The real estate industry faces significant legal challenges regarding broker commission practices. A recent class-action lawsuit in South Carolina has accused the National Association of Realtors (NAR) and Keller Williams Realty of violating federal antitrust laws. This lawsuit alleges that these organizations have artificially increased home prices in the state, spotlighting long-standing issues in real estate brokerage.
This South Carolina case is linked to a similar lawsuit in Missouri. There, a jury found the NAR and several major real estate brokerage firms guilty of illegal agreements that caused home sellers in Missouri to lose $1.79 billion. With the possibility of triple damages, these firms could be liable for up to $5.3 billion. Defendants in the Missouri case include Keller Williams, Berkshire Hathaway’s HomeServices of America, RE/MAX, and Anywhere (formerly Realogy). Anywhere Real Estate and RE/MAX settled for $138 million before the verdict, indicating the seriousness of these allegations.
The lawsuit in South Carolina, filed on Monday, is important because it’s trying to become a class-action case. It seeks to represent all the people who sold their homes in South Carolina in November 2019 using a Keller Williams broker and listing their home on the National Association of Realtors (NAR) Multiple Listing Services (MLS). The people suing argue that the NAR’s rules, which Keller Williams has to follow, make the housing market less competitive.
They claim that these rules force a set commission fee that can’t be negotiated and require home sellers to pay a commission to brokers who represent the buyers. The plaintiffs argue that this setup changes the fundamental nature of buying and selling homes. They also claim that these rules keep buyers and sellers from seeing the actual details about the commission fees.
Cases like this could challenge the NAR’s firm control over a system that has been criticized for a long time. Critics say this system could be better for the people selling and buying homes because it keeps the commission rates for real estate agents between 5% and 6% of the home’s sale price. The NAR’s MLS databases, used for 91% of home sales in 2020, help connect people who want to buy homes with people who want to sell them. Brokers using these databases must agree to share their commission with other brokers on MLS. The people suing say that this rule makes home prices go up unfairly and lowers the profit for sellers.
The NAR is standing by its commission structure that has been around for over a hundred years, saying it suits customers. But after losing the lawsuit in Missouri, they plan to appeal the decision.
This legal fight is a big deal, and it’s shown by information from Redfin, a company that lists homes online and helps people buy and sell houses. They left the NAR not long ago. Redfin says that last year, people buying homes paid more than $41 billion in fees to brokers. In South Carolina, the people suing (the plaintiffs) want a trial by jury and have yet to say how much money they want. They also want the court to stop the NAR from making deals that they think stop fair competition.
The impact of these lawsuits goes beyond the people directly involved. The U.S. Justice Department oversees potential market competition impacts and has reportedly considered intervening. In July 2021, it halted a proposed settlement with the NAR, concerned that it might limit the department’s ability to ensure competitive practices in a market that significantly affects Americans’ financial well-being.
As these legal battles continue, they’re bringing much attention to how the real estate industry works. This industry is a big part of the economy and affects many people in the U.S. These cases are not just about money but about ensuring fair play and openness in one of the country’s biggest markets.