The National Association of Realtors can't dodge a suit accusing it of breaking antitrust laws by imposing sales commission rules that can result in unfair charges to home sellers, an Illinois federal court declared Friday.
The NAR had been trying to sway U.S. District Judge Andrea R. Wood to its position that the proposed class — composed of former homeowners who say they were duped into paying too high of a commission when they sold their houses — couldn't prove it had been injured.
But the judge wasn't convinced, saying that the injury laid out by the home sellers was "assuredly of a type that the Sherman Act was designed to prevent."
"Each plaintiff was a home seller required to pay a commission to the buyer-broker for the person who purchased their home. But-for Defendants' conspiracy, each plaintiff would have paid 'substantially lower commissions,'" the court said.
That was enough to plead an antitrust injury, she said.
Judge Wood also wasn't a fan of the association's "perfunctory argument" that the home sellers couldn't claim that NAR rules caused their injury because they never tried to negotiate a lower commission, since "that argument ignores plaintiffs' allegations that the buyer-broker commission rules preclude any opportunity for effective negotiation."
When homeowners want to sell their house, they contact a seller's broker and list their home on what is known as a multiple listing service, or MLS. To list their home on the MLS, which makes the listing available to other agents but not home buyers, sellers are required to "make a blanket unilateral offer of compensation to any broker who finds a buyer for the home," including brokers who represent the buyer.
The seller is the one who pays both sets of brokers, not the home buyer, and NAR rules prohibit sellers from negotiating the buyer-broker commission rate once that buyer-broker's client has seen the home.
This makes negotiating the commission that a buyer's broker gets "a practical impossibility," according to Judge Wood.
The proposed class members claim that the NAR rules keep them locked into a single rate no matter what quality of service they receive and illegally inhibit competition. According to the plaintiffs, total commissions for U.S. residential real estate sales have remained between 5% and 5.4%, with 2.5% to 3% commissions going to buyer-brokers. Those rates are sufficiently higher than in comparable international markets to warrant the antitrust claims, the plaintiffs said.
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The proposed class is represented by Cohen Milstein Sellers & Toll PLLC, Susman Godfrey LLP and Hagens Berman Sobol Shapiro LLP
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