A federal judge yesterday affirmed class-action status for a suit targeting the National Association of REALTORS® (NAR) and several real estate companies, potentially opening up the antitrust case to a huge number of recent—and future—home sellers.
In her 54-page ruling, Judge Andrea R. Wood of the Northern District of Illinois denied a motion by NAR and the other named real estate companies—which include RE/MAX, Berkshire Hathaway HomeServices, Anywhere and Keller Williams—to dismiss expert testimony provided by the plaintiffs, which claimed to show that NAR and brokerage policies harm a broad swath of consumers.
Wood also certified an extensive class to be certified in the lawsuit, including “(c)urrent and future owners of residential real estate in the covered jurisdictions who are presently listing or will in the future list their home for sale on a Covered MLS,” as well as sellers across multiple states who utilized agents from the named brokerages and paid a commission anytime between March 6, 2015 and December 31, 2020.
A “conservative” estimate of total damages for the class, calculated by one of the plaintiff’s expert witnesses, was $13.7 billion.
In a statement provided to RISMedia, spokesperson Mantill WIlliams said that NAR is “disappointed in the decision,” arguing that MLS-broker marketplaces “ensure equity, efficiency, transparency and market-driven pricing options for homebuyers and sellers.”
“These marketplaces save (buyers) the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people,” he said.
Benjamin D. Brown, co-lead counsel for the certified classes, told RISMedia in a statement that they are “pleased to be one step closer to a trial that will bring a competitive market to millions of Americans buying or selling real estate.”
“Our complaint alleges that (NAR) and the four largest national real estate broker franchisors engaged in a conspiracy that inflated broker commissions by billions of dollars for home sellers around the United States,” Brown said.
Spokespersons for Long & Foster (another brokerage named in the suit) and RE/MAX declined to comment. Other brokerages had not returned requests for comment at press time.
Filed in 2019 by several recent home sellers, the lawsuit is Moehrl v. National Association of REALTORS®, et al.
Wood’s ruling does not directly deal with the merits of the case, which claims that various policies applied by the brokerages and NAR stymie competition and inflate real estate commissions, focused specifically related to how commissions are paid by home sellers as well as how they are presented on the MLS.
But Wood did write that the plaintiffs had shown at least some foundation to their argument, and noted NAR’s “history of involvement in shaping historical compensation practices in the real estate market,” which previously were “subject to antitrust scrutiny.”
“The Court finds that the evidence supports the plausibility of Plaintiffs’ contention that the (MLS rules and NAR policies) create steering incentives,” Wood wrote.
Wood also found the expert testimony of the plaintiffs’ witnesses—Harvard Law professor Einer Elhauge and NYU economics professor Dr. Nicholas Economides—“reliable,” and rejected NAR’s motion to dismiss their testimony, saying most specific disputes about the underlying economic and antitrust issues were better explored in front of a jury.
Economides compared commission paid on the named MLSs to foreign markets, while Elhauge claimed that current policies “incentivize sellers to offer supracompetitive commission rates to buyer-brokers, lest they risk buyer-brokers steering potential buyers away from the seller’s home,” according to Wood.
NAR has consistently argued that the current system governing real estate in the United States is consumer-friendly and transparent, saying that making buyers pay commission could put homeownership out of reach for many.
“The U.S. model of independent, local broker marketplaces is widely considered the best value and most efficient model in the world, with no hidden or extra costs and with more complete, verified information compared to other countries,” Williams said.
This case, and another similar class action suit are only the most recent moves in a long history of both regulators and private citizens questioning the structure by which real estate agents and brokers charge commission. A 1950 Supreme Court ruling found a “fee-fixing conspiracy” by a local real estate board, but absolved the national association (then known as the National Association of Real Estate Boards) of responsibility.
A class action suit in 1980, offering similar arguments to the Moehrl case, also made it to the Supreme Court, which only ruled that antitrust laws could be applied to real estate brokers without examining the merits of the plaintiffs’ claims.
