The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.

A California homeseller who paid more than $50,000 in commissions in the sale of her home is the latest to file a lawsuit alleging real estate companies and trade groups violated antitrust laws by conspiring to inflate broker commissions.

The complaint was filed Friday, Dec. 8 and seeks class action status on behalf of anyone who, from December 8, 2019 to the present, paid a buyer broker commission in connection with the sale of residential real estate listed on the Bay Area Real Estate Information Services, Inc. multiple listing service.

Bay Area Real Estate Information Services, or BAREIS, is a broker- and Realtor-association owned MLS that covers Marin, Mendocino, Napa, Solano, and Sonoma counties.  The suit was filed in the U.S. District Court for the Northern District of California San Francisco Division.

This is the latest suit to generally attack the practice of requiring listing brokers to share commissions with buyer brokers in the wake of an Oct. 31 verdict in a case known as Sitzer | Burnett in which a Kansas City jury found the National Association of Realtors and major real estate franchisors conspired to inflate commissions and awarded damages that may end up costing the defendants nearly $5.4 billion.

According to the complaint, the plaintiff in this case is Christina Grace, a California resident, who sold her home located in Marin County in April 2020 and paid a total of $50,328 in commissions: $29,358 to the listing agent (3.5 percent of the sale price) and $20,970 to the buyer agent (2.5 percent of the sale price).

The defendants in the case are:

  • NAR
  • the Marin Association of Realtors
  • the North Bay Association of Realtors
  • the Northern Solano County Association of Realtors
  • the Solano Association of Realtors
  • Compass
  • eXp World Holdings
  • Keller Williams Realty
  • Anywhere Real Estate
  • RE/MAX Holdings, Inc.

“The gravamen of Plaintiff’s claim is that the anti-competitive BAREIS MLS rules require all homesellers to agree to make a blanket, unilateral and effectively non-negotiable offer of buyer broker compensation when listing a property on the BAREIS MLS,” the complaint says.

The rules, which are similar to NAR rules challenged in Sitzer/Burnett and other commission cases, allegedly violate the federal Sherman Antitrust Act as well as state antitrust laws.

“Throughout the Class Period, the BAREIS MLS board, and virtually all committee members and broker owners were all NAR members, and members of at least one of the Realtor Association Defendants,” the complaint says.

“NAR members are required to comply with rules set out in the NAR Handbook and NAR’s Code of Ethics. Access to BAREIS MLS is conditioned on members’ agreement to adopt and follow the BAREIS MLS rules.

“As such, the BAREIS MLS members who were franchisees and agents of the Brokerage Defendants were obligated to and did adopt, implement, and enforce anticompetitive restraints, including the Anticompetitive Broker Rules, through their control of the BAREIS MLS board and its committees. Specifically, the BAREIS MLS adopted, implemented, and enforced BAREIS MLS Rule 11.25 (‘Rule 11.2′), which requires all home sellers to make a blanket, unilateral and non-negotiable offer of buyer broker compensation.”

According to the complaint, “Rule 11.2 is the functional equivalent” of a NAR rule known as the Cooperative Compensation Rule or the Participation Rule, which requires listing brokers to offer buyer brokers compensation in order to submit a listing in a Realtor-affiliated MLS.

“Given the requirement that seller brokers make a blanket and unilateral offer of commission to buyer brokers, buyer brokers face strong incentives to steer their buyer clients toward homes where the buyer broker would receive a higher commission,” the complaint says.

“Steering is a key reason why agent commissions have remained high in the United States during the internet era, even as commissions in other countries have plummeted. Economic studies and literature have documented and confirmed the prevalence and significance of steering.”

The complaint alleges the defendants’ conspiracy cost homesellers thousands of dollars in overcharges and damages each.

“In a competitive market, the seller would pay nothing to the buyer broker, who would instead be paid by the buyer (their client), and the total commission paid by the seller would be set at a level to compensate only the seller’s broker,” the complaint says.

“In a competitive market, the cost of buyer broker commissions would be paid by home buyers, and buyer brokers would compete with one another, including by potentially offering a lower commission rate. The anticompetitive rules adopted by BAREIS restrain price competition among buyer brokers because the home buyer that retains the buyer broker does not negotiate or pay any commission to his or her broker.”

In an emailed statement, NAR spokesperson Mantill Williams told Inman the 1.5 million-member trade group would respond to the complaint in court.

“The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible,” Williams said.

“Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation.”

The Marin AOR and North Bay AOR also told Inman the trade groups are reviewing the filing and will respond in court. In emailed statements, Marin AOR CEO Romeo Arrieta and North Bay AOR CEO Lisa Badenfort both said their association “stands by the value of the professional expertise that its members provide to their clients.” In addition, Arrieta said, “[W]e strongly disagree with the allegations made in the complaint.”

Also in an emailed statement, Keller Williams spokesperson Darryl Frost told Inman the franchisor would “vigorously defend” itself against the suit.

“We have followed the law regarding cooperative compensation,” Frost said. “Offers of cooperative compensation remain negotiable and at the discretion of the seller.”

Regarding the Sitzer/Burnett verdict, Frost added, “We have strong grounds for appeal and are focused on next steps.”

EXp spokesperson Lisa Patrick told Inman the company had not yet received the formal complaint but had been “closely observing” the recent, ongoing antitrust litigation against its competitors.

“We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions,” Patrick said in an emailed statement. “Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”

RE/MAX and Compass declined to comment for this story. Inman has reached out to the remaining defendants for comment and will update this story if and when they provide responses.

The complaint demands a jury trial and asks for treble damages, restitution, costs of the suit, and a permanent injunction banning “Defendants from (1) requiring that sellers pay the buyer broker, (2) continuing to restrict competition among buyer brokers and seller brokers, and (3) engaging in any conduct determined to be unlawful.”

The law firms representing the plaintiffs are Pearson Warshaw and Freed Kanner London & Millen.

Editor’s note: This story has been updated with additional details from the complaint and responses from NAR, KW, eXp, RE/MAX, Compass, the Marin AOR and the North Bay AOR.

Email Andrea V. Brambila.

Like me on Facebook | Follow me on Twitter

This post was originally published on this site