Real Estate Broker Fee-Splitting Arrangements Draw $1.8 Billion Verdict

Growing pressure on sales practices includes DOJ probe.

      • Case in Missouri is similar to another in Illinois set for trial next year.
      • Damages have potential to exceed $5 billion under antitrust laws.
      • Antitrust Division is investigating residential real estate brokerage and seeks to participate in Tennessee litigation.

The National Association of Realtors, Keller Williams, and HomeServices of America have been hit $1.8 billion verdict in a case brought by home sellers in Missouri, alleging the companies’ practice of splitting commissions between buyer and seller agents drove up home prices and limited sellers’ ability to negotiate.

Filed as a class action, the suit says this long-running fee-splitting practice is anticompetitive because it requires NAR agents to list all of their properties on regional listings and agree to broker commissions beforehand. If trebled under antitrust laws, the award could reach $5.4 billion (Burnett v. NAR, Case No. 19-CV-332-SRB, W.D. Mo., Western Div.).

Defendants Anywhere Real Estate and RE/MAX settled out of the case in September. Anywhere (fka Realogy) is the parent company of Century21, Coldwell Banker, Sotheby’s International Realty, and Corcoran Group. Unconfirmed reports put the combined settlements paid by these two brokers at $138 million, and another put Anywhere’s settlement alone at $83 million.

As described in the third amended complaint, the plaintiffs — “home sellers who listed their homes on one of four Multiple Listing Services” — charge the association and brokers with “agreeing, combining, and conspiring to impose and enforce an anticompetitive restraint that requires home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount, in violation of federal antitrust law and in violation of Missouri law.”

The law firm representing the Burnett plaintiffs is representing another batch of home sellers in a new suit filed Oct. 31 against NAR, plus brokers Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate, and Douglas Elliman (Gibson v. NAR, No. 4:23-cv-00788-SRB, W.D. Mo., Western Div.).

Anywhere and RE/MAX are in the process of finalizing settlements in another similar case in the Northern District of Illinois. That case is expected to go to trial in 2024 (Moehrl v. NAR, No: 1:19-cv-01610, N.D. Ill., Eastern Div.).

DOJ Enforcers Stalking the Industry

The Antitrust Division of the Department of Justice is reportedly investigating practices in residential real estate brokerage, including compensation paid to brokers.

Real estate sales aren’t the only aspect of the housing market that interests the Antitrust Division. It is expected to file a memorandum supporting its participation in the RealPage Inc. antitrust action in federal court in Tennessee later this month.

The issue that drew the attention of DOJ antitrust enforcers is how the Sherman Act will apply when competing businesses — in this case landlords, property owners, and property managers — use algorithms to set prices. RealPage is the connective entity in this equation, providing property management software for the multi-family, single-family, commercial, and vacation rental housing industries.

Arguments on the Antitrust Division’s participation are set for Dec. 11 before Chief Judge Waverly D. Crenshaw who is overseeing cases consolidated in multi-district litigation (In re: RealPage, Inc., Rental Software Antitrust Litigation [NO. II], Case No. 3:23-md-3071, MDL No. 3071). Read our previous post.

Edited by Tom Hagy.

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