In the dynamic world of real estate, the question of commission structures has long been debated. With the recent class action lawsuit filed in the United States District Court for the Western District of Missouri (Case No. 19-CV-332-SRB), this discussion has again come to the forefront. This lawsuit, involving major players like the National Association of Realtors (NAR) and several top real estate companies, raises critical questions about the fairness and competitiveness of traditional real estate commission models. The court has ruled against the NAR, who vows to appeal the decision.
The Case at Hand: An Overview
The plaintiffs, representing a class of home sellers, have accused NAR and various real estate firms of conspiring to inflate the cost of selling a property. Central to their argument is the "Adversary Commission Rule" imposed by NAR, which mandates that sellers pay the buyer's broker's commission. This lawsuit contends that such practices violate federal antitrust laws and lead to artificially high commission rates, ultimately burdening sellers.
View the Court Filing/Download the PDF:
The Impact on Sellers
The traditional commission structure, often hovering around 5-6% of the sale price, is split between the seller's and buyer's agents. As the lawsuit suggests, this model unfairly burdens sellers, compelling them to finance the buyer’s representation. The plaintiffs argue that buyers would bear such costs in a competitive market, fostering a more equitable and transparent transaction process.
Championing a New Model: The Equitable 1% Commission Structure
Given these issues, it's time to champion a more equitable model: a 1% commission structure with no obligation to cover the buyer's agent fee. This model represents a paradigm shift, ensuring sellers are not disproportionately burdened with commission fees. Learn more about my 1% commission fee for SELLERS HERE, or BUYERS HERE.
The Benefits of the 1% Commission Model
Fairness and Transparency: By charging only 1%, sellers enjoy a more transparent transaction, understanding precisely what they are paying for.
Cost-Effective: This model significantly reduces the seller's financial burden, making home selling more affordable.
Market Competitiveness: A lower commission rate can make a property more attractive, potentially leading to quicker sales.
Empowering Buyers: Removing the expectation that sellers pay the buyer’s agent fee encourages buyers to take greater control over their representation, fostering a more balanced market dynamic.
Conclusion
The ongoing lawsuit against NAR and significant real estate firms highlights critical flaws in the traditional commission structure. It's time to move towards a more equitable model that aligns with the interests of sellers. The 1% commission structure, devoid of any requirement to pay the buyer's agent, represents a fair, transparent, and cost-effective approach to real estate transactions. This model benefits sellers and contributes to a healthier, more competitive real estate market.
20-Question FAQ About the Real Estate Commission Lawsuit
1. What is the lawsuit filed in the Western District of Missouri about?
This lawsuit challenges the traditional real estate commission structure, focusing on the "Adversary Commission Rule" imposed by the National Association of Realtors (NAR), which mandates sellers to pay the buyer's broker's commission.
2. Who are the plaintiffs in this lawsuit?
The plaintiffs are a group of home sellers, including Scott and Rhonda Burnett, Ryan Hendrickson, Jerod Breit, and others, representing themselves and others similarly situated.
3. Who are the defendants in this case?
The defendants include NAR, Realogy Holdings Corp., HomeServices of America Inc., BHH Affiliates LLC, HSF Affiliates LLC, RE/MAX LLC, and Keller Williams Realty Inc.
4. What is the "Adversary Commission Rule"?
It's a policy requiring sellers' brokers to offer a set commission to the buyer's broker, making it a standardized, non-negotiable cost borne by the seller.
5. What laws do the plaintiffs claim were violated?
The plaintiffs allege violations of federal antitrust law, the Missouri Merchandising Practices Act (MMPA), and the Missouri Antitrust Law.
6. What is the time frame covered by the lawsuit?
The lawsuit covers transactions involving properties listed on certain Multiple Listing Services (MLS) and paying a buyer broker commission from at least April 29, 2015, to the present.
7. What damages are the plaintiffs seeking?
They seek treble damages under federal antitrust law, threefold damages under Missouri Antitrust Law, punitive damages under MMPA, injunctive relief, and the costs of the lawsuit including attorney fees.
8. What is the plaintiffs' main argument against the commission structure?
The main argument is that this structure forces sellers to bear the cost of the buyer’s broker unfairly, inflating overall commission fees and stifling price competition.
9. How do the plaintiffs argue this impacts the real estate market?
They claim this practice leads to inflated buyer broker commissions and overall higher costs for sellers, distorting the competitive dynamics of the real estate market.
10. What alternative do the plaintiffs propose for commission structures?
While not explicitly stated in the lawsuit, the debate opens up possibilities for more equitable structures, like a 1% commission model without requiring sellers to pay the buyer's agent fee.
11. Why is this lawsuit significant for home sellers?
It challenges long-standing industry norms, potentially leading to more favorable and transparent commission structures for sellers.
12. How does the lawsuit affect buyers?
The suit could encourage a shift where buyers directly negotiate and pay for their representation, promoting more active involvement in the process.
13. What is the likely impact on real estate agents?
A change in commission structures could alter how agents negotiate fees and represent their clients, possibly leading to more competitive pricing strategies.
14. How might real estate firms respond to this lawsuit?
Real estate firms may need to reconsider their commission policies and practices in light of potential legal and market pressures.
15. Could this lawsuit lead to broader industry changes?
Yes, a ruling in favor of the plaintiffs could set a precedent, prompting widespread changes in commission practices across the industry.
16. How does the lawsuit view the role of MLS in commission structures?
The lawsuit implicates MLSs as platforms where the alleged anti-competitive practices are enforced and standardized.
17. What is the role of NAR in this lawsuit?
NAR is accused of being a key player in establishing and maintaining the disputed commission structures.
18. Has there been any precedent for such a lawsuit in the real estate industry?
There have been other antitrust lawsuits in the real estate industry, but this case is notable for its scope and the involvement of major industry players.
19. What are the potential outcomes of this lawsuit?
Outcomes could range from significant monetary damages for the defendants to mandatory changes in how real estate commissions are structured and negotiated.
20. How can interested parties keep informed about the lawsuit?
Staying updated through legal news outlets, court documents, and industry publications will be essential for those interested in the developments of this case.
Sources:
A $1.8 billion earthquake just hit the real estate industry - Business Insider