Did You Pay an Artificially Inflated Real Estate Commission?

A federal jury just awarded $1.78 billion in damages against the National Association of Realtors and brokerages like Keller Williams

At the end of October 2023, a jury in Missouri found the National Association of Realtors (NAR) and assorted brokerages, including Keller Williams Realty and HomeServices of America, liable to the tune of $1.78 billion for artificially inflating commissions in real estate sales and violating anti-trust laws. The lawsuit alleged that more than 260,000 Missouri home buyers paid inflated commissions on homes they purchased between 2015 and 2022. If you sold a home in Georgia in the last seven years, contact Harris Lowry Manton LLP. Our trial attorneys in Atlanta and Savannah have decades of experience handling complex litigation against national companies and corporations. Contact us today to learn more.

Agents, brokers, and relators

Related to these cases, there are four terms you need to know. Per Investopedia:

• A real estate agentis licensed to help people buy and sell real estate, and is paid a commission when a deal is completed. The agent may represent either the buyer or the seller.
• A real estate brokerdoes the same job as an agent but is licensed to work independently and may employ agents. Brokers are paid on commission but also get a cut of the commissions of agents who work for them.
• A realtoris a member of the National Association of Realtors (NAR) and may be an agent or a broker, among other professions in the industry. A “multiple listing service,” or MLS, is a private database accessible only to agents and brokers; it lists information about homes that are for sale.

What are the class action lawsuits about?

If an agent or broker wants to list a property on a MLS, NAR “required sellers to make a nonnegotiable commission offer before listing homes…. That commission hovers around 5 to 6 percent of the sale price and is paid by the home seller to the sellers’ agent and the buyers’ agent,” per the Washington Post. This rule is called the Participation Rule, or the Buyer-Broker Commission Rule.

But that’s not really what happened. Instead, buyer-brokers ended up with guaranteed commissions that were being paid not by home buyers, but by home sellers. The lawsuit alleged that this practice not only violated antitrust laws, but that it “stifled competition and has resulted in higher prices” for homes, per the Washington Post.

During the trial, Craig Schulman, an associate professor of economics at Texas A&M, testified that NAR’s Participation Rule was  “one of the clearest cases of price-fixing and collusion [he has] ever seen.” Notre Dame law professor Roger Alford testified “that NAR’s Participation Rule ‘is not designed to benefit home sellers.’ He also alleged that it was created to protect the trade group from non-MLS affiliated brokers.”

The federal jury for the plaintiffs in this case, and found that NAR, along with real estate brokerages like Keller Williams, conspired to artificially inflate commissions in an attempt to make more money off homeowners. From Housingwire:

The jury reached its verdict after a little over two weeks of testimony from the plaintiffs and defendants. During their testimony, the home seller plaintiffs and their lead attorney… argued that despite the defendants having antitrust rules and regulations in place, the trade group and corporate brokerages knowingly violated their own rules in order to maintain high commission rates.

What happens now?

Currently, there are class action lawsuits filed in Illinois and South Carolina. Given the implications of the anti-trust violations, the Department of Justice may get involved. If the DOJ gets involved, the real estate industry may need to change entirely the way buyers and sellers get paid. The Washington Post reports that this could lead to $100 billion in savings for consumers – a 30% drop in commissions.

How Harris Lowry Manton LLP can help

Harris Lowry Manton LLP is currently reviewing cases on behalf of Georgia residents who have sold a home in the last seven years. If you have sold a home in the last seven years, our team is ready to help. We are licensed to practice in all of Georgia, and have the resources to thoroughly represent you at every stage of your case. We’re the law firm other attorneys in Georgia recommend when it comes to holding companies and organizations accountable for their actions through a trial.

As the only law firm in Georgia to secure the top verdicts in seven different practice areas, we know what it takes to win. We are a team of award-winning litigators who have been recognized by virtually every object ratings service, and whose attorneys are members of multiple prestigious, invitation-only legal organizations. If you need a fighter, Harris Lowry Manton LLP is here to answer the call.

Don’t let NAR and Keller Wiliams get away with your money. Call or contact us in Atlanta or Savannah, Georgia.