Suit over buyer’s agent commissions expansive

Kenneth R. Harney

WASHINGTON — In what could be the most farreaching antitrust lawsuit for the real-estate market in decades, the National Association of Realtors and four of the largest realty companies have been accused of a conspiracy to systematically overcharge home sellers by forcing them to pay commissions to the agents who represent the buyers of their homes.

The class-action suit, filed in federal district court in Chicago, focuses on a rule it says has been imposed by the National Association of Realtors. The rule requires brokers who list sellers’ properties on local multiple listing services (MLSS) to include a “non-negotiable offer” of compensation to buyer agents. That is, once a home seller agrees in a listing to a specific split of the commission, buyers cannot later negotiate their agents’ split to a lower rate.

That requirement, the suit alleges, “saddle(s) home sellers with a cost that would be borne by the buyer in a competitive market,” where buyers pay directly for the services rendered by their agents.

In overseas markets where there is no such mandatory compensation rule for buyer agents, total commission costs tend to be lower — averaging 1 to 3 percent in the United Kingdom, for example — versus the 5 to 6 percent commonplace here. The suit alleges that if buyers in the U.S. could negotiate fees directly with the agents they choose to represent them, fees would be more competitive and lower. Today, many American buyers are unaware of their agent’s commission split.

Sellers typically know the percentage because they agree to it in the listing contract. But they might wonder: Why am I required to pay the fee of the buyer’s agent, who might be negotiating against my interests in the transaction? Also, at a time when buyers often search for and find the house they want to buy online, shouldn’t compensation for a buyer’s agents be decreasing, rather than steady in the 2.5 to 3.0 percent range?

Besides the National Association of Realtors, the suit names as co-defendants RE/MAX Holdings Inc., Keller Williams Realty Inc., Homeservices of America Inc. and Realogy Holdings Corp., which includes among its brands Better Homes and Gardens, Century 21, Coldwell Banker Real Estate and ERA.

The plaintiff in the case is Christopher Moehrl, who sold a home in 2017 using a RE/MAX broker to list the property; the buyer was represented by Keller Williams. Moehrl paid a total commission of 6 percent. Just under half of that, 2.7 percent, went to the buyer’s agent.

If Moehrl’s case is certified as a class action, the potential number of sellers affected would be massive. It includes sellers who have paid a broker commission during the past four years in connection with a home listed by an MLS in these metropolitan areas: Columbus; Cleveland; Washington D.C.; Baltimore; Dallas; Denver; Detroit; Houston; Las Vegas; Miami; Philadelphia; Phoenix; Salt Lake City; Richmond, Virginia; Tampa, Orlando, Sarasota and Fort Myers, Florida; Charlotte and Raleigh, North Carolina; Austin and San Antonio; and Colorado Springs, Colorado.

NAR Vice President Mantill Williams called the suit “baseless” and said it “contains an abundance of false claims,” but he provided no specifics. Representatives of the four realty companies declined comment. But some Realtors say the suit could dismantle the compensation system as it now exists.

Anthony Lamacchia, broker-owner of Lamacchia Realty in Waltham, Massachusetts, says if the suit is successful, “it would basically destroy buyer agency, which would not be in the best interests of buyers or sellers.” Lamacchia argues that even in an era in which buyers frequently find homes online, buyer agents have important functions in managing contract negotiations, providing strategic advice and guiding clients through the process to closing.

Some brokers challenged allegations in the suit, such as buyer agents refusing to show homes with low commission splits. Alexis Eldorrado, managing broker of Eldorrado Chicago Real Estate, told me that “in reality, if the buyers have found the place they want and are interested in seeing it, NAR’S code of ethics requires the agent to show it.”

(Disclosure: Having sold a house in 2017, I am a potential class member if a class action is certified. To avoid any perceived conflict of interest, I will opt out of the class.)

Kenneth R. Harney covers housing issues on Capitol Hill for The Washington Post Writers Group. kenharney@ earthlink.net.