Justice Department sues National Association of Realtors over commission structure

An antitrust lawsuit filed Thursday by the Justice Department alleges the National Association of Realtors’ rules on artificially inflated commissions fees paid to realtors by landlords.

“NAR coordinated and enforced anti-competitive agreements, which likely contributed to reduced price competition between buying brokers and lower quality of buying brokerage services for homebuyers,” the Justice Department said. .

The NAR has denied any wrongdoing, but said Thursday evening it had reached a deal that fully resolves the issues raised by the Justice Department. He declined to detail what the deal entailed.

“While NAR does not agree with DOJ’s characterization of our rules and policies, and NAR does not admit any responsibility, wrongdoing, or veracity of DOJ’s allegations, we have agreed to make certain changes to the MLS code of ethics and policies … “Mantill Williams, vice president of communications for NAR, said in an email.

At the heart of the lawsuit was how the buyer’s agents are paid. If the deal succeeds in lowering fees, it could potentially save sellers of individual homes thousands of dollars in commissions, but it would also reduce income for realtors across the country – including some 37,000 in the Houston area – and put more pressure on brokers, already grappling with a host of discount and online competitors.

In particular, the Justice Department found fault with four NAR policies which:

allow real estate agents to qualify their services as “free” to home buyers (in effect, the real estate agent’s fees will be paid out of the amount the buyer provides at closing);

recommend concealing the amount of commission a buyer’s agent will make when selling a home;

allow buyer’s agents to filter ads based on the amount of commission they will receive; and

limit access to safes to real estate agents who are not members of the association.

In the United States, home sellers pay both the listing agent and the buyer’s agent. And when listing agents add homes to the National Association of Realtors’ listings service – which owns the majority of listings and often syndicates them to other real estate search sites such as Zillow and Realtor.com – they have to tell upfront how much they offer. pay the agent whose client is buying the house. Agents can negotiate this offer as the transaction progresses.

The commission on the sale of a home is typically 6 percent, which is traditionally split between the buyer’s and seller’s agents. As a result, the Justice Department alleges that buyers’ agents have little incentive to sell their clients homes that will offer them lower commissions.

The ability of buyers’ agents to filter the homes they see online based on the amount of commission offered also makes it easy for them to choose not to show certain listings to buyers, and the inability of buyers to see the difference. commission prevents them from detecting such direction, the lawsuit, filed in the United States District Court for the District of Columbia, alleged.

Williams said most of the changes that NAR has agreed to “seek to more explicitly state what is already the spirit and intent of the NAR Code of Ethics and MLS policies regarding the provision of commission information and participation in MLS “.

Thursday’s lawsuit comes as NAR is already pushing back a legal challenge to how real estate commissions are structured. A case brought by a Minnesota homeowner in 2019 seeks to overturn the standard practice of dividing commissions by agents. The case highlights that real estate agents are paid much more in the United States than in other countries.

For an average house in Houston, priced at $ 310,700, realtor commissions cost $ 18,600. If the same deal had been made in London, the seller would have paid the agents only about $ 3,700.


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Romona L. Lopez

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