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A significant trial in Kansas City, Missouri, has the potential to revolutionize how homes are bought and sold in the United States. The trial revolves around a practice that involves fees paid to real estate agents when homes change hands, and several key companies are involved. Here’s a comprehensive look at the case and the latest developments.
The Key Issue: At the heart of the case is the fees that home sellers must pay to the buyer’s agent. According to National Association of Realtors (NAR) regulations, it’s the seller’s responsibility to cover this fee, which is then divided between the seller’s agent and the buyer’s agent. The sellers argue that this system artificially inflates home prices.
Why It Matters: This case holds immense significance as it has the potential to challenge the NAR, a powerful organization that establishes the rules for the real estate industry. If the case goes against them, it could lead to significant changes in how Americans purchase homes.
The Opposition’s Viewpoint: The NAR believes that their regulations benefit consumers and the overall market. They argue that altering these rules could potentially create obstacles for individuals looking to purchase homes. The NAR maintains that their approach ensures equal access to homes for sale and contributes to the stability of the housing market.
The Bigger Picture: For quite some time, there has been ongoing criticism of the NAR and its fee structure for driving up home prices without substantial benefits to buyers. While the internet has transformed how we make purchases, real estate fees have remained largely unchanged.
Settlement Agreement by RE/MAX: In recent developments, RE/MAX, a national real estate brokerage firm, has reached a preliminary settlement agreement in two major class-action antitrust lawsuits concerning buyer brokers’ commissions. These lawsuits have significant implications for the real estate industry. RE/MAX’s settlement, along with earlier settlements by Anywhere Real Estate, is currently pending approval by the U.S. District Court judges in Illinois and Missouri, who oversee the two lawsuits.
The details of the settlement agreements are confidential until plaintiffs file a motion for approval. However, an SEC filing reveals some information regarding the RE/MAX settlement. It states that RE/MAX has agreed to pay a total settlement amount of $55.0 million into a qualified settlement fund, and the company has committed to making certain changes to its business practices.
The Remaining Defendants: After the settlements by Anywhere and RE/MAX, the only defendants left in the two lawsuits are the National Association of Realtors, HomeServices of America, and Keller Williams.
The Core Issue: The two lawsuits target NAR’s Participation Rule, which mandates that listing agents must offer compensation to buyers’ agents to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, this commission structure inflates costs for consumers, violating the Sherman Antitrust Act. NAR contends that this structure has been in place for over a century and benefits consumers.
Anticipated Damages: The Sitzer/Burnett suit is expected to have damages of up to $4 billion, while the Moehrl suit could reach up to $40 billion.
Trial Dates: The Sitzer/Burnett trial is set to begin on October 16, 2023, while a trial date for the Moehrl suit is expected to start in early 2024.
The NAR’s Perspective: Mantill Williams, NAR’s Vice President of Communication, expressed confidence in defending the organization’s position in court. He highlighted the benefits of the current marketplace system, which he believes provides equity, efficiency, transparency, and market-driven pricing options for homebuyers and sellers.
Schappert’s View: Buyer Agency Contracts in Changing Times
“Buyer agency contracts have played a significant role in my career as both the broker of an exclusive buyer brokerage and a full-service brokerage. Ensuring that customers knew what to expect has always been a priority. While the core concept remains consistent, there are emerging issues to consider in the aftermath of this legal battle.
One crucial concern is ensuring that lenders are prepared to finance the commissions. This is especially important for first-time homebuyers who might face financial hardship if they have to pay the commission separately from the transaction. Having to use cash or short term credit would make the gap between different races and income levels in homeownership even wider and leaving many people out of reach, a real socioeconomic pandora’s box.
Another potential challenge is the possibility of significant discrepancies in commission rates, which could add complexity to the work of appraisers.
At Connecticut Real Estate, we’ve recently revamped our flat-fee listing system and are set to introduce a similar platform for homebuyers. We are closely monitoring the ongoing lawsuits and are ready to adapt swiftly to any changes. This adaptability is a key strength of independent brokerages in these evolving times”, said Schappert, the founder and broker of Connecticut Real Estate Brokerage LLC.
Conclusion: This ongoing legal battle is not only significant for the companies involved but also for the real estate industry as a whole. It is a case to closely monitor, as it could potentially usher in a new era of home buying in the United States. What do you think? Leave a reply below
Sources:
Lawsuits Threatening Agent Commissions: Moehrl v. NAR
US home sellers’ class action over buyer commissions
DOJ sues NAR for alleged antitrust violations
These lawsuits could upend the real estate market