What the NAR Lawsuit Means for Real Estate Agents

The National Association of Realtors (NAR) is accused of violating the Sherman Antitrust Act. This is because NAR’s rules restrict competition and artificially inflate costs for sellers. The lawsuit focuses on four commission-sharing rules within the NAR Handbook and Code of Ethics that all REALTORS(r) subscribe to.

It’s a Class Action Lawsuit

If this suit succeeds, it will remove buyer agents from the equation. This could be a game changer for the real estate industry and could radically change how home buyers and sellers buy and sell properties. The NAR Lawsuit claims that NAR’s rules, which require listing brokers to offer buyer brokers a commission for listing a property, violate the Sherman Antitrust Act. That’s because it inflates the costs of home buying and selling. The case is currently in discovery, meaning that both sides are gathering testimony and evidence to support their respective claims.

It’s Anti-Competitive

The NAR Lawsuit has a severe antitrust issue that could affect the entire real estate industry. In this regard, will realtors become extinct? The answer is no because, despite the lawsuit, Realtors still run the homebuyer and seller kingdom. However, the lawsuit explains that the National Association of Realtors has conspired with four major broker franchisors to inflate home seller commission rates through their multiple listing service (MLS) policies. According to the lawsuit, sellers must offer buyers a higher buyer broker commission rate before their property is listed on an MLS for prospective buyers to view. This results in inflated buyer costs that drive up the price of homes, which damages both sellers and homebuyers. NAR argues that the plaintiffs cannot prove an impact on the competition with common evidence, but that isn’t true. Instead, the plaintiffs say that their individualized inquiries about how the real estate market would work without the Challenged Rules demonstrate that common evidence can prove their impact.

It’s Legal

The National Association of Realtors (NAR) is a leading trade association of residential real estate brokers and agents. NAR and its affiliated real estate broker associations and multiple listing services enforce several rules, policies, and practices to protect members’ rights and promote fair competition in the industry. NAR and its affiliates have been sued numerous times for alleged anti-competitive and unconscionable practices. These cases are generally based on the Sherman Antitrust Act. A recent lawsuit filed by home sellers in four MLS markets claims that NAR and four national real estate brokers conspire to violate the Sherman Act by forcing home sellers to pay their buyer-broker commissions at an inflated rate. The suit is pending in federal court in Missouri. If successful, it could lead to hundreds of thousands of home sellers being able to seek reimbursement on their commissions from NAR and the four national real estate brokerage franchisors.

It’s Important

The National Association of Realtors (NAR) and several major real estate franchisors face many lawsuits that threaten to change commission structure policies. These lawsuits are aimed at various approaches, including NAR’s Commission-Filter Rules and Practices and Buyer Broker Commission Rule. NAR believes that these pro-competitive, pro-consumer local broker marketplaces are in the best interests of buyers and sellers. They help first-time, low/middle income, and all homebuyers achieve their housing goals, according to NAR President Leslie Rouda Smith. However, the lawsuit argues that NAR’s rules and policies violate the Sherman Antitrust Act by requiring home sellers to pay commissions directly to the buyer broker. Home sellers can offer first-time, low/middle-income, and all homebuyers a better chance at affording a home and professional representation.