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Real Estate Commission Structure Found to Violate Antitrust Law

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On October 31, 2023, a federal jury handed down the verdict: the National Association of Realtors and several national brokerages (collectively, NAR) “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.” The verdict was the culmination of a 2019 class action lawsuit filed by close to 500,000 home sellers in a federal court in Missouri alleging that NAR conspired to have home sellers pay buyers’ brokers an inflated commission in violation of federal and state antitrust laws. The realtors and brokers were ordered to pay nearly $1.8 billion in damages—an amount that could be tripled as allowed in many antitrust actions.

The lawsuit claimed that NAR’s rules violated antitrust laws because they were, in effect, a conspiracy that forced home sellers to pay a cost that would be paid by the buyer in a competitive market. The idea is that both the buyer and seller agents have the same incentive: receiving the highest commission. This was alleged to be to the detriment of buyers, who have to pay more for a home (assuming the commission fee is reflected in a higher list price to provide sellers with a desired net return on the sale), as well as sellers, who have to pay the commission fee for both agents (the standard commission being around 5 to 6 percent to be split equally between the buyer and seller agent).

NAR has argued that its rules give the greatest number of buyers a chance to afford a home and obtain professional representation. If buyers don’t have to pay the commission fee, they can spend more money on their home. In this vein, broker-assisted sales also allow first-time homebuyers with potentially less liquid assets to afford representation. NAR also argued that commission percentages are not a fixed amount and can always be negotiated.

If this verdict stands, it is unclear at this point how exactly the commission structure would change. If buyers had to start paying their own brokerage fee, but could not afford it upfront, presumably it could be financed into the mortgage. However, there are regulatory issues with this approach that would need to be resolved.

While the fight continues for several more years through multiple lawsuits and appeals, homebuyers and sellers most likely will not see any changes in how home listings and agency commissions are handled. NAR has stated that in the interim they intend to ask for a reduction in damages and to appeal the verdict. At this point, we will have to wait for the federal court of appeals to weigh in to know whether this decision is going to change how brokers earn their fees.

This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.

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