Daily Press (Sunday)

Lawsuits target rules setting agent home sale commission­s

- By Alex Veiga

LOS ANGELES — A series of court challenges seek to upend longstandi­ng real estate industry practices that determine the commission­s agents receive on the sale of a home — and who foots the bill.

A federal jury in one of those cases this week ordered the National Associatio­n of Realtors along with some of the nation’s biggest real estate brokerages to pay almost $1.8 billion in damages, after finding they artificial­ly inflated commission­s paid to real estate agents.

The class-action lawsuit was filed in 2019 on behalf of 500,000 home sellers in Missouri and some border towns. The verdict stated that the defendants “conspired to require home sellers to pay the broker representi­ng the buyer of their homes in violation of federal antitrust law.”

If treble damages — which allows plaintiffs to potentiall­y receive up to three times actual or compensato­ry damages — are awarded, then the defendants may have to pay more than $5 billion.

“This matter is not close to being final as we will appeal the jury’s verdict,” Mantill Williams, a spokesman for the NAR, said in a statement. “Intheinter­im,wewillaskt­he court to reduce the damages awarded by the jury.”

Williams said it will likely be several years before the case is resolved.

But the NAR and several real estate brokerages are already facing another lawsuit over agent commission rules. Fresh off the verdict in the 2019 case, the lawyers filed a new classactio­n lawsuit in the U.S. District Court for the Western District of Missouri that seeks class-action status covering anyone in the U.S. who sold a home in the last five years. It names the trade associatio­n and seven brokerage companies, including Redfin Corp., Weichert Realtors and Compass Inc.

“What’s at issue nationwide is costing Americans about $60 billion in extra realestate­commission­s,”said Michael Ketchmark, one of the attorneys representi­ng the plaintiffs in the lawsuits.

The focus of the lawsuits is an NAR rule requiring that home sellers offer to pay the commission for the agent representi­ng the homebuyer when they advertise their property on a local Multiple Listings Service, where a majority of U.S. homes are listed for sale. This is in addition to having to cover the commission for their listing agent or broker. The NAR’s rules also prohibit a buyer’s agent from making home purchase offers contingent on the reduction of their commission, according to the complaint.

“Defendants’ conspiracy forces home sellers to pay a cost that, in a competitiv­e market and were it not for defendants’ anticompet­itive restraint, would be paid by the buyer,” the plaintiffs argued in the newly filed lawsuit.

Plaintiffs also claim that the NAR requiremen­t effectivel­y keeps commission­s for a homebuyer’s agent artificial­ly high.

If NAR’s “Mandatory Offer of Compensati­on Rule” were not in place, then homebuyers would foot the bill for their agent’s commission, which would open the door for competitio­n — and lower commission­s — among agents vying to represent a homebuyer, the plaintiffs contend.

The NAR argues that the practice of listing brokers making offers of compensati­on to buyer brokers is best for consumers.

“It gives the greatest number of buyers a chance to afford a home and profession­al representa­tion, while also giving sellers access to the greatest number of buyers,” Williams said.

Typically, the home seller pays their listing agent, who then splits the commission with the buyer’s agent according to the NAR rules. Traditiona­lly, that works out to a 5% to 6% commission split roughly evenly between the buyer’s and seller’s agents.

Such commission­s are justified, given the profession­alism agents offer their clients and the hefty expenses they often incur in preparing to sell a home, said Matthew Shelton, a Kansas City area real estate agent.

 ?? GENE J. PUSKAR/AP ?? Pennsylvan­ia homes are seen in April. A National Associatio­n of Realtors rule requires home sellers to offer to pay the commission for the buyer’s agent.
GENE J. PUSKAR/AP Pennsylvan­ia homes are seen in April. A National Associatio­n of Realtors rule requires home sellers to offer to pay the commission for the buyer’s agent.

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