The Real Truth Behind The NAR Buyer Commission Lawsuit

What is the Class Action Lawsuit for NAR About?

There’s been a lot of buzz lately about the Class Action Lawsuit for the NAR (National Association of Realtors). If you’re unfamiliar with it, here are the basics: a group of realtors has filed a lawsuit against NAR and other prominent real estate conglomerates, claiming that they were misled about the commission structure for real estate agents. Some fear this lawsuit could have significant implications for the real estate industry, and we wanted to give our readers an update on what’s going on.

What’s at Stake?

There is a great division of opinions about the ramifications of Moehrl v. National Association of Realtors, et al. While the Class Action Lawsuit was filed in 2019 and is currently ongoing, most realtors and professionals don’t know the details of the case and are being swayed by the fear and rumors of prominent headliners. Class action lawsuits are serious and can potentially change how we do business, but let’s take a step back and look at what’s happening.

The crux of the lawsuit is that NAR worked with four major franchisors to overcharge commissions through its MLS policy. If valid, this could have devastating consequences for the real estate commission structure. The plaintiffs allege that they were promised a 50/50 split of the buyer’s commission, but when they went to collect their commissions, they only received a fraction of what they were expecting. They also claim that NAR failed to disclose important information about how commissions are calculated, which led them to believe they would receive more money than they actually did.

What Does This Mean for Realtors?

Some believe this could have enormous implications for the real estate industry:

  • First and foremost, it could upend the commission structure that has been in place for decades.
  • Additionally, we could see a shift to a flat fee model, where agents are paid a set amount regardless of the sale price. This would significantly change the real estate industry and have far-reaching implications.
  • It’s also possible that this lawsuit could lead to more transparency around commissions. At the moment, there is a lot of confusion about how commissions are calculated. This lawsuit could force NAR and other real estate organizations to be more explicit about their policies.

However, many believe this case is much to do about nothing, most likely resulting in lawyers getting rich and a set of negotiations within the real estate purchase where the seller still agrees to pay the buyer commission.

The Trivial Nature of the NAR Lawsuit

This lawsuit against NAR and other prominent real estate entities claims home sellers have been duped into paying the buyer’s agent commission. The reality of the situation is a classic example of a problem in search of a solution, as class action lawyers make a lot of money while solving nothing.

Under the current structure, an average home sale involves a 6% seller’s agent commission, where 3% is paid to the buyer’s agent. The lawsuit stipulates this shouldn’t happen because it is unfair to the seller and seller’s agent.

Many believe this argument is nonsense because 9 out of 10 home buyers don’t have the $10,000-$20,000 of up-front cash to pay the buyer’s commission. Most home buyers barely have enough for their downpayment, and the ability to find other ways to pay these agent commissions opens up the dream of home ownership to more people.

Since most home buyers don’t have this extra cash on hand, the market will be forced to shift details to the same result if this lawsuit succeeds. For example, a home buyer finds an agent to buy a house and is given their commission for their services. The buyer responds they don’t have the commission money and barely enough for the downpayment. The buyer agent suggests they offer a little more for the house and ask the seller to pay the commission. Instead of $400k, they offer $415k, and the seller pays the buyer agent. The result is that 90% of the time, the seller will still pay the buyer side commission.

Bottom line: If the lawsuit is successful, the lawyers get rich, and nothing changes except for procedural differences and negotiations.

What Happens Next?

The Class Action Lawsuit for the NAR is still in its early stages, and it will likely be several months before we know any results. In the meantime, staying up-to-date on the latest developments is crucial to being prepared for changes in the real estate industry due to this case.

You can stay updated on the Class Action Lawsuit against NAR by following our blog, where we will post updates as they become available. We will also continue to provide expert analysis of what this lawsuit means for realtors and the real estate industry as a whole. Thanks for reading!

Frequently Asked Questions About the Realtors & the Real Estate Industry

The Class Action Lawsuit against NAR is led by a group of lawyers who claim that home sellers are being taken advantage of by paying the buyer’s agent commission. The defendants in the case are named the National Association of Realtors (NAR) and the four largest national real estate broker franchisors:

  • Realogy Holdings Corp.

  • HomeServices of America, Inc.

  • RE/MAX Holdings, Inc.

  • Keller Williams Realty, Inc.

