A new class-action lawsuit takes aim at real estate agents and the tools they use to do business, and housing industry watchers say it could revolutionize the way Americans buy and sell the biggest asset they’ll ever own.
The suit was filed in Chicago on behalf of anyone who sold a home through one of 20 of the largest listing services in the country over the past five years. It charges that the mighty Washington-based lobby National Association of Realtors, as well as the four largest national real estate brokerages, and the Multiple Listing Services they use, have conspired to require anyone selling a home to pay the commission of the broker representing their buyer “at an inflated amount,” in violation of federal antitrust law.
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Rob Hahn is founder and managing partner of 7DS Associates, a real estate consultancy. In a blog posted shortly after the lawsuit was filed, Hahn called it a potential “nuclear bomb on the industry.” And in an interview with MarketWatch, he said that he’s taking it “very seriously.”
In large part, that’s because of the heft of the law firms behind the suit. Both Cohen Milstein Sellers & Toll, and Hagens Berman Sobol Shapiro have a long history of prevailing over weighty entities like Volkswagen, for its emissions scandal, Apple, for its e-book collusion, and Exxon, after the Valdez spill.
In response to a request for comment, NAR 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.”
Still, as Hahn put it, past lawsuits have mostly been filed by what he calls “ambulance-chasers,” not the firms behind some of the biggest civil settlements in American history.
That view is shared by Cohen Milstein partner Daniel Small, who called the way Realtors do business “a longstanding problem.” What’s different now, Small told MarketWatch, is that deep-pocketed law firms had done a “substantial investigation” that convinced them that there was merit to the case.
Small declined to elaborate on what had prompted the investigation in the first place. It’s worth noting, however, that the suit was filed roughly four months after the expiration of a Department of Justice consent decree against the National Association of Realtors. That settlement was struck in 2008 after the federal government spent several years unsuccessfully trying to rein in what it called anti-competitive behavior from NAR, which felt under attack from internet upstarts.
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“This is an important case for many reasons,” Daniel Small said. “Among them is that this is the biggest transactions of most peoples’ lives. There is a lot at stake.”
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