Antitrust Lawsuit Could Force Buyers To Pay Commissions On Top of Home Purchase
Alleging his broker conspired a commission scheme that over-inflated the cost of selling his home, Christopher Moehrl and other home owners filed a class action antitrust lawsuit against several real estate brokerages in federal court, which included the National Association of Realtors®.
The 30-page complaint claims The National Association of Realtors, Realogy Holdings (Coldwell Banker, Sotheby’s International Realty, Century 21) and RE/MAX Holdings, conspired “to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.”
What the plaintiffs are claiming is that ‘The National Association of Realtors’ “adoption and implementation of a rule that requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation…when listing a property on a Multiple Listing Service,” or MLS is an antitrust conspiracy against the consumer.
What this could mean if they win is that a real estate agency could no longer split their commission with a buyer’s agent, and thereby force the buyer’s agent to add an additional commission to the purchase price of a home, or even worse not having a buyer’s agent at all. It could also force a buyer and seller into dual representation or for a buyer to have no representation whatsoever.
Traditionally sellers have hired a broker to market and sell their property, and the negotiated commission was split between the seller’s agent and the buyer’s agent. The buyer’s agent has a fiduciary duty to the buyer, and vice versa. In the competitive climate of listing homes, agents have reduced their commissions as low as 4% and offered 3% to a buyer’s agent. Still however the entire 4% was paid for by the seller as part of the employment agreement with their agent to sell the home.
What’s potentially coming is that if a buyer wants an agent, and the seller’s broker is not allowed to spit commissions, then the buyer would have to hire an agent and add a commission to the total cost of the transaction. This is currently how auctions work. Rather than subtracting the fee from the seller, the fee is added to the total and paid for by the buyer, usually 5%.
Companies like Zillow have to sign a non-compete clause when they syndicate real estate listings on their site, however they have already started to compete by offering Instant Offers. Zillow knows how much a home is potentially worth, and they’ve figured out a way to flip homes by offering home owners an Instant Offer at slightly less than full market value, then they turn around and re-sell the home at a higher price. Because Zillow is not representing the seller, they’re actually the buyer, they don’t have a fiduciary duty to the home owner. Even if they can make a few percentage points on the sale they will potentially make millions or billions on the volume of transactions they could potentially do. On top of that Zillow still charges roughly 7.5% to take a property off the hands of a home owner.
In the end consumers could end up paying even more money than they currently are, while exposing themselves to potential lawsuits because they didn’t have an agent/fiduciary behind them. Worse for buyers who want to the best price on a new home, they could have to start adding commissions to their closing costs.
Very little has been stated about the lawsuit from the defendants other than the allegations are without merit. As a Realtor® it’s hard to imagine things staying the way they have traditionally been forever. I do believe that people buying and selling homes will always want to work with someone who has their back, regardless of who pays the buyer’s agent.