A series of legal challenges is aiming to disrupt long-standing practices in the real estate industry that determine commissions for agents on home sales and who bears the cost.
In a federal court case, the National Association of Realtors (NAR) and major real estate brokerages were ordered on Tuesday to pay nearly $1.8 billion in damages. The jury found that they artificially inflated commissions paid to real estate agents, violating federal antitrust law. The class-action lawsuit, filed in 2019 on behalf of 500,000 home sellers in Missouri and border towns, alleged that the defendants conspired to make home sellers pay the broker representing the buyer of their homes.
If treble damages are awarded, the defendants could potentially be required to pay over $5 billion. The NAR and several real estate brokerages are already facing another lawsuit over agent commission rules.
The lawsuits focus on an NAR rule requiring home sellers to offer to pay the commission for the agent representing the homebuyer when advertising on a local Multiple Listings Service (MLS), where most U.S. homes are listed for sale. This is in addition to covering the commission for their listing agent or broker. The NAR’s rules also prohibit a buyer’s agent from making home purchase offers contingent on reducing their commission.
Plaintiffs argue that this rule forces home sellers to pay a cost that, in a competitive market, would be paid by the buyer. They claim the NAR requirement keeps commissions for a homebuyer’s agent artificially high.
The NAR contends that offering compensation to buyer brokers is best for consumers, providing more buyers with access to affordable homes and professional representation. The association's policies have always required an offer of agent compensation without specifying an amount, according to the NAR spokesman. The NAR also emphasizes that regardless of the offer, it is always negotiable.
As home prices rise, so do agents' commissions, with the national median sales price reaching $394,300 as of September.
