Why was the National Association of Realtors Sued?

The lawsuit against the National Association of Realtors was originally filed on March 6, 2019. The basis of the lawsuit was that sellers who listed their homes on one of the twenty MLSs brought the Moehrl suit against NAR and the four largest national real estate broker franchisors, Reology Holding Corp, Home Services of America INC, Re/Max Holdings INC and Keller Williams Realty INC, for conspiring to have a mandatory Buyer Broker Commission Rule that required sellers to pay the fees of the broker representing the buyer, and to pay these fees at an inflated amount, in violation of federal antitrust law. (Antitrust law is a collection of laws that regulate businesses from getting one another and creating a monopoly.) Due to the commission being set by the listing broker the buyer brokers have incentives to steer clients away from listings offering commissions that are below a certain rate. The commission offered to the buyers agent was set by the seller and listing agent therefor not negotiable to the buyer. The plaintiffs claimed that if the commission was not set by the seller or broker, buyers would be able to negotiate their own brokers commissions to save money or be able not to pay an agent all together. From there the conspiracy plaintiffs alleged that sellers were paying a fee that should be paid for by the buyer. Because the fee was not negotiable the commissions sellers paid to buyer brokers were inflated which in turn inflated the total commissions paid by the home sellers.

Many people are under the assumption that this lawsuit was over real estate commissions and that they were not negotiable and now are. Real estate commissions have always been negotiable.  The Sherman Antitrust Act of 1890 is a federal statute which prohibits businesses from conspiring, or combining to form a monopoly. Which means brokerages cannot get with one another to set a certain commission amount. But, an individual brokerage can set their commission rates. Antitrust just prevents brokerages getting together to set a certain rate. So if you are interviewing different brokerages and someone tells you that is a “standard” commission they are in violation of the Sherman Antitrust.

NAR ended up settling the lawsuit for $418 million, admitting to no wrong doing. The lawsuit could have been won in appeals, according to NAR but would have gone bankrupt with all of the legal fees. Even though NAR admitted no wrong doing, the settlement has caused a lot of distrust in the real estate industry. Like any industry there are good and bad apples. Do your research and find an agent that is competent and knowledgable in the are in which you are looking. An agent can save or cost you thousands. Many people will never know how much money was left on the table, but will always know how much commission was paid.