’ll be paid.

• Limit real estate agents who are not association members from accessing lockboxes.

Homesellers in the United States pay both the listing agent and the buyer’s agent. And when listing agents add homes into the

NAR’s listing service — which holds the majority of listings and often syndicates it to other real estate search sites such as Zillow and Realtor.com — they must say upfront how much they’re offering to pay the agent whose client buys the home. Agents can negotiate that offer as the transaction progresses.

The commission on the sale of a home is usually 6 percent, which is traditionally split between the agents for the buyer and seller. As

a result, the Department of Justice alleges buyers’ agents have little motivation to sell their clients on homes that will offer them lower commissions.

The ability of buyers’ agents to filter the homes they see online by the size of the commission offered also makes it easy for them to choose not to show certain listings to buyers, and the inability of buyers to see the difference in commission prevents them from detecting such steering, the lawsuit,

filed in the U.S. District Court for the District of Columbia, alleged.

Williams said most of the changes NAR agreed to “seek to more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS Policies regarding providing information about commissions and MLS participation.”

Thursday’s suit comes as NAR is already fending off a legal challenge to the way real estate agent commissions are structured.

A case brought by a Minnesota homeowner in 2019 seeks to strike down the standard practice of agents splitting commissions.

The case points out real estate agents are paid much more in the United States than in other countries.

For the average Houston home, priced at $310,700, real estate agent commissions cost $18,600. If the same deal had closed in London, the homeseller would have only paid agents about $3,700.