NAR reaches agreement with Department of Justice

After being sued by the Department of Justice on Nov. 19, NAR reached an agreement later that day with the U.S. Department of Justice to create rules that more explicitly lay out the intent of NAR’s Code of Ethics and MLS policies regarding commissions and MLS participation. 

Before reaching the agreement, the Department of Justice filed a lawsuit against the National Association of Realtors, alleging that the organization violates antitrust law, including commission arrangements and consumer disclosure requirements. 

In the lawsuit, the federal government alleges that NAR has adopted a “series of rules, policies, and practices governing, among other things, the publication and marketing of real estate, real estate broker commissions, as well as real estate broker access to lockboxes, that have been widely adopted by NAR’s members resulting in a lessening of competition among real estate brokers to the detriment of American home buyers,” the DOJ said in a press release on Nov. 19.

Specifically, the DOJ alleges that NAR violated the Sherman Act and “restrained” free trade in the following by:

  • “prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS;
  • allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
  • enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers;
  • limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS.“

These practices have been largely adopted by NAR-affiliated MLS networks. The complaint alleges that, “Therefore, agreements among competing real estate brokers each of which reduce price competition among brokers and lead to lower quality service for American home buyers and sellers.”

NAR VP of Communications, in a statement emailed to Chicago Agent, said its rules and policies “have long sought to ensure fair and competitive real estate markets for home buyers and sellers. In response to questions from the DOJ, we have been working to explain our rules. We have reached an agreement that fully resolves the questions raised by the DOJ about the MLS system and commissions. Most of the changes seek to more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS Policies regarding providing information about commissions and MLS participation. We’re proud to be associated with the MLS system that puts consumers first and benefits home buyers, sellers and small business brokerages, and is constantly building upon these principles. While NAR disagrees with the DOJ’s characterization of our rules and policies, and NAR admits no liability, wrongdoing or truth of any allegations by the DOJ, we have agreed to make certain changes to the Code of Ethics and MLS Policies while we remain focused on supporting our members as they preserve, protect and advance the American dream of homeownership.”

See also: updates on the buyer-side lawsuit against NAR.

NAR’s motion for dismissal denied; third buyer-side lawsuit to move forward

In a hearing Oct. 5 in U.S. District Court, a judge denied motions brought by the National Association of Realtors asking to dismiss a lawsuit that seeks to end the practice of sellers paying buyers’ broker commissions.

This is the third such lawsuit filed against NAR about buy-side commissions, although this one zeroed in on NAR’s buyer broker commission rule requiring “all brokers to make a blanket, non-negotiable offer of buyer broker compensation” in order to list the property on the Multiple Listing Service.

The plaintiffs in the class-action suit are two Connecticut homeowners who say NAR’s policies force sellers to pay buyer commissions at an inflated amount.

The lawsuit, which alleges racketeering and conspiracy, also names four brokerages: Keller Williams, Berkshire Hathaway HomeServices of America, RE/MAX Holdings and Realogy Holdings.

Responding to NAR’s motion to dismiss the suit, Judge Andrea Wood agreed with the plaintiffs’ contention that they were forced to pay higher commissions because of the rule.

“The Court finds that plaintiffs have sufficiently pleaded that they suffered an antitrust injury from defendants’ conspiracy,” Wood wrote. “Each plaintiff was a home seller required to pay a commission to the buyer-broker for the person who purchased their home. But-for defendants’ conspiracy, each plaintiff would have paid substantially lower commissions.”

Although disappointed in the ruling, a NAR spokesperson told Chicago Agent magazine that as the case moves forward, they intend to demonstrate how the MLS system creates competitive, efficient markets that benefit homebuyers and sellers as well as small business brokerages.

“The MLS fosters cooperation between brokers providing the best and greatest number of options for buyers and sellers,” NAR said. “The broker commission structure also ensures greater access for first-time, low-income and many other home buyers who otherwise couldn’t afford a home purchase. We are confident that when the case is ultimately decided, we will prevail.”