The case, which was first filed in 2019 and is now moving forward as a class action lawsuit, will allow home sellers across multiple states to join as plaintiffs. This lawsuit alleges that NAR “created and implemented anticompetitive rules which require home sellers to pay commission to the broker representing the home buyer,” effectively driving up consumer costs.

The NAR is adamant that the pro-competitive, pro-consumer local broker marketplaces are in the best interests of buyers and sellers. Sellers offering compensation to buyer brokers gives first-time, low/middle-income, and all homebuyers a better chance at affording a house and professional assistance when purchasing their first home.

If the Class Action Lawsuit against NAR is successful, it could mean significant, while unneeded, changes for the real estate industry. The lawsuit is based on the argument that home sellers are being taken advantage of by paying the buyer’s agent commission. This, the lawyers behind the case claim is unfair to sellers and drives up consumer costs.

The NAR states that local broker marketplaces, which are pro-competitive and pro-consumer, are in the best interests of buyers and sellers. Sellers providing commission to buyer brokers give first-time, low/middle-income, and all homebuyers a better chance at affording a house by assisting them with their purchase.

A successful Class Action Lawsuit against NAR would likely result in changes to how real estate commissions are structured and paid out. These changes could have unintended consequences for realtors, buyers, and sellers alike. For example, suppose home sellers are no longer required to pay the buyer’s agent commission. In that case, they may be less likely to offer any compensation, leading to buyer’s agents becoming less available or working only with buyers who can afford to pay them directly.

The most immediate change would be the elimination of buyer’s agent commissions, which could ripple effect on how real estate agents are compensated.

This lawsuit can upend the entire real estate commission structure and disrupt how agents are paid. It’s still early in the process, so it’s hard to say precisely what will happen if the Class Action Lawsuit is successful. However, we will be closely monitoring the situation and will provide updates on our blog as more information becomes available.

The complaint against NAR and other prominent real estate firms claims that home sellers have been misled into paying the buyer’s agent fee. The truth is that a typical example of a problem looking for a solution, as class action lawyers make money while changing nothing. While litigating can have unintended, wide-sweeping consequences, the actual resulting implications of the NAR lawsuit may only be procedural due to market forces.

Under the present system, a typical home sale necessitates a 6% seller’s agent fee, with 3% paid to the buyer’s agent. According to the lawsuit, this should not happen because it is unjust to the seller and seller’s agent.

Although some believe this argument invalid, 9 out of 10 home buyers don’t have the substantial cash needed for a buyer’s commission. Most individuals barely have enough saved for their downpayment, and finding other ways to pay these agent commissions would allow more people access to homeownership.

Since most homebuyers do not have this additional money on hand, the market will be compelled to rearrange details to achieve the same result if this lawsuit is successful. For example, a buyer hires an agent to purchase a property and receives their commission requirements. The buyer explains that they do not have enough money for the commission and just enough for the downpayment. The buyer’s agent tells the seller to offer a little more for the home and requests that they pay the fee. Instead of $400k, they propose $415k, and the seller pays their buyer agent. As a result, 90% of the time, the seller will still produce a buyer-side commission. The lawyers make money if the case is successful, and nothing changes except for some agency procedures and negotiations.

The case, Moehrl v. National Association of Realtors, et al., which was first filed in 2019 and is now moving forward as a class action lawsuit, will allow home sellers across multiple states to join as plaintiffs. This lawsuit alleges that NAR “created and implemented anticompetitive rules which require home sellers to pay commission to the broker representing the home buyer,” effectively driving up consumer costs.

The NAR is adamant that the pro-competitive, pro-consumer local broker marketplaces are in the best interests of buyers and sellers. Sellers offering compensation to buyer brokers gives first-time, low/middle-income, and all homebuyers a better chance at affording a house and professional assistance when purchasing their first home.

Home sellers who advertised their properties on one of twenty MLSs filed this lawsuit against the National Association of Realtors (NAR) and four major national real estate broker franchisors (Realogy Holdings Corp., HomeServices of America, Inc., RE/MAX Holdings, Inc., and Keller Williams Realty, Inc.) for conspiring to impose home sellers with the obligation to pay the buyer’s broker at an inflated price, in violation of federal antitrust law.

The plaintiffs allege that the defendants have been conspiring, centering around the adoption and implementation of a rule by NAR (the “Buyer Broker Commission Rule”). This mandatory rule requires all brokers to offer buyer broker compensation that is non-negotiable and blanket when listing any property MLS.

