In my practice, I am fortunate enough to attend a real estate conferences on a regular basis. And, without exception, we always get a run down on hot trends/cases from industry leaders. Some issues that are being attacked in hot cases/trends are:
- Are the typical commission structures – e.g., the typical 5% to 6% divided in half – fair or creating an antitrust issue?
- Is MLS commission anti-competitive and artificially inflates commission rates?
- Can a buyer’s agent advertise/represent that it is working for its client for free, as generally happens and has been allowed?
- What is the impact of agent only showing their clients houses with higher typical commissions, like 6%? And how is this being advertised, pushed for and manipulated contrary to the interests of consumers?
There are currently some big, national cases that will likely bring about big changes in the entire national real estate community with regard to how real estate brokers’/agents’ commissions are determined, explained and advertised. These cases revolve around antitrust and alleged conspiracy claims – asserting that the use of commissions in today real estate markets are creating an overcharging to consumers and artificially manipulation of the market.
Leeder Suit: This was a suit filed in January 2021 and amended in May 2022. It is antitrust suit by home buyers, as opposed to sellers, seeking class action status for buyers of homes listed on any NAR-affiliated MLS from Dec. 1, 1996 to the present. It names NAR (National Assn of Realtors), Anywhere Real Estate (formerly Realogy), Keller Williams, RE/MAX, etc. as defendants. The suit alleges that the brokerage’s current commission structure has led to inflated home prices that buyers have had to pay because they were responsible for commissions.
There are several Federal lawsuits, including Moehrl; and Sitzer/Burnett suits. In these suits, the plaintiffs allege there has been a “longstanding conspiracy” to get consumers to pay higher commissions. They argue that what happens today in real estate is “not the natural consequence of the free market.” The suits seek to preclude agents from allegedly overcharging consumers and artificially manipulating the market.
Most if not all of these issues are pending. As such, the discussion is to keep an eye on impact of these, nationally, and then into distinct markets. We shall see!
Rachel Mihai is a Partner at the Newport Beach office of Bremer Whyte Brown & O’Meara, LLP. She can be contacted at firstname.lastname@example.org.