A class-action lawsuit has been filed against major U.S. real estate firms, accused of violating antitrust laws.
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According to the suit (Moerhl v National Association Realtors (NAR)) – filed in federal district court in Chicago – the defendants worked together to require home sellers to pay the broker representing the buyer of their homes at “inflated” amounts.
The lawsuit centers on a rule allegedly imposed by the National Association of Realtors (NAR), which pertains to multiple listing services (MLS) – or a database of properties listed for sale in a particular area. The plaintiff argues this is how most homes in the U.S. are sold, and most MLSs are controlled by local NAR associations.
When a property is listed on the MLS, the guideline in question requires a seller not only to pay the agent listing his property, but also a “non-negotiable” offer of compensation to the buyer’s representative, which “saddle(s) home sellers with a cost that would be borne by the buyer in a competitive market.”
The plaintiff argues without this rule, buyer brokers’ commissions would be negotiated by the buyers, and would be less.
“In a competitive market, the seller would pay nothing to the buyer broker, who would be paid instead by the buyer, and the commission paid by the seller would be set at a level to compensate the seller broker only,” according to the suit.
The resulting effect of the rule is that agents want clients to buy higher-priced listings that are subject by the requirement, the suit alleges.
Typically, total broker compensation in the U.S. is about 6 percent, with half being awarded to the buyer broker. The suit argues that in international markets, home buyers pay their own brokers less than half of the rates paid in the U.S.
The plaintiff, Christopher Moehrl, sold a home in Minnesota where, as part of the transaction, he paid a total broker commission of 6 percent – and 2.7 percent was paid to the buyer broker.
According to Benjamin D. Brown, an attorney for the plaintiff and a partner at Cohen Milstein – where he is co-chair of the firm's antitrust practice group – the lawsuit could really help Americans save money in the home selling process.
"This lawsuit could have profound effects on the real estate industry going forward, introducing true competition and ultimately saving people thousands of dollars when they sell their homes in the future,” Brown said in a statement to FOX Business.
The class-action suit covers people who used one of 20 of the largest listing services over the course of five years across a number of major cities, including Dallas, Washington, D.C., Cleveland and Denver.
In response to the motion, Mantill Williams, the National Association of Realtors vice president of communications, said the complaint “is baseless and contains an abundance of false claims.”
“The U.S. Courts have routinely found that Multiple Listing Services are pro-competitive and benefit consumers by creating great efficiencies in the home-buying and selling process. NAR looks forward to obtaining a similar precedent regarding this filing,” Williams said.