NAR’s Handbook on Multiple Listing Policy requires all brokers to follow specific rules to access various MLSs. The Buyer Broker Commission Rule is just one of these many rules.

The arrangement, according to plaintiffs, has placed home sellers with an added cost that would be reimbursed by the buyer in a competitive market. Furthermore, because most buyer brokers will not show properties to their clients where the seller is willing to pay a lower buyer broker commission or will show properties with higher commission bids first, sellers are incentivized when making the required blanket, non-negotiable offer to obtain the buyer brokers’ cooperation by offering a high commission.

The Buyer Broker Commission Rule restrains price competition among buyer brokers. This is because the person who employs the broker, aka the buyer, doesn’t pay their commission. Additionally, the seller’s inflated commission offer can’t be lessened by buyers or their respective brokers. Without this rule, buyer brokers would get paid by other means and compete to be employed by offering a smaller commission percentage-wise.

For many years, defendants have conspired to keep buyer broker commissions at a 2.5 to 3.0 percent range instead of adapting with the times. In the United States, it is typical for brokers to receive five to six percent of the home sales price. However, half of that amount has been increasingly paid to the buyer broker despite their diminishing role in finding homes independently through online services.

In response to the class action certification, NAR made a statement to HousingWire, stating its disappointment in the decision and its plan to appeal. 

“The pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers,” NAR said in the statement. “Local broker marketplaces ensure equity, transparency, and market-driven pricing options for the benefit of home buyers and sellers. These marketplaces reduce transaction costs by ensuring, among other things, that a buyer broker and their client understand how much the listing broker will pay the buyer broker for procuring a buyer for the listed property. Local broker marketplaces also level the playing field among brokerages, allowing small brokerages to compete with large ones, and provide for unprecedented competition among brokers, including different service and pricing models.” 

The case, which was first filed in 2019 and is now moving forward as a class action lawsuit, will allow home sellers across multiple states to join as plaintiffs. This lawsuit alleges that NAR “created and implemented anticompetitive rules which require home sellers to pay commission to the broker representing the home buyer,” effectively driving up consumer costs.

“The complaint centers around an allegation that just isn’t true,” Katie Johnson, NAR General Counsel & Chief Member Experience Officer, said after the suit was initially filed. “NAR’s policies do not require sellers to pay buyer agent commissions.”

The Class Action Lawsuit against NAR could have significant implications for the real estate industry if successful, or the verdict may have limited impact. This case can potentially change how realtors are paid and could lead to a decrease in home prices. Only time will tell how this lawsuit will play out, but it will surely be a major topic of conversation in the coming months. Stay tuned for more updates on this developing story.

 

In the current real estate market, it is typical for commission fees to range from 5-6% of the selling price, with the buyers’ agents receiving at least two percent of the home’s sale price from the seller as commission. For example, if a home sells for $200,000, the buyer’s agent typically receives $4,000 in commission. The seller’s agent usually splits their commission with the buyer’s agent, so in this case, they would keep $8,000 and give $4,000 to the buyer’s agent.

This process of dividing the commissions is typically outlined in what is known as the Co-Broke Agreement. The Co-Broke Agreement is the contract between the listing and selling broker that sets forth how commissions will be paid. In most cases, this agreement provides that the listing broker will pay a certain percentage of the commission to the selling broker, who then pays their agents accordingly.

In some instances, buyers or their agents may try to negotiate a lower commission with the sellers or their agents. However, under NAR’s rules, any offer on commission fees must be presented in writing before it can be accepted or rejected. This rule is designed to level the playing field among brokers and ensure that all offers are transparent.

Some tips for selling a home include:

  • Pricing: It’s essential to price your home correctly from the start. If you underprice your home, you’ll sell it quickly but for less than it’s worth. If you overprice your home, it will sit on the market, and eventually, buyers will wonder what is wrong with it.

  • Marketing: To attract buyers to your home, you must market it well. This includes taking good photos, writing a great listing description, and using the right keywords.

  • Staging: Staging your home can significantly affect how quickly it sells. Buyers are more likely to be interested in a home that is staged well.

  • Showings: Once your home is on the market, you’ll need to be prepared for showings. This means keeping your home clean and tidy at all times.

  • Open Houses: Open houses are a great way to get potential buyers interested in your home.

Selling a home without the help of a realtor can be difficult. Some common mistakes include:

  • Not pricing the home correctly

  • Failing to stage the home

  • Not marketing the home well

  • Not being prepared for showings

  • Missing out on open houses