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Brokers Sued? Yes.

Who was sued? 

Real Estate Brokerage firms like KW, Re/Max, the parent company of Coldwell Banker and Sotheby's, as well as the National Association of Realtors (NAR). 


Because some consumers of real estate services (Sitzer | Burnett) who live in Missouri - about 500 of them - filed a lawsuit against the National Association of Realtors, as well as many brokerage firms because they believe their transaction costs, specifically brokerage fees, were inflated. 

Their claim: 

That some of the nation's largest real estate companies conspired to inflate real estate commissions. NAR was also named as a defendant. The jurors were asked to find whether home seller plaintiffs in a class action lawsuit had proved “by a preponderance of the evidence that a conspiracy existed to follow and enforce” a NAR policy known as the cooperative compensation rule. 

The lawsuit specifically addresses real estate transactions in Missouri, during the timeframe of April 29th, 2022 - June 30th, 2022. But it could  happen elsewhere - and likely will - now that the precedent is set. 

The 500 home sellers were awarded triple damages - over $5B. It took the 8 person jury 2.5 hours to come to a verdict. 

So far, NAR has said they plan to appeal. 

Some background: 

Real estate professionals promote their clients' properties for sale on the Multiple Listing Service (MLS). MLS is the source of data that feeds to popular sites such as Zillow and (which, btw, has no connection to NAR). In order to get access to list a property in MLS you must be a member of a local Realtor organization, an affiliate of NAR. MLS has a rule that requires the broker who lists a property on MLS to display a cooperating fee to the Broker who brings the buyer to the transaction (and NAR sanctions this rule). In other words, I execute a contract with my client to sell their house. That contract says the seller must pay not only my fee, but also a cooperating fee to the buyer broker. And my client has no choice but to agree...or not list in MLS. (That fee could be as low as $1.)

In Missouri, a judge just decided that it wasn't fair for the seller to bear the burden of compensating the buyer broker. Makes sense. 

The suit also argued that the Cooperative Compensation rule violated the Sherman Antitrust Act by inflating sellers’ costs. The implication is that the brokers are all colluding about how much to charge clients. 

This lawsuit raises two issues: 

1. By sellers paying the buyer agent fee are seller’s costs inflated?

2. Are the brokers engaging in price fixing/collusion?

I don't agree that cooperating compensation inflates a seller's costs. In fact, the buyer is the one writing the check. 

I also don't agree that the brokerages conspired or colluded. We as brokers are required by NAR to offer cooperating compensation in MLS. NAR dictates that, not the brokerages. All the brokers can see in MLS how much cooperative compensation is being offered. It’s a required field, however it can be as low as $1. As Realtors we are taught that we shall not collude, that we all shall set our own rates., and we do. However, we have a pretty good idea what brokers in our markets are charging. But Isn't this the case with any business in a competitive environment? 

I do agree that the plaintiffs/sellers shouldn't be responsible for paying the buyer agent's commissions. I agree with this, always have. It's not a seller's responsibility to pay me. That's on me and my buyer. Seller’s costs inflated? Yes. Seller’s proceeds reduced? Probably not - if the buyer paid the buyer agent they would have agreed to a lower purchase price to reflect this fee. 

The takeaway:

Work with a competent and transparent broker who will set clear expectations up front - whether you are a buyer or a seller. Ask how they get paid. If you sign an agreement with a broker make sure you know where the agents’ fees are coming from. Much of real estate happens off market these days, outside of MLS, meaning I earn my money making a market. There’s no guarantee the seller will pay my fee.  I wouldn’t rely on a seller I've never met to pay my commission. Those Realtors who do will just die on the vine. 

The market will adjust when the cooperating fee is no longer baked into the purchase price. 

This decision is a net Good for seasoned brokers who can articulate their value proposition to a buyer (ear to the ground, current on local land use, knows zoning, hyper-micro market conditions, and contracts).  Our job is and always will be, to bring buyers and sellers together for a fee. 

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