Real Estate Broker Commissions Face Yet Another Class-Action Lawsuit
Real estate broker commissions are facing heightened scrutiny with the emergence of a new federal class-action lawsuit in South Carolina. Filed against the National Association of Realtors (NAR) and Keller Williams Realty, the lawsuit alleges violations of federal antitrust laws, accusing the entities of artificially inflating home prices within the state. This legal action follows a recent class-action case in Missouri, where a jury verdict found the NAR and major real estate brokerage firms culpable for illegal agreements that led to $1.79 billion in losses for home sellers.
The damages in the Missouri case, which could amount to “treble” or triple damages, might compel defendants, including Keller Williams, Berkshire Hathaway’s HomeServices of America, RE/MAX, and Anywhere, to pay up to $5.3 billion. Notably, Anywhere Real Estate and RE/MAX reached a $138 million settlement before the verdict was rendered. In South Carolina, plaintiffs are seeking class-action status on behalf of home sellers who, since November 2019, utilized a Keller Williams-affiliated listing broker on the NAR’s Multiple Listing Services (MLS).
The lawsuit contends that the NAR’s regulations imposed on Keller Williams create anti-competitive restraints within the housing market by enforcing non-negotiable commission structures. This enforcement, coupled with the requirement for home sellers to pay commissions to buyers’ brokers, is argued to mask the compensation structure from the buyers and sellers, potentially disadvantaging them. The legal action raises concerns that such cases could undermine the NAR’s long-standing influence, criticized for setting and maintaining broker commission rates between 5% and 6% of a home’s sales price.
The NAR’s MLS databases, which played a significant role in 2020 by holding listings for 91% of homes sold in the county, are highlighted as a primary tool for matching home buyers and sellers. Brokers, as members of the NAR, listing their clients’ properties in these databases, must agree to share their commissions with other MLS participants. Plaintiffs argue that this practice artificially inflates home prices and hampers seller profits.
While the NAR asserts that its commission structure, established for over a century, benefits consumers, the South Carolina plaintiffs are pursuing a jury trial and unspecified damages. Additionally, they seek an order to prevent the NAR from continuing alleged anti-competitive agreements. Notably, the Justice Department has reportedly considered legal intervention, withholding a settlement with the NAR in July 2021 due to concerns about protecting competition in a market that profoundly affects Americans’ financial well-being. The NAR plans to appeal the Missouri verdict, as further legal developments unfold in these impactful cases.