Another homebuyer is alleging he and other buyers are the ones getting screwed because of commission sharing between listing and buyer brokers. And he’s targeting more than the usual suspects.
On March 19, Alfio Conti, a California resident who bought a home in San Diego with a buyer agent in September 2020, filed an antitrust lawsuit in U.S. District Court for the Northern District of California against not only the National Association of Realtors and Realogy, Keller Williams, RE/MAX and HomeServices of America as other commission suits have, but also Compass, Sotheby’s International Realty, Beverly Hills-based Rodeo Realty, the San Francisco Association of Realtors and the Greater San Diego Association of Realtors. The latter two defendants own and operate their own multiple listing services.
The suit, like its predecessors — dubbed Moehrl, Sitzer and Bauman after their lead plaintiffs — alleges that the sharing of real estate commissions between listing and buyer brokers is a conspiracy in restraint of trade in violation of the Sherman Antitrust Act — but for inflating buyer costs, not seller costs, in the form of higher home prices. The suit is similar to one filed in January by New Jersey homebuyer Judah Leeder.
The plaintiffs in all five suits want to have homebuyers pay their broker directly, rather than have listing brokers pay buyer brokers from what the seller pays the listing broker — a move that could upend the U.S. real estate industry by effectively forcing changes in how buyer’s agents are traditionally compensated.
Like the Leeder suit, the Conti suit seeks class-action status for this very broad class: everyone who has purchased residential real estate that was listed on a NAR-affiliated MLS from Dec. 1, 1996 to the present.
The suit alleges that the class members, which likely add up to “at least thousands of individuals,” were overcharged by “at least thousands of dollars” in an amount exceeding $5 million “as a result of Defendants’ conspiracy.” In addition to the Sherman Act, the suit alleges unjust enrichment and violations of California’s antitrust law, the Cartwright Act, and California’s Unfair Competition Law.
At issue in the suit are some of NAR’s rules, primarily the “Buyer Agent Commission Rule,” which requires listing brokers to make a blanket, unilateral offer of compensation to buyer brokers that is either a percentage of the gross sale price of the home or a definite dollar figure when entering a home in a Realtor-affiliated MLS. Other commission suits call it the “Buyer Broker Commission Rule.”
“By encouraging and facilitating steering, and adhering to the ‘standard real estate commission,’ the Buyer Agent Commission Rule deters downward departures from the standard commission and enables brokers to avoid doing business with, or otherwise retaliate against, buyer agents who try to compete by offering significant discounts,” the complaint said.
“The reason for the Buyer Agent Commission Rule is clear: to maintain high broker commissions for NAR members at the expense of home buyers. In the absence of the Rule, buyers rather than sellers would negotiate buyer agent commissions, and brokers would compete with each other by offering lower commission rates and/or higher quality services.”
The suit also objects to rules that NAR is changing as a result of an antitrust lawsuit filed against the 1.4 million-member trade group in November by the U.S. Department of Justice (DOJ).
A proposed settlement between NAR and the DOJ requires NAR to repeal or change several rules the Conti suit alleges violate antitrust laws:
- prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn if a buyer purchases a home listed on a multiple listing service;
- allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
- enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential homebuyers; and
- limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS.
These rules allow NAR and the other defendants to maintain buyer agent commissions at inflated levels unrelated to the services buyer agents provide and thereby also artificially raise home prices; steer buyers away from listings offering lower buyer agent commissions; and drive out brokerages that offer discounted commissions, according to the complaint.
“Defendants’ unlawful, anticompetitive conduct causes home buyers to pay inflated commissions for broker services that are misrepresented to be free, to pay inflated prices for the homes they purchase, and to receive reduced quality broker services,” attorneys for the plaintiff wrote.
In an emailed statement, NAR spokesperson Mantill Williams told Inman,”This baseless complaint is merely a copycat lawsuit, and NAR firmly disagrees with the intentional distortion of our rules and misleading claims about the MLS. We will vigorously contest this lawsuit, and we expect to prevail.
“The consumer’s MLS system experience is efficient and transparent because brokers are incentivized to work together to buy and sell homes on behalf of their clients in highly competitive markets,” Williams added. “Because of MLSs, we’re at a point in the market where we’re seeing unprecedented competition among brokers, especially when it comes to service and commission options. From leveling the playing field for first-time and low-income homebuyers to providing the maximum number of options for consumers, this is a pro-consumer, pro-competition system.”
In regards to the broker defendants, the complaint maintains their participation in the alleged scheme is essential to its success.
“The Broker Defendants have agreed to participate in, facilitate, and implement the conspiracy,” the complaint says. “Each of the Broker Defendants play an active role in the NAR and has required franchisees, brokerages, and individual realtors to join in and implement the NAR’s anticompetitive agreements as a condition to receiving the benefits of each Broker Defendant’s brand, brokerage infrastructure, and other support.
“The Broker Defendants use their control of the MLSs and their own governing policies to ensure adherence to NAR rules.”
The complaint alleges that the franchisees and brokers of the defendants are co-conspirators in the alleged violations and that the defendants are liable for their conduct.
The suit seeks a jury trial, trebled damages and/or restitution, the costs of the suit and permanent injunction preventing NAR from establishing the same or similar rules as challenged in the lawsuit.
HomeServices of America and Compass declined to comment for this story. Realogy, Keller Williams, RE/MAX, Rodeo Realty, the San Francisco Association of Realtors and the Greater San Diego Association of Realtors did not respond to emailed requests for comment. Inman will update this story if and when we hear back.
Email Andrea V. Brambila.