The Real Truth Behind The NAR Buyer Commission Lawsuit

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