California Realtor groups hit with copycat commission rates lawsuit

A Marin County woman is the key plaintiff in a proposed class-action complaint against the National Association of Realtors and Bay Area industry groups.

Five weeks after a Missouri jury issued a $1.78 billion judgment finding that Realtors charge anticompetitive commission rates, a “copycat” lawsuit has been filed in the Bay Area making similar claims.

A Marin County home seller filed the antitrust complaint in federal court this month seeking unspecified damages from the National Association of Realtors, several local Realtor associations, and a north-Bay Area multiple listing service. The complaint also sought damages from five of the nation’s leading real estate brokerages.

The lead plaintiff, Christina Grace, paid a $50,358 commission to sell her home in 2020, “a rate higher than it would have been in a competitive market,” the lawsuit said.

The proposed class-action case also seeks to end the requirement that sellers pay commissions to their buyers’ agents — a long-standing practice that allegedly keeps broker commissions in the 5-6% range despite technological advances, the suit said.

Currently, NAR requires sellers to specify buyer-broker compensation as a condition for listing their properties on an MLS database.

See also: Accused of price-fixing, Realtors talk change at annual convention in Anaheim

The practice prevents buyers from negotiating compensation directly with their own agents, leading to higher commission rates, the lawsuit alleges.

“To gain the cooperation of buyer brokers, selling brokers are incentivized to offer a higher buyer broker commission,” the lawsuit states. “In a competitive market, the cost of buyer broker commissions would be paid by home buyers, and buyer brokers would compete with one another, … potentially offering a lower commission rate.”

The Missouri case was one of two key antitrust lawsuits filed against NAR and top brokerages, with another proceeding in Illinois. The U.S. Justice Department is also studying possible antitrust action over real estate commissions.

The stunning $1.78 billion verdict prompted the filing of a similar nationwide class-action suit in the weeks following the Missouri trial. Two copycat suits were filed in Pennsylvania and Florida, according to “HousingWire” and “The Real Deal.”

The Bay Area case is California’s first copycat case, with potential statewide implications.

In addition to NAR, defendants include the Bay Area Real Estate Information Services, a multiple listing service for Marin, Sonoma, Napa, Solano and Mendocino counties.

Other defendants include Re/Max Holdings, Anywhere Real Estate Inc. (parent of Coldwell Banker, Century 21 and five other brands), Keller Williams Realty, Compass, eXp World Holdings and four north-Bay Area Realtor associations.

The proposed class consists of anyone who sold a home after listing it in the north-Bay Area MLS after Dec. 8, 2019.

Also see: Realtors predict a housing rebound from 2023’s dismal sales

Current practices incentivize agents to “steer” buyers to homes paying the highest commissions rather than the homes best suited for their clients, the lawsuit said.

During the trade group’s annual conference in Anaheim last month, NAR President Tracy Kasper vowed to appeal the Missouri verdict and expressed confidence NAR would ultimately win.

Forcing buyers to pay their agents directly would make it impossible for cash-strapped, entry-level and minority buyers to afford a down payment plus a commission, Realtors said. Many could be forced to enter the bewildering homebuying process without representation.

There also could be unintended consequences, Realtors said.

Charlie Lee, NAR’s senior counsel and legal affairs director, told the membership last month that buyers using Department of Veterans Affairs loans are banned under current rules from paying their own commissions.

“If the offer of cooperative compensation goes away, veterans will be harmed,” Lee said. “They cannot pay for the services of a professional buyer’s representative themselves.”

An email from a NAR spokesperson maintains the current system is more efficient and transparent, while ensuring more buyers can get representation.

“Sellers can sell their home for more and have their home seen by more buyers, while buyers have more choices of homes and can afford representation,” NAR Communications Vice President Mantill Willams said.