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In the suit – known as Moerhl v National Association Realtors (NAR) – the defendants are accused of “conspiring” in a scheme to require sellers to pay the brokers representing the buyers of their homes “inflated” commissions.
In an interview with CNBC on Thursday, Buffett said the real estate industry is “not a cartel.”
“If you’re looking for demons in the American capitalist system, I don’t think you’ll find them with your local real estate broker,” he said.
HomeServices of America was recently named the largest residential brokerage in the country by Real Trends. It is owned by Buffett's Berkshire Hathaway.
The lawsuit in question centers on a rule imposed by the 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 that without this rule, buyer brokers’ commissions would be negotiated by the buyers, and would be lower.
The resulting effect of the rule is that agents want clients to buy higher-priced listings that are subject to 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 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 NAR's 